The old system of accounting is really boring.
If you are like most small business owners each month you ‘transact’ (making it, buying it and selling it) through a manual system, a spreadsheet, a timesheet, a cash register and/or a receipt or quote book. Then progressively through the month (or at the end of the month) the data would be entered into a ‘hard drive’ accounting system – either by you or an external bookkeeper.
Sometime into the new month you may get an income or Profit & Loss statement which typically was wrong. You would monitor cash balances via internet banking or the check book. At the end of the year you would package up all of your receipts and a copy of the year end file from the accounting system and send it in to the external Accounting firm for processing & filing.
The external Accountant would get started on your file then stop, ask you questions, get started again, ask more questions and then sometime into the future (often months go by) they would finish your job and present you with a ‘set of financial statements.’
They have a meeting with you, do not explain things very well, get you to sign the documents, they then lodge/file the work with the government authorities and you’re done. The financial statements they present have old redundant data that reflect last year’s performance not yesterdays. How can you run a business on old redundant data?
Along the way with this most typical process we are sure your most important questions / issues were not explained very well – if at all. We find there are 4 key questions every small business owner wants and needs answered:
- How much in taxes do I have to pay and why?
- Where did the cash go?
- Am I am making money and if so how much?
- How much free cash do I have this month?
You will never get an accurate ‘real time’ answer to those 4 questions while you have an archaic ‘desktop’ or ‘hard drive’ based accounting system that involves manual data entry.
These systems were developed last century and they are well past their use by date.
Accounting can be sexy if you change your systems to ‘cloud’ (fancy word for internet based) technology.
Your accounting system ‘talked’ to your client management system which talked to your inventory system which talked to your distribution or point of sale system. All the technology was hosted on the internet and it synchronized with each other every day – or every minute if you wanted. They may be different providers for each component but they are linked together via the internet.
What you end up with is rich data, accurate data, less manual input and awesome reports to help you run your business in real time. Everything is super safe and easy to use.
In our business we get amazing dashboard reports automatically sent to our email every single day. We get client numbers, client frequency, most recent activity, forecast pipeline, cash balance and revenue & profit – yesterday, month and year to date. These reports give us a snapshot of the most important things going in our business every day. They enable us to run a better business because we have accurate information at our finger tips to make better management decisions.
We know how much money we are making. We know where the problematic areas are. We know how much cash we have to play with.
You cannot get this sort of data on multiple ‘hard drive’ or manual based systems. You just can’t. You can only get what we are talking about with cloud based technology.
It starts with your accounting system. When the data is in the cloud it can be seriously sexy!
With our CPA office in Flower Mound, we can come to your business location and offer a free, confidential consultation to discuss the pros and cons of using a cloud accounting solution in your business. Call us on 972-446-1040 to learn more.
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© Rob Nixon. Rob Nixon is the global leader in helping Accounting & CPA firms become Real Time. He has been advising Accountants around the world since 1994. He is the founder & CEO of PANALITIX (www.panalitix.com) and the author of ‘Accounting Practices Don’t Add Up’ and his most recent book ‘Remaining Relevant’. You can follow him on twitter – @therobnixon – or via his blog – www.robnixon.com.