Smart Financial Management for Small Businesses

How well do you know your tax and business laws? If you're an entrepreneur or a small business owner, you're already aware that laws and regulations for businesses differ from those for personal financial management. For most small businesses, providing clients with high quality products or services takes precedence over most other activities. Many small to mid-sized companies were launched to fulfill an entrepreneur's dream of running their own business or developing an extraordinary idea. Chances are, the business owner was not starting a company out of a desire to delve into the administrative and financial aspects of running a company. Therefore, it is critical for startups and small company to hire the right people for managing these aspects of their business.

What are a few ways to easily manage finances?

Find the right resource

Unless you have expertise in financial management, you are better off not managing your company's finances yourself. Hiring a good bookkeeping, accounting and financial resource can help minimize errors and ensure that reports include the essential data. The right resource can also help minimize financial losses and assist in streamlining accounts better.

Compare this with hurriedly-executed financial work completed by someone whose primary responsibility in your company is not accounting and bookkeeping. Furthermore, unless the employee managing the finances is trained on these functions, there is the likelihood for errors that can result in inadvertent fraud for your company.

Choose the right software

For most small businesses, budget crunches and constraints can pose limits on investments in infrastructure. In turn, this can impact client deliverables and therefore business growth. Alternatively, most businesses have shifted to online systems. This eliminates the need to hire and retain expensive manpower, thereby reducing the need to invest in additional office space, furniture, etc. The most important qualifications to consider when purchasing software are that the software meets your specific needs and enhances your client deliverables.

Automate and integrate systems wherever possible. This significantly reduces time spent on manual processes and costs, while improving adherence to deadlines and overall data accuracy. Most software programs eliminate time gaps between actual financial transactions and report generation, thus timely access to data and accuracy improves radically. Your basic bookkeeping or record-keeping is completed automatically.

If you are confused about what type of software is most appropriate for your business, there are many vendors who provide specialized services and can guide you in selecting the best software, as well as provide support for that program if required.

Keep costs of operation separate

A good way to ensure your operation costs remain separate is to outsource your work. When you outsource this work, you avoid locking up capital in areas such as infrastructure and salaries. Outsourcing is also available for critical functions such as bookkeeping and payroll management. In addition, outsourcing specific operational functions can provide you with the flexibility to pursue business development activities.

Following the above suggestions should assist in the financial management for your business.

Satish Patel, CPA
President, Analytix Solutions
Satish Patel, Founder-CEO of Analytix Solutions, has more than two decades of experience as a CPA. He has also advised small and mid-sized businesses on diverse matters such as valuation, accounting, and finance. His experience extends to raising capital and arranging for finance from angel investors.

CFO And IT Services: A Winning Combination

In today's increasingly global and fast moving economic environment, successful companies recognize that finance and IT departments have grown increasingly complementary. One of the greatest advantages of working with small to mid-sized businesses is their ability to move quickly and efficiently to deliver services and address client issues. Synergies between CFO services and IT foster this type of business agility, and businesses which embrace these synergies discover they can demonstrate a competitive advantage to their clients and customers. As a starting point, following are four key areas to assess for integration between CFO and IT services.

Software roll-outs - This may appear obvious, but what is not always obvious is at what point the two areas should begin collaborating. Answer: as soon as possible. Software rollouts are most successful when finance and IT begin working together at the beginning of the process. A CFO can provide insight into financial reporting and management needs, as well as expectations of an accounting system or software program. Early involvement of IT services allows them to anticipate long term implications of the system and address what is technically capable. IT can ensure that the systems selected are flexible and scalable enough to meet future growth.

Greater access to data sharing - One of the benefits of updated accounting software and systems is their ability to provide access to key data for reporting needs. Newer systems allow authorized partners or employees access to key data by logging into the system themselves and generating automated reports. Previously, providing these partners or coworkers with critical reporting or real-time data required a CFO or Controller to compile and generate requested reports, often manually. When a CFO and IT services work collaboratively to identify areas appropriate for real-time data sharing, productivity increases as the data sharing is performed more efficiently.

Data security - With many finance departments now subscribing to financial SAAS programs and leveraging cloud based systems, ensuring data security within a business is critical. In addition, many companies have evolved into businesses with a high volume of web based transactions- purchases, inventory management, fund transfers, bank statement reconciliations, etc. The increasing volume of web based and remote financial related transactions necessitates unprecedented levels of data security. Delivering this level of data security requires the commitment of both the CFO and IT services.

Cost controls - One of the most significant ways a small to mid-sized business can increase profitability is to control costs. Working together, finance and IT can identify thresholds and establish automated triggers to notify CFOs when costs are surpassing this threshold. Success depends on the data being accurate, while also readily and immediately accessible. Even more importantly, IT involvement to automate these types of functions and reports means that a CFOs role can evolve from simply reporting to analysis, resulting in more robust financial management for small to midsized businesses.

These are just a few areas in which IT and CFO services can complement each other to make your financial operations more effective. Other areas to consider integrating the two are any place where analysis and decision making can be enhanced or where efficiencies and cost reductions are achieved. We are currently offering a free analysis of your business processes and accounting system. If you would like to learn more on how Analytix Solutions can help move your business forward, please call me directly at 781.503.9004 or email me at sales@aixsol.com

Satish Patel, CPA
President, Analytix Solutions
Satish Patel, Founder-CEO of Analytix Solutions, has more than two decades of experience as a CPA. He has also advised small and mid-sized businesses on diverse matters such as valuation, accounting, and finance. His experience extends to raising capital and arranging for finance from angel investors.

Online Accounting Systems Can Result In More Effective Services

Taking your accounting online can help you streamline your finances, making for more organized accounting and reliability in other areas of your services offerings.

Organized data and better management

When your accounting moves online, human intervention is greatly reduced, automatically resulting in heightened accuracy. Because accounting is one of the basic functions in a business, scattered or poorly-maintained accounts can create problems across all your business offerings and client services. Online accounting automatically results in better organization of your records and helps you maintain updated and current records across the services and solutions you provide your clients.

Online accounting systems do not mean you no longer have control over your accounts. On the contrary, it takes off the drudgery from your day-to-day operations so that you have time and resources for your business concerns. Online accounting takes over data entry and management so that you no longer struggle with complex data or spend quality man hours in training staff to meet your specific needs. Once you hand over your needs to a qualified vendor, you will find that an online accounting system actually speeds up your operations overall, allowing you to provide deliverables and services to your clients better.

Complete and updated data

An online accounting system provides you with complete financial information at your fingertips. What is the money owed to you by your clients, what is the exact amount and by how much time is it overdue - all of these questions can be answered when you look at your accounts, provided they are updated. Low on cash? An online accounting system can help ensure you don't face crippling cash crunches that could force you to disable your client deliverables and regular services.

Further, having updated accounting means you are on top of your expenses and balance sheets. This is vital not just from the perspective of a business owner, but also from the point of view of investors who will examine your credit-worthiness. Here are some specific benefits that prove how an online accounting system can help you spruce up operations and deliver better solutions and services.

Satish Patel, CPA
President, Analytix Solutions
Satish Patel, Founder-CEO of Analytix Solutions, has more than two decades of experience as a CPA. He has also advised small and mid-sized businesses on diverse matters such as valuation, accounting, and finance. His experience extends to raising capital and arranging for finance from angel investors.

Evaluating the Efficiency of your Financial Processes

How do you ensure the efficiency of your company's operations within the framework of your existing financial department? Keep a sharp eye on the performance of your business processes and key metrics associated with them. Below are some suggested metrics you may consider integrating into your financial analyses in order to measure whether your current financial processes are optimized or not.

Receivables Turnover Ratio- This is a company's credit sales divided by average account receivables, and it is an indicator of how efficiently a business collects credit extended to customers or clients. Maintaining a sound accounts receivables practice can greatly help maintain the liquidity of a business, reducing the possibility of money lost as a result of missed collections. As a small business on a budget, you might already be following established practices to ensure that your financial processes are on track.

Days Sales Outstanding (DSO)- Metrics that reduce the amount time it takes to collect receivables can help you tighten your cash flows and ensure that more cash stays within the business. One rule to remember is that you should not keep accounts receivable open for an indeterminate period. The longer your money remains unpaid, the higher the chances of uncertainty on collecting it.

Month-end Closing Period- Ideally, month-end closing should be wrapped up within a one month period. However, in practice the month end closing often extends into the next month as well.

Month-end closings that move beyond the first week of the subsequent month indicate a need to streamline your processes. If your paperwork is not in order, your actual month-end closing can last for an inordinately long time, depending on the volume of work that needs to be completed.

Rapid Follow-up for Accounts Receivable- Your accounts receivable needs an efficiency check if it is taking more than 30 days, or if cash remains uncollected and pending for more than a month. It may also be helpful to establish a maximum collection time period, for example 35 days. Consider automating certain key functions and enabling reminders to notify you about which accounts to pursue as they approach that maximum collection period. Also, consider incenting early payments by offering discounts.

Daily reconciliations- If you've defaulted on your daily reconciliations, your month end closing can become a daunting task. Ideally, reconciliations should be performed on a daily basis. Banking especially should be reconciled everyday instead of being pushed back. As with accounts receivable collections, banking reconciliations in addition to general ledger reconciliations lend themselves well to automation, which could provide enormous gains in productivity.

Consider evaluating your financial processes based on the above metrics and practices to improve efficiency for your business.

Satish Patel, CPA
President, Analytix Solutions
Satish Patel, Founder-CEO of Analytix Solutions, has more than two decades of experience as a CPA. He has also advised small and mid-sized businesses on diverse matters such as valuation, accounting, and finance. His experience extends to raising capital and arranging for finance from angel investors.

Five Business Functions to Automate

Although small to mid-sized businesses may operate under constricted budgets, this does not imply a decrease in quality of work, regardless of limited infrastructure or manpower. Optimizing existing resources can help you remain within budget parameters, while ensuring that client deliverables and client expectations are met.

Automation can assist small businesses in optimizing existing resources. With automation, companies need not invest in expensive new machinery or hire highly skilled human resources. Identifying key areas to automate can produce significant productivity results. Often times, vendors or partner companies can assist with automating certain functions. An experienced vendor who is familiar with your business may also help you identify areas which could benefit most from automation. As a starting point, following are five suggested business functions worth investigating for automation.

Financial processes: Due their significance within the daily operations of a small to mid-sized business, financial processes can benefit immensely from automation. Timely access to data and data accuracy are equally important in recording financial transactions. Automation improves the quality of both.

Accounting: Accounting functions are the backbone of every business, including start-ups or solo practitioners. Accounting is also an area which requires maximum attention to detail. A minor error that occurs when recording revenues can result in major revenue losses, or worse significant tax implications.

However, for many small business owners, minimizing accounting errors while meeting client requirements often are at odds with each other. Business owners can only perform a finite number of functions and do them well. They can either work diligently to ensure client deliverables are met, thereby often neglecting accounting tasks, or they can pull key resources from business deliverables to focus on the companies financials. However, automating accounting functions can assist in ensuring both objectives are met. In addition, automation reduces dependency on human resources therefore freeing up an employee's time to focus on more client focused work.

Bookkeeping: Bookkeeping is the foundation for accounting. When companies automate bookkeeping functions, business owners can feel confident that record keeping is completed in a timely and accurate manner. Automated bookkeeping assists in creating timely records. For example, regular, periodic transactions can be recorded instantaneously. This eliminates the possibility of omitting particular entries, as well.

IT processes: As a small business, dependence on IT can determine the speed and efficiency with which you service clients. Automating your IT processes can help radically reduce actual time incurred to execute. Besides execution, IT automation can assist in ensuring better record-keeping and adherence to deadlines through a system of automated triggers, email-reminders, etc.

In addition, automated IT processes also help track initiation and the progress of various assignments and projects, as well as promote business continuity.

Training and Communication: Automation can enhance communication needs as well, including training. In the case of small businesses where employees may work remotely or in various geographic locations, business owners can create frameworks which serve as information and training portals, thus cutting reducing time and expenses involved in live training and knowledge transfers.

In summary, for many companies, these five areas are worth investigating as areas which could benefit from automation.

Satish Patel, CPA
President, Analytix Solutions
Satish Patel, Founder-CEO of Analytix Solutions, has more than two decades of experience as a CPA. He has also advised small and mid-sized businesses on diverse matters such as valuation, accounting, and finance. His experience extends to raising capital and arranging for finance from angel investors.