Do not ignore your accounts…
My experience is that most business owners who are “not interested” or “not motivated” by accounts are in severe danger and major unpleasant surprises, often too late.
It’s amazing how some costs just creep up and before you know it, you are loosing money.
So, you are not a financial guru, most business owners aren’t. But you cannot ignore your financial management responsibilities. Too many business owners I come across, have absolved their finances to an accountant or book-keeper.
Finance is not an annual activity; it’s at very least a monthly activity.
Yes by all means use a bookkeeper for entry, but on a monthly basis you need to review some basic financial dashboards.
Each month I would suggest you review the following three dashboards.
- Year to Date Profit & Loss Statement – per account code, per month
what you are looking for here is , beyond how much profit or loss you made, are any unexplained shifts up or down month by month
export this to excel so you can easily review
- Balance Sheet – this statement shows your real financial position – keep an eye out on liabilities such as GST to pay – particularly if you are on 6 monthly GST
- Account Receivables – Manage your debtors – be very aware of who owes you what – chase the poor payers as soon as they go over your agreed terms.
In addition to the above reports have a copy of your last years P&L month by month statement so you can constantly compare and look for trends.
The next major activity as a manager is to plan your forward cash flow. Businesses fail due to poor cash flow planning, particularly with items such as tax payments. These do not appear out of thin air. Work with your accountant to plan these 12 months ahead.
If getting financial reports out is a chore, I would suggest you either do not have a good accounting system or you or your staff do not know how to use it effectively. Some older systems such as MYOB are very powerful but users need to be trained to minimize entry time and maximize value.
Most SME’s should not require more than 4 hours accounts work per month. Modern tools have automated so much of the process.
In my business I shifted from MYOB to Xero this year. Here are my observations:
- Automated daily bank feeds from both of my banks: It’s quicker now to log into Xero either on my phone or PC than go through lengthy logins and clumsy interfaces from two banks – just to check balances and see who’s paid and not
- Payment reconciliation now takes seconds – rather than minutes.
- I am out and about – so being able to check up on reports is great– I did not need to do a days training to learn it.
- I miss the powerful analysis tools and abilities to customize the set of accounts with multiple cost centres, that MYOB offered me
Recently I have become a real fan of Xero (its $60 per month) but offers the following advantages:
- It’s available instantaneously for review by you and other trusted advisors
- Most tasks can be automated – Reconciliation and entry of payments invoices take seconds
- Enables you to keep an eye on your book-keeping staff
- For a business of your size it should be taking you less than 4 hours per month to stay on top of all of your book-keeping need