The world moves fast — and you always need to be moving several steps faster. As an entrepreneur in today’s world, everything moves at a quick pace. Does your financial data? Unfortunately, even with technology innovations many entrepreneurs are making decisions based upon old data or no data at all. Not having timely financial data increases the chances that your business fails or that it does not achieve its full potential. When it comes to timely financial data, there are three main components that will impact it: infrastructure and processes, technology, and business management. Let’s dive into them.
Infrastructure and Processes
You can’t have timely financial data without having the proper infrastructure and processes in place. The components of infrastructure include your accounting software and having Standard Operation Procedures (SOPs). When we start a new engagement with clients, we often see businesses without any formal accounting software in place. Other than by a best guess, they don’t know from day to day, week to week, or month to month how the business is doing. Our most recommended tool for a small to medium sized business accounting system is Quickbooks online. We will get into more details on that system and benefits when we discuss the technology aspect of financial reporting.
SOPs are the other key component to infrastructure and processes. Our typical recommendation is to have documented SOPs so that if you have a change in personnel, you don’t miss much of a beat. Even if you don’t have documented SOPs, you should have standard procedures that you follow on the financial / accounting end. These SOPs would include items such as when, who, and how you receive and pay bills, when you invoice, and when you record accounting transactions. Entrepreneurs are busy, but you need to make the recording of said data a priority. Without that, data will not be recorded timely and there is no way you will have timely financial data. Entrepreneurs should hire someone (internally or externally) to do so, so that they can focus on growing and/or running the business. Other than a CPA firm, no one ever starts a business so that they can spend time recording accounting data.
Technology can be leveraged to make recoding accounting and financial data easier. It can also be used to make digesting and acting upon data easier. As mentioned, Quickbooks online is our recommendation for the technology piece upon which everything is built. It can be connected to your online banking and to transform data entry into data review and classification. It has reports that can be setup to be emailed to the management team on a regular basis. It also has apps that can be tied into it so that you can have financial dashboards that allow you to review Key Performance Indicators (KPIs). KPIs are pieces of data that simplify your business into 3-5 items that allow you to determine at a quick glance how your business is doing.
Timely financial data is ultimately going to be driven by both management and company culture. Is it an area of importance and emphasis for the business? If so, it will happen. If not, you won’t have timely financial data and will increase the challenges that your business will face. The tone of emphasis on timely financial data needs to start at the top.
Timely financial data is a key component to a successful business. We hope that the information we shared today will help you in your entrepreneurial journey. If you have questions about timely financial data specific to your situation or how we could help, please feel free to reach out to us.
Caroline Montgomery, CPA (NC License Number 39017), MSA, is tax manager and partner of Adam Shay CPA, PLLC. The most rewarding part of what she does is helping business owners and individuals achieve their goals, all while working with a dynamic team that is growing quickly. The firm focuses on a proactive approach by encouraging clients to minimize taxes via income tax planning and projections, or by focusing on other areas of their business as part of the firm's Virtual CFO services. The firm also offers tax preparation, fraud and forensic accounting and tax issue resolution services. She moved to Wilmington in 2014 and started at the firm in 2015. Caroline graduated with her her undergraduate and graduate degree in 2010 from East Carolina University. She is actively involved with NourishNC as their Treasurer and enjoys volunteering with various organizations throughout New Hanover County. In her free time, Caroline enjoys spending time with her husband, Mike, and dog, Mason, as well as travelling and going to the beach.
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