Why Our Clients Are Relying On An Outsourced CFO

Throughout the course of our work we find ourselves engaging with and working in accordance with many different types of professionals to assist our clients. One of the most common professionals we work with is the company CFO—and for good reason. Of course CFOs rely on accurate financial statements and thorough accounting, which is the bulk of our daily work for clients. As we’ve honed this working relationship and find ourselves engaging on more comprehensive levels with our clients’ CFOs, we’ve started to notice a bit of a trend: Many of our clients are increasingly reliant upon outsourced CFOs.

What Is An Outsourced CFO?

So what is an outsourced CFO you might ask? And how does it differ from a conventional CFO? Well, in actuality the specifics of the job functions don’t differ so much between outsourced and conventional as they may between different company types and sizes. However, where they differ substantially is in the flexibility and adaptability in the particular application of their skills.

For many of our clients, an outsourced CFO is proving the ideal channel because it provides the high level CFO services they require without the burden of hiring and keeping on staff a seasoned CFO. For growing and established businesses with revenues up to $30 million (our typical client type), an outsourced CFO provides all of the expertise and accountability without needing to be kept on staff and on payroll at their pay scale. Instead, they can utilize the CFO services they require at the frequency they require, whether that is once a week, once a month or on a project basis.

What Are CFO Services?

Of course, CFO services vary just as greatly. CFO services run the gamut, from overseeing the totality of accounting and finance functions, securing funding or financing, engaging with other key professionals, ensuring regulatory compliance, reviewing and negotiating contracts and insurance or managing restructuring, buy outs and company turnarounds. From our startup clients seeking funding to our established businesses looking to explore new growth opportunities, the CFO role is an integral part of their development and decision process.

For more information on Outsourced CFO Services, please check out our recent blog post on About.com’s new Accounting Channel.

 

Smart Tools to Improve Cash Flow and Collections

No business can operate over the long term without generating sufficient cash inflows. Even a profitable firm will struggle if it can’t collect enough cash to fund operations. If cash collections are too slow, there are some great tools that can help you improve the process. When your business faces this challenge, an outside expert can help you address this critical issue.

Understanding Working Capital

Working capital, broadly defined as current assets less current liabilities, is needed to address cash flow and liquidity. In this case, “current” refers to 12 months or fewer. Current assets include cash and anything you expect to convert to cash within 12 months. Inventory and accounts receivable are two current assets that can be sources of cash. You collect on accounts receivable to generate cash and sell inventory to collect cash.

How Much Cash Do You Need?

If you need a system to collect receivables faster, how much cash is enough? How much cash do you need each week or month to operate your business? The answer to that question will be your collection goal for a given time period.

Technology can help you find out your cash needs quickly. As this article explains, Expensify is a mobile app that helps a business process and pay expenses remotely. The app will store your expense payment history. If you need a quick estimate of your firm’s expenses, you can check your Expensify activity.

If you find estimating your cash requirements difficult, an outsourced controller service can help by forecasting your required cash flow. The firm can also help you determine your cash needs and create a plan to collect cash faster.

Implementing Your Collection Plan

Assume that Bob’s commercial plumbing business requires $30,000 a week to operate. Bob’s outsourced controller helps him with this calculation. He realizes that the next step is to implement a cash collection program.

Quickbooks online accounting software offers a variety of reports to track your progress on cash collections. An aged accounts receivable report, for example, will group your receivables together, based on the date of each invoice. This report provides a quick snapshot of how fast you’re collecting receivables.

A lack of manpower can prevent a business from generating more cash flow and profit, as explained in this article. In this case, an outsourced controller sets up a system to generate and review accounts receivable aging reports each week. The controller sits down with company management and documents a formal collection policy. The plumbing firm follows up with delinquent customers using the new policy. Outsourcing this work helps the business collect cash faster.

 

When Is A Good Time To Switch Accounting Services

From improper classifications to the 1099s you still don’t have prepared because you’re tracking down corresponding W-9 information, your taxes are going to need an extension—again. This is the fifth year in a row you have agonized through tax season, wringing your hands and wondering how you can fix it yet the dread you feel when you think about switching accounting services has kept you in the same annual cycle. To avoid the same crisis next year, it is officially time for you to figure out when is a good time to switch accounting services.

How Much Back Work Will You Have?

This is a question only you can answer, as there is no one-size-fits-all for any business. Do you plan on having your new accounting services fix last year’s books? Then you’ll want to find a new provider without delay. The faster you switch, the faster they can get on with their work. This will save you time and money over waiting and letting the work pile up.

Starting Fresh With New Accounting Services?

You can technically start any time with accounting services but be mindful of your current situation. If you plan on terminating any of the staff currently working on your accounting, you want to make sure either their work is complete or you have a plan in place to finalize their previous work. This is especially true if you don’t want your new accounting services to provide any back work support but still need your completed books for last year. The more your accountant is still waiting on from your current bookkeeper, the more sensitive you need to be to announcing a switch.

Can You Afford To Wait?

Of course, if your accountant isn’t getting any information from your bookkeeper, simply waiting for information and completed books isn’t likely to be of much help (or simply, happen at all!). If your books are a total mess right now, you may be better off making the jump to new services without delay. After all, do you really have much else to lose?

13 Reasons All Our New Clients Use (and Love!) Bill.com

We pride ourselves on being on the cutting edge of accounting technology and innovations both on behalf of our customers as well as in our role as an industry expert. After extensive review, we made the company-wide decision in 2014 to bring all new clients on the Bill.com platform as they were on boarded as a client. To date we can say client experiences have been nothing less than stellar—and after a year and a half we seen enough to compile the following list of features that our clients love about Bill.com.

  1. Instant access and connections from invoice lists and bills to vendor information, historical documents and statements, and all related data.
  2. Smart support via drop down suggestions and keyword search, keeping you from having to remember vendor names or specifics to find the information you need.
  3. Current vendor status snapshots and notes in one place.
  4. The ability to choose which bills to pay, edit payment amounts and ask questions about invoices from one interface, without navigating between screens or programs.
  5. Comprehensive dashboards with segmented areas to consolidate invoices with partial payments.
  6. Major vendors are already enrolled in the system and easy to link to new accounts.
  7. Payments are made electronically with vendors getting an invite and taking over the responsibility of updating their bank information to receive payment.
  8. No more printing, stuffing or signing checks.
  9. QuickBooks balances and bank balances are synchronized without check cashing delays.
  10. Mobile applications and cloud-based systems allow users the ability to approve via any device with the internet.
  11. Multiple approval levels managed within single workflows without any burden on users.
  12. Old information is readily accessible so questionable transactions can be reviewed, cleared check information can be printed to send to vendors and all historical data can be retrieved easily.
  13. Everything is readily available online, allowing users the ability to run reports, export and view offline, and access information without waiting on others or putting in requests.

Did we mention no more manual data management—ever? Yes, our clients love Bill.com. And so do we.

 

Accounting and Bookkeeping Software for Independent Contractors

As an independent contractor, it is important to make sure your books are in order. One of the main reasons for this is to make your tax reporting a lot easier and get you back to work as quickly as possible. As an independent contractor, you are responsible for paying quarterly income taxes–which can be an arduous process if you don’t know what you’re doing. Knowing how much you are paying out and bringing in will assist in getting your taxes paid in a timely and accurate manner and reduce the amount of time spent with your bookkeeper or accountant. Having an accounting system in place will increase productivity and help your business run efficiently. By keeping track of bills, receipts, your net profit and gross profit, and by maintaining a clean balance sheet, you can keep an eye on your money without taking too much time from your day job.

To help get your accounting system up and running, check out a few accounting industry software providers we like to use with our clients:

Quickbooks Online

QuickBooks is now available in the cloud for on-the-go accounting and allows you to import your monthly bank statements directly into the program for ease of use. There are a variety of functions you can use based on your niche for well-documented recording and its easy-to-use interface can help you get up and going whether you manage your books entirely on your own or use an outsourced bookkeeping service. Plus, if you take payments through different online shopping sites, it includes the ability to keep track of your expenses and income from PayPal, Amazon, Etsy and eBay.

Tallie

Keeping all your receipts together can be a hassle. This program lets you take a picture with your smartphone, catalog it directly with the phone app, and organize based on project, client or another categorization method as you determine. If your business is especially expense-heavy, including lots of on-the-go receipts, you likely run the risk of losing receipts or failing to keep adequate track of your expenses. And the last thing you want to do is find yourself sifting through a box of unorganized receipts every quarter. Tallie can help you manage your receipts as you create them–and syncs directly with QuickBooks Online for seamless data management.

ScanWriter

ScanWriter assists with automated data entry directly into QuickBooks, including 100s of transactions from bank and credit card statements, bills, sales orders and invoices. A lot of independent contractors find themselves spending countless hours hand-keying data–which takes up way more time than it is worth. Instead of catching up on data entry on your day off, using an automated system will help you get data entered quickly and correctly (less user error!).

Bill.com

Start encouraging your accounts payable to take electronic payments–and then move your accounts payables and accounts receivables into the 21st century with Bill.com. You’d be surprised how many of your payments can be switched to ACH payments–we help our clients switch to electronic payments for as many vendors as possible to help streamline the bill review, payment and approval process. Whether you’re the only person reviewing bills or you’re working with a partner or small team, Bill.com can help automate the entire review process for you.

Staying on top of your accounting will save you a lot of time, effort and money in the long run. Finding and utilizing the programs that meet your needs will help make you a successful indepedent contractor. And if you need any help, an online bookkeeping service can help you get up and running, from managing your entire accounting department to assisting with accounting software integrations or specific bookkeeping services.

Wondering what accounting services are available for independent contractors? See whether accounting services are for you.

7 Surprising Time-Saving Accounting Automations

The never-ending debate about whether accountants and bookkeepers can be replaced is ongoing still. Of course, you’ll likely always need actual human professionals to weigh in and oversee many functions—but there is a growing list of tasks and processes that can be automated to save everyone time and money. We have compiled 7 of the top automations we encounter regularly in the hopes that we unveil at least a handful of things you may never have considered but now will not be able to live without. And if you’re automating something special that we didn’t cover, tell us in the comments!

  1. Import Bank Transactions

    Please, please, please tell us you are not manually entering any bank transactions in QuickBooks. A long time ago, we paid an Excel guru to create a really impressive workflow to automate this process for us—and it set us ahead of the game. But now, everyone can (and should) automatically import bank transactions into QuickBooks.

  2. Credit Card Statement Imports

    Bank transaction imports? Wait, that’s not all! Your credit card transactions can also automatically import to QuickBooks as well. (And other accounting platforms too of course). You may need to contact your credit card company for logon information to activate online service—but a simple phone call should get you the information you need in no time.

  3. Expense Report Submissions

    Whether you have one employee with expenses or 100, tracking down employees’ expense reports, verifying information, and managing receipts is a headache. All that paper pushing is a waste of everyone’s time—time that can be better spent on the company. Using an expense management application (like our friends at Tallie) can help you automate all of this—from taking photos of receipts in real-time to compiling and submitting expense reports from a mobile device, your employees will never have to rely on pen, paper and time again.

  4. Expense Report Sync To Accounting Software

    Did we mention that the expense management software doesn’t live in a bubble? It should integrate with your accounting software to pull your expense directly into your financial statements. And whether your reimbursements are done via ACH, live check or payroll, they can manage that too. Automation at its finest!

  5. Field Employee Time Tracking

    Nothing worse than having to collect and compile messy, difficult to read time cards from field employees. They’re busy, you’re busy, and yes, it is still way too much paper. Instead, time tracking applications with mobile interfaces (such as TSheets) allow field employees the ability to clock in from the field by either text message or mobile application. This supports real-time time tracking and funnels data directly into your general ledger system. No more delayed payroll because of missing time sheets.

  6. Generate Automatic Invoices

    If your business doesn’t get paid, nothing else matters. Therefore, any improvement you can make to generating and distributing invoices is a huge step towards improving your accounts receivable process. You can use any number of programs, from Bill.com to QuickBooks to PayPal to automatically generate new invoices, including on a recurring basis, and send directly to your clients.

  7. Invoice Approval Workflows

    There is nothing we dislike more than a pile of invoices waiting to be reviewed. It just seems so—unnecessary. Instead, you could automate the whole thing, review invoices, read back up documentation and approve payments in one interface. You can setup multiple approval workflows for different types of invoices or payments—for example, if a certain department needs to verify the expenses before the CEO will issue final approval—and you can do it all from any device with internet access. So much nicer than paper piles!

Want more information on how to improve your bookkeeping and accounting? We have you covered!

Profits vs. Profitability: Why You Need to Track Profit Margins

You don’t need an MBA to know there are two basic ways to increase your profits: increase revenues or reduce costs. The smartest businesses implement marketing strategies and cost-cutting measures that do both, but far too many obsess so much over increased sales that they forget about the importance of trimming the fat, and end up actually reducing profits.

Profits Alone Can Be Deceiving

Anyone who’s taken a basic business course knows how to calculate profits. You add up total revenues and subtract total costs, and whatever’s left is your profit. But profit as a measure of business success can be deceiving. For example, Company A spends $900,000 to sell $1 million in products and services, generating $100,000 in profits. Company B spends $400,000 to generate $500,000. The two companies generate the same profit ($100,000), but are they equally profitable?

The simple answer is no. The more a company spends to generate a designated profit, the more vulnerable it is to minor cost shifts, which could quickly put it out of business. Let’s say Company A above spends $200,000 in health insurance costs, and those costs increase by 10 percent. That increases insurance costs by $20,000, reducing profits to $80,000. Company B spends $100,000 in health insurance costs. The 10 percent increase cuts into the bottom line by just $10,000, and profits drop to $90,000. Company B is now making $10,000 more in profit than Company A.

Profit Margins Provide a More Realistic Perspective

It’s important for businesses to track not only profit, but also profit margin. While profits are measured in dollars, the profit margin is measured as a percentage, or ratio, specifically, the ratio between net income (profit) and total sales.

Continuing the example above, Company A has $100,000 in net revenue and generates $1 million in total sales, so its profit margin is 100,000/1,000,000 or 10 percent. Company B also generates $100,000 in net revenue, but its total sales are $500,000, making the profit margin 20% (100,000/500,000). The two companies have the same amount of profit, but Company B is twice as profitable as Company A.

How to Increase Profit Margin

Because profit margin more accurately reflects long-term profitability and a business’s vulnerability to sudden increases in fixed costs (such as insurance, office expenses and taxes), it’s important to track profit margin and implement strategies, which keep it as high as possible.

There are basically two ways to increase a company’s profit margin. First, you can increase the price you charge for your products and services, but this must be done only after a careful analysis of the impact of those increased prices on consumer behavior and total sales. The second and much safer approach is to control costs.

The Importance of Cutting Costs

A minor decrease in costs will improve your profit margin more than a comparable increase in total sales. Company B in the scenario above spends $900,000 to generate $1 million in sales, giving it a profit of $100,000 and a profit margin of 10 percent. If the company increases sales by $50,000 (say, by increasing either pricing or customer base) but don’t decrease costs, its profit increases to $150,000, and the profit margin increases to 150,000/950,000, or 15.8 percent.

If it instead kept sales constant, but reduced cost by the same amount ($50,000), profits once again move to $150,000, but the profit margin now increases to 150,000/900,000, or 16.7 percent. Cutting costs has made Company B more profitable, and less vulnerable, than increasing sales, and it’s generally easier and less risky to reduce costs than to increase sales.

Conclusion

No single strategy is likely to increase a company’s profitability or prospects for long-term success. The most successful companies carefully analyze consumer behavior to determine the best price to charge for products, while simultaneously researching a range of fixed cost-cutting strategies, ranging from outsourcing non-critical job functions to downsizing to carefully researching health care options for their employees. A comprehensive analysis of both price and prudent cost-cutting measures has the greatest chance of increasing a company’s profitability and persistence.

 

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