What is really happening in the life of our small business?
As a small business owner for over 20 years, that’s a question I’ve
asked myself many times. And one I’ve frequently been asked by other
small businesses. It’s often hard to step away from the day-to-day running of
things to take in the big picture. But it’s essential to know when to call a
stop to the every-day so we can take an objective look at what’s really
happening in the business – and use the information to make decisions
that will contribute to its overall success.
In days gone by, obtaining useful financial information was tiresome. It
took time and money to get accurate, up-to-date data to review in order to
understand what was happening in the business. But now we have real-time,
single-ledger access to online data – and those of us in small business have
fast come to expect clean data. We want to know what is happening on a daily
basis – and want to project ahead rather than look at what happened in the
past.
As a small business owner, we can act to make sure we’re getting the
information we need and that the story it tells about our business is correct.
Vital metrics for your
business
- the cash you have immediately available
- your cashflow projections including projected
turnover - debtors – money owed to your business
- creditors – money your business owes to
others, mainly suppliers - your sales tax and payroll liabilities
- income and other tax liabilities for future
year and upcoming years - equity ratio – seeing whether your equity is
building and where your money went
Before I started at Xero, I ran several businesses – which included an
IT services company and a motorcycle dealership which offered finance
brokerage. These were the days of desktop computers. The constant chore of
entering a backlog of data – which often got left to last – meant seldom having
up-to-date data. This made it very difficult for me to see what was happening
in the business.
We all have a gut feel of what’s going on as far as the money coming in
and going out is concerned. But often we can’t see the real picture or the
trends without actual data. That’s what I knew I needed, so I gave up many
nights and weekends to the task of entering clean, accurate data. I lost a lot
of family time during this process – not a great work/life balance. Had I adopted
cloud technology then – it was just starting to be introduced – my
business and my family would have benefited hugely from the real-time access to
data and automation it offered.
The basic formula is: Automation + Real-time clean data = Current financial
information
The formula + automated
bookkeeping
This formula allows the business owner and their advisor to see what is
happening. And having a fully automated bookkeeping process is vital to
achieving this. Not having a system in place is a direct opportunity cost to
the business.
So what does an automated bookkeeping process look like? The first step
is connecting with an advisor who can help you set up and implement a system.
Then they should work with you to understand, plan and shape your business
journey – to put into words what the numbers are saying.
If you choose Xero as your online accounting software, it will not only
automate your accounts, but will become the foundation of your business.
A Xero advisor can help you to select and use any of the more than 500
software applications that exchange data with Xero, eliminating
duplicate data entry and adding functionality.
These tools include Receipt Bank which captures
images of source documents and feed them into Xero for you, and Crunchboards which uses your Xero data to tell
the story of your business. Crunchboards is a powerful all-in-one forecasting
and reporting engine. It gives you and your advisor live, real-time visual
reports showing how your business is performing against KPIs and benchmarks,
right down to an hourly basis.
But only clean data gives you the accurate financial info that
translates into the true clear story you need – no matter whether it’s good or
bad!
