BEST PRACTICES FOR MANAGING
YOUR SMALL BUSINESS FINANCES
V I C TO R I A KO S U DA , C PA , C I T P
INTRODUCTION
MY BACKGROUND
• Certified Public Accountant (CPA)
• Certified Information Technology Professional (CITP)
• CPA specializing in technology
• Owner of Beyond Financials Consulting, LLC
• Provide Accounting, Tax, and Consulting services to small businesses.
• Focus on accounting technology & virtual CFO Services
• Early career with Fortune 500 companies implementing
accounting & finance software solutions.
• Bringing that know how to the small business owner.
WHAT I SEE EVERY DAY
• Very smart entrepreneurs with no insight into their business
finances.
• Struggling with cash flow because they don’t know how to
manage it.
• Running their business with no idea if they are profitable.
• Only knowing their bottom line at tax time.
MY APPROACH
• Train small business owners on how to manage their
finances.
• Use technology to keep things organized and make life easier.
• Review the numbers on a monthly basis.
• Regularly discuss the current state of the business and future
plans.
• Be proactive instead of reactive.
EFFECTIVELY MANAGING YOUR
BUSINESS FINANCES
6 KEY STEPS
•
•
•
•
•
•
Separate business & personal spending
Record everything
Use accounting software
Get paid as quickly as possible
Reconcile your bank account
Be consistent
SEPARATE BUSINESS & PERSONAL
• Legal ramifications for co-mingling business & personal
expenses. Not going into here.
• Need to separate to ensure a good understanding of
business cash flow and profitability.
• When you take money out of the business for personal expenses, it is
not an expense or a “write-off”. It is simply depleting business funds.
• Need to learn and understand the difference between
business and personal expenses.
• There is a lot of confusion here.
• Need discipline to start and keep doing this correctly.
RECORD EVERYTHING
•
•
•
•
•
Every invoice
Every receipt of $
Every expense that hits your bank statement – (e.g. fees)
“Garbage in garbage out”
Record it timely
USE ACCOUNTING SOFTWARE
• No double entry of info
• Able to automate a lot with technology – bank downloads,
online invoicing, recurring transactions
• Ability to generate financial statements and other important
reporting
• All in one – customer invoicing, vendor bills, payroll, banking
information
• Will enable you to have the best picture of how the business
is doing
GET PAID AS QUICKLY AS POSSIBLE
• Use Online Invoicing
• Speed
• Enter in your software and generate an e-mail to the customer.
• Saves days in the process by not sending via mail.
• Closely Manage your A/R
• Reduce terms – it is rare to gives 30, 60, 90 days anymore
• Software records when an invoice e-mail is opened, lets the customer add
comments, and sends reminders. Invoices are not getting lost on a desk.
• Comprehensive outstanding A/R reporting for easy follow-up
• Accept Online payments
• Money is in the bank faster
• Software provides link to payment gateways – Pay Now buttons
• Recurring Services? Get approval to directly debit their bank account or
credit card.
RECONCILE YOUR BANK ACCOUNT
•
•
•
•
•
•
Need to capture everything
Apply deposits to invoices
Record bank fees
Record transfers
Find mistakes
Use bank download technology to make it easier
BE CONSISTENT
• Nothing worse than needing to catch up
• Allocate time to accounting on a weekly/monthly basis or
hire someone to do it
• Stay in control
USING TECHNOLOGY FOR YOUR
ACCOUNTING NEEDS
SOFTWARE OPTIONS
• QuickBooks Desktop
•
•
•
•
Hosted QuickBooks
QuickBooks Online
Xero
Freshbooks
Options in the “Cloud”
THE CLOUD
• Push towards the “Cloud”
• Internet software that can be accessed from anywhere.
• Easy to connect software apps to meet your needs.
• Accessible via the web, tablet, smart phone
• Constantly releasing new enhancements
• This is the trend
QUICKBOOKS
• QuickBooks Desktop
Most well known
Can handle all small business needs
Setup is critical. If it is setup wrong, your accounting will be incorrect.
Best for a business with a dedicated bookkeeper or detail oriented owner
Pro, Premier, Enterprise – versions can handle small to mid-size biz
Still the best option for manufacturing, retail, and distribution businesses
Use direct connection to banks to avoid double entry.
Files have to be sent to the accountant or the accountant has to login to
your computer.
• Purchase a software license for a specific yearly version. Upgrades
required every two years as product support expires.
•
•
•
•
•
•
•
•
HOSTED QUICKBOOKS
• Hosted QuickBooks
• Desktop QuickBooks loaded onto remote server - accessible via the
internet.
• The user is accessing a “desktop” in the cloud and can use the full
version of QuickBooks.
• Accountant can access this cloud desktop also.
• Right Networks, Cloud9, InSync plus other vendors
• Can be expensive – Paying a monthly fee.
• Need QuickBooks, but want to work in the cloud, a hosted solution is a
great option.
QUICKBOOKS ONLINE
Service businesses
Light inventory requirements
Online invoicing
Invoicing via the app
Bank downloads
Not like QB Desktop, so need to understand differences if
looking to switch.
• Intuit is focusing here
• Monthly subscription fee
•
•
•
•
•
•
XERO
www.xero.com
•
•
•
•
•
•
•
•
Called “beautiful accounting software”
Easy to use, visually appealing interface.
Online invoicing with a link to PayPal & some new options
Invoicing via iPhone and iPad apps
Bank and PayPal feeds into the software daily
Easy to use dashboard showing cash balance, A/R and A/P
Can use add-on software to get more functionality
Monthly subscription fee
FRESHBOOKS
www.freshbooks.com
• Great invoicing software
• Perfect for service businesses that need to bill back for out of
pocket expenses
• Great integration with Xero
• Invoice in Freshbooks
• Accounting in Xero
• Online invoicing with a link to various payment gateways.
• Monthly subscription fee
BENEFITS OF ACCOUNTING IN THE CLOUD
Anywhere anytime access
Real-time information
Better collaboration with your accountant.
Very regular software releases to make improvements
Easy to integrate applications – use the best in breed and
link them together – invoicing, scheduling, inventory
• Online invoicing / Invoicing in the field
• Lower up front costs
• No need to backup date. They do it for you.
•
•
•
•
•
WHO IS USING
• Cloud
•
•
•
•
•
•
Web Developers
Creative Agencies
Consultants
Financial Planner
Cleaning Service
App Developer
• QuickBooks Desktop
• Retailer
• Distributor (Traditional and eCommerce)
WHAT SOFTWARE IS BEST FOR YOU?
•
•
•
•
•
•
•
•
Type of business
Who is doing the bookkeeping
Number of users
Where are users located
Security required around user access/roles
Complexity of accounting requirements
Cost
Assess software based on your specific needs
MANAGING AND GROWING YOUR BUSINESS
WITH REAL-TIME ACCOUNTING INFORMATION
REAL-TIME BUSINESS INFORMATION
Following the 6 KEY
STEPS can get you
here…
Real-time information
to manage your
business.
MANAGE YOUR BUSINESS
• Benefits of real-time information can only be realized if you
implement the 6 KEY STEPS
• Control over Cash Flow
•
•
•
•
Cash balance, Money in, Money out – What is left?
Can you cover your overhead?
Can you pay yourself?
Longer term - Is there cash available to invest in the business
• Focus on Profit – Are we making money?
• Less stress at the end of the year
• Peace of mind because you know where you are
GROW YOUR BUSINESS
What are your goals?
How can your reach your goals?
Good information to make informed decisions.
Get your business to the next level by understanding where
to invest time and resources
• Without good financial information you are guessing and
running blind.
• Understand results as a whole and then drill down to the
next level of financial detail
• Learn to understand your numbers and develop growth
strategies that can be supported by the numbers.
•
•
•
•
GROW YOUR BUSINESS
• Break down the business and analyze what is working and what is not
• Look at profitability:
• By Month – Is there a trend, is there seasonality?
• Year over year – Has performance improved? Are we spending more money is
a specific area?
• Versus an annual budget – Are we going to reach our revenue and profit goals?
• By project – Was a project profitable?
• By product – Which products are most profitable? Top selling?
• By service – What service offerings are most profitable? Top selling?
• By customer – What is our customer mix? What type of customer generates
the most sales?
• If you aren’t making money doing something, why are you doing it?
• I see a lot of people spinning their wheels
• You should have access to this type of information at any time.
Q&A
CONTACT INFORMATION
• Vicki Kosuda
• 908-358-4680
• http://www.beyondfinancialsconsulting.com
• Click Contact and sign up for our mailing list
• Some tough love, technology, taxes – small biz finance advice.