Supercharge Your Accounting
Things You Can Do Right Now to Prepare
Your Company’s Accounting for Growth
Successful entrepreneurs can adapt quickly and find the right time to hit the gas pedal. Timing the acceleration is different for all businesses but once you do, get ready for the ride.
Before You Hit The Gas
One thing to make sure you do BEFORE you hit the gas is to ensure your systems are ready to scale. Hitting the gas when your systems don’t talk to each other or are manual will create chaos. You’ll have to burn cash on people-power to report the metrics you need fast enough to make a difference.
So once you’ve proven your product in the market and have the capital to accelerate rapidly, align yourself with strategic partners that can support you on your journey.
As outsourced accountants & bookkeepers helping small businesses across the country grow, we’ve developed a checklist of things you can do to prepare your financial accounting solution for your journey.
Get a Lay of the Land
Before you take any action, you need to understand what is being done today and who is doing it. A simple way to look at the overall accounting function is to group it into People, Systems & Workflows.
What people are touching is the process, from generating sales or receiving inventory through to your financial statements. Talk to them and understand what they are doing today and why they are doing this. Talking to people almost always uncovers manual tasks or the dreaded “that’s the way we’ve always done it.”
Think about the purpose of their involvement and what skills you’ll need if volume goes 2x or 10x.
From an accounting perspective, you may go from needing a cash-basis type bookkeeper who codes everything at the end of the month to a controller-level person who is coding things in real-time and providing management reports and analytics. Do they have the skills needed for where you will be a ½ mile down the road?
What applications are currently being used for sales, bills, payroll, or file storage? A SaaS company would utilize a completely different app stack than an eCommerce business. Figure out what’s being used and assess if the team is savvy enough to be able to put together a complete, integrated solution.
For your accountants, who are stereotypically not tech-savvy and don’t embrace change, are they savvy enough to participate in collaborating with your operations and management teams to help put together a cloud-based, integrated solution so as volume ramps up you’re not adding bodies?
Workflows bring together People and System. If you sell products via B2B and B2C, then some part of your processes break out into different workflows. Map these out (mind map app or sketch on paper) to make sure you’ve identified weaknesses, know who you need on the bus, and what you’ll need the systems to do.
The optimal workflows are critical to understanding when you are looking for the People and Systems.
Once you have a good understanding of where you are now, you are ready to take action in the future.
Supercharge Your Accounting
After watching hundreds of businesses succeed, fail, and everything in between we’ve accumulated a list of characteristics that make for an accounting solution that will help you flourish. It can’t help you make a great product, but it shouldn’t get in your way when you hit critical mass.
Do these things to prepare your business for growth:
Collect Cash - Regardless of the business model, try to collect as much cash as you can as soon as you can. Running out of cash kills businesses. It may seem like a no-brainer, but it can get sometimes lost in the grand scheme of “building” a business. If you sell SaaS software, allow customers to prepay a year in advance. If you perform services, require deposits or progress billing versus billing for work performed at the end and waiting for checks that may never come. If you collect cash in advance of the work, you’ll create an accounting scale issue, so be prepared to make sure the reporting process is optimize.
Merchant Services - Most businesses scale charge their customer’s credit cards. Stripe and Braintree seem to be the most common and flexible, especially if you plan to tap into the merchant services API. Contact them to negotiate their rates based on volume. It can’t hurt to try. Do it again when you’ve grown some more.
Credit Cards - Find a great credit card with a high limit, and that provides the best rewards. You may need discounts with vendors you use, cash back, or miles. Ask them how they can grow with you as the business takes off.
Vendors & Bills - Review key vendor relationships and try to negotiate favorable volume pricing and payment terms. They may say no, but it’s worth a try. Don’t pay bills early, unless you get a discount. Keep your cash whenever you can. Automate bills like rent that can’t wait. Hold off on some if you need to manage cash.
Line-of-Credit - Work with a bank to get a line-of-credit in place. You never know when you need immediate cash and this is the best way to do it. Short-term lenders like Kabbage are expensive ways to borrow but could get you out of a bind. Banks will offer more favorable terms. Smaller, regional banks may work with you more than the Nationals. Silicon Valley Bank seems to have placed themselves in the service of rapidly growing businesses.
Software -Cloud, cloud, cloud! Did we say cloud? Ensure you are selecting the right systems that plug into your optimal workflows. Get as close as you can; don’t expect to find all the apps that check every box or you'll go crazy. If you can tick every box you’re lucky; buy a lotto ticket immediately. Make sure the app looks fresh and new and review their more recent product releases to make sure they are actively improving the app. There are too many to list, but as accountants, your goto apps will be Xero or Quickbooks Online.
Scalability - Being in the cloud opens up the wonderful world of APIs. Whatever software you chose, make sure they talk to each other. Don’t trust their integration web pages. You need to dig in with a sales rep and make them show you the integration before you starting signing contracts and beginning the implementation process. If you assume one app works with another; a critical element won’t work as needed midway through the implementation. Yes, we speak from experience.
Digitize Everything - This means NO PAPER; not paperless. Digitize whatever paper you have and store it online in apps like Box, Dropbox or Google Drive. You may need a business-level plan to make sure you have enough storage space and have more administrative controls necessary for a business. Check with your insurance companies to make sure you don’t need wet signatures as some industries may have such requirements. Talk to your insurance agent about cyber insurance. Scan everything that comes in on paper and shred it. You should have access to everything you need for your business online.
Build Continuity - Your goal is to protect your business from any interruption. If the internet goes down, what do you do? If an employee no-shows, how will you cover their work? From an accounting perspective, cross-train others so things, like collecting cash and running payroll, will never be at risk. The most common issue we see here is the lack of any documentation about what people do. Everybody hates doing it, mainly because if they are the one to leave, they won’t have to deal with the issue - you will. Make no exceptions.
Measure - Determine what drives your business and measure it. There are a ton of KPIs out there and weighing 10 or more is probably overkill. Start small and find the first three that are critical to your business’s success. Try to find KPIs that are vital predictors versus key performance. The top 3 drivers may not be the same for businesses that are in the same industry let alone in a different industry. SaaS metrics are entirely different than a service business. Some of these metrics will come from the accounting system, but it’s not uncommon for them to come from non-financial numbers. Some KPIs combine both. Simple example, Revenue by FTE pulls in a financial and non-financial amount for the calculation. Many of them should come out of your sales cycle, so a good CRM is critical. Find a cloud-based app that can visualize these metrics for you and automate these calculations as best you can. Apps like FUTRLI, Fathom or Spotlight Reporting are a few.
Set Targets - What “should” you be selling each month to achieve your goal? What is your goal? Modeling out your business is critical in helping you understand what will drive it. Set aggressive goals to push your team. Seeing what happens if they hit that goal, exceed or fall short is essential to know BEFORE it happens. Forecast 12 months out and refine quarterly. You could always use a custom Google Sheet, but using tools like FUTRLI or the more high powered Jirav will provide a better output and increases the chances that they can be maintained in the future. Most custom spreadsheet models die a quick death as the only person who can keep the whole thing working is the person who created it. Using an app allows someone to step in and take over where the other person left off.
Many of those items are common sense. Most businesses are all over the place because you do what you need to do to keep things together when you start. You’re probably reading this because you’ve already felt some strain with your accounting so it’s easy to imagine what may fall apart volume increases 10x.
You don’t have to go it alone! Hire a competent outsourced accounting and bookkeeping company who does this every day. Someone who will collaborate with you and your team to develop a solution that works for your business. Someone who will be there with you as you grow and adjust along the way.
Remember, if you have any questions reach out and ask.
Good luck on supercharging your accounting for growth!