Having the foundations of strong financial systems is of utmost importance if you want to have a profitable business.
So to give you the best chance for success, I invited Meryl Johnston from Bean Ninjas to join me and share her tips on how to get yourself to set up your financial foundations.
Here are some of the tips from the webinar:
- Use A Cloud Accounting Software
Ten years ago, it wasn’t common and cost-effective for businesses to use cloud-based accounting software. Most people preferred systems that were installed in their computer.
But now, cloud accounting software is preferred by entrepreneurs and business owners as it is much easier to access, it easily integrates with things such as bank data, and it integrates with applications.
Some examples of cloud accounting software include Xero, FreshBooks and Quickbooks.
2. Choose A Receipt Management Process
Do you have a system for managing receipts? Or are you still keeping your receipts in a shoebox?
Managing receipts does not have to be difficult. The key is to pick a process or system and follow it. Luckily there are tools available such as Hubdoc (comes free with Xero subscription starting this mid-March ) and ReceiptBank that takes the data from your receipts and directly sends it to your accounting software. Or you can simply use Dropbox and Google Drive. The key is to pick a system and follow it.
3. Have Business Specific Bank Accounts
Ensure that you have separate business and personal bank accounts so it’s easier to track your transactions.
If you are going to use a credit card and it is not possible to use the business name, use a separate card, even if it is under your name and use another one for personal use.
This way, it can be more easily linked to the accounting software. Be disciplined in using credit cards.
4. Fix Your Chart Of Accounts And Be Consistent
Your chart of accounts is a list of all the different accounts that transactions can be allocated on. Have a chat with your accountant on how to customize the accounts in the cloud accounting systems. Make sure that the accounts listed make sense for your business.
Take note to allocate those accounts consistently to be able to clearly see the flow of your finances.
For example, if you have paid software applications, for this month, you allocated it to Software Apps, then the next month you allocated it to Marketing Tools, at the end of the month, you will see a decrease in the allocation for Software Apps when in truth, it was just allocated to the Marketing Tools account.
5. Develop A Rhythm In Your Bookkeeping
Whether you’re doing your bookkeeping or someone else, break it down into daily, weekly, fortnightly, quarterly or annual tasks.
Identify the task, who needs to complete it, and when it needs to happen. Afterwards, schedule the key tasks in a calendar to keep up to date.
This is especially useful if you are working with a team of accountants, bookkeepers or a VA, so that everybody is on the same page.
6. Firm Up A Debtors SOP
Oftentimes we create SOPs for different areas of the business and forget the SOP’s for Debtors.
Steps can include running a report on a weekly basis in Xero, exporting the data into a Google or Excel sheet to know who needs to be followed up and then setting up a follow-up email template. For examples of email templates, you can check out the Bean Ninjas Financial Literacy course.
7. Set Up A SOP For Paying Bills
Paying bills on time will strengthen your relationships with your suppliers. Pay consistently and on-time rather than always waiting for the final notice for payment. Set a day in your calendar to pay the bills or assign someone in your team to create batch bill payments.
You can use Xero (under the Bills Payment section) and see at a glance which bills are due and what is outstanding and needs to be paid.
8. Build A Dream Team
No man is an island, especially with finances, and it’s always good to have an extra set of eyes when dealing with numbers.
A good team consists of:
- CEO – major decision maker
- Tax accountant – staying up to date with tax matters
- Management Accountant/Virtual CFO – analyzes business numbers
- Bookkeeper – makes sure that the data in the system is accurate
- Admin – for data entry purposes
9. Review Your Financial Reports
Start with the balance sheet. Is it accurate? Are invoices paid?
Look for potential errors and talk with your bookkeeper to resolve areas with inconsistencies, and then review your profit and loss reports.
Is income increasing? Do you need to adjust the prices? Is there anything you need to change to improve performance?
10. Create a Cash Flow Forecast Report
Begin with your opening bank balance, how much money is coming in from the customers and the projected expenses.
This will help you to predict the cash flow month by month.
HOW TO GET STARTED
- Set up Xero well
Ask your bookkeeper or accountant to help you set up your accounting software.
2. Allocate the time to document SOPs.
Doing this right from the beginning will save you from future headaches. Work with your team to ensure this works for everybody.
3. Have someone review your work for a few months.
Again, ask for feedback and assurance that you are on the right track.
4. But most of all, be patient with yourself.
She is the Founder and CEO of Bean Ninjas, which helps eCommerce businesses, agencies and coaches & consultants with their bookkeeping and financial reporting.
