Back in 2006, a small but innovative New Zealand company launched a real-time accounting program for non-accountants. Its good sense and simplicity soon heralded calls for business owners to get ‘in the cloud’. Fast forward to 2018, where cloud accounting for financial management is largely the norm for businesses (certainly for my clients), and the calls have changed from encouraging cloud take-up to challenging business owners to use it effectively so they REALLY do prosper.
Accountants (including yours truly) have needed to invest personally in cloud accounting systems to fully understand their power. That is, the ability to provide the business management support required by today’s innovative, entrepreneurial and growth-oriented business owners.
This year I’ve decided to write a series of articles to outline what I’ve learned about cloud accounting, and what you should expect from it that will enable you to take your business (and your own personal prosperity) to a whole new level.
Please take a moment now to understand why effective cloud systems and cash flow go together, just like Mr Spock and Captain Kirk.
Set a Course for Smooth Cash Flow – Make it so!
It’s a recurrent story…lumpy cash flow. Surplus cash isn’t generally a problem, and if it is, it’s a good one to have.
However, no cash or poor cash flow is stressful, and not just for you. It also puts pressure on your team to perform and often leads to unhappy suppliers who can tighten up their terms or put you on ‘stop’ until your account is up to date. The ripple effect can be far-reaching and result in lost sales and other missed opportunities.
Your financial management system should provide reporting that indicates the ups and downs of your cash flow over the past 12 months. This information allows you to identify the peaks and troughs in your income as well as the outflows required to meet your obligations.
Your cloud accounting program should provide cash flow management reporting at this fundamental level. Access to earlier years’ records will provide even clearer insights as cash flow patterns or trends will emerge.
Clear (easy to understand) cash flow reporting is particularly helpful for business owners who may feel they’re losing control of their business but aren’t sure why. It will also benefit those who are seeking to grow.
Understanding your cash flow creates a sense of financial freedom, confidence and entrepreneurial licence that enables you to meet your day to day business obligations while allowing you to fund your business, personal lifestyle or philanthropic projects as well as appropriately rewarding the efforts of others in your business.
So, what should you do next?
Firstly, record your cash position right now as of today.
There are a number of reasons why this information may not be available to you. You may need to wait until your bookkeeper comes in and logs in for you; data entry may not be up to date; or the reports may not have been designed to generate the information you need – whatever the issue, it needs to be fixed as a priority.
Next, you’ll need to analyse the numbers and truly understand where your cash comes from and where it goes to. You’ll need a 12-month Profit & Loss Statement and a 12-month Balance Sheet with monthly comparatives.
Finally, you need to decide what you want your cash flow to look like in a year’s time, and this may require advice.
If you are unable to progress beyond the first step, I invite you to contact me as your management accounting systems may require attention. While it’s important for you to have 24/7 access from anywhere, our goal is to tailor your cloud systems so that they are relevant and meaningful to you so that you may better manage your type of business.
With appropriate cash flow reporting in place, we can help you to understand your numbers, expose problems, identify opportunities and help you to implement the actions necessary to achieve smooth cash flow. All you need to do is contact us to … make it so.
*”Live Long & Prosper” – Spock
