Help! 5 signs you need financials help – and what to do about it

Less admin, more freedom.

Help! 5 signs you need financials help – and what to do about it

Your finance systems are all the ways you keep track of how money moves through your business.

If your financial systems are in good shape you will be able to focus on getting business done and not getting bogged down in admin.

So why do successful businesses make keeping their financial systems in shape a priority?

Knowing you are not duplicating data and risking data entry errors saves time and stress.
Knowing information is readily available from any device and in real time means you’re not chasing around trying to find out what’s going on.
Knowing you can make quick decisions based on solid data makes it easier to succeed.
Knowing your financial systems are robust means less risk of accidental loss or intentional fraud.

What are the 5 top signs that you need help?

Pressure on Cashflow
Accounting info is out of date
Accounting info can’t be trusted
It’s a struggle to keep up with IRD filing
You can’t make quick business decisions

If your business is showing 2 or more of these signs then it’s time to take a closer look.

What are the ways to make things better?

There are many parts to making up a strong and robust financial system and if any area is weak it will more than likely affect the other areas too. However, the good news is that this also works in reverse - if you address problems in one area, that will also help to fix issues in other areas. So sometimes what can initially seem like an overwhelming list to fix up can actually fall into place easier than you might expect. As an example if you had a manual purchase order system and it was causing data entry errors (due to illegible writing), delays (other staff not having the info at hand), and difficult decision making (not knowing what has been ordered), then all these things will improve just by adding a simple centralised system everyone can access. Here’s a breakdown of some things to look for and pointers on how to fix them.

Cashflow Pressure:

How quickly do invoices get sent out after the job is done?

Use software that allows you to keep track of deposits, create and send invoices on the spot and accept payment instantly from a cell phone or tablet.
Use software that keeps all info on jobs or orders in one place so that when the work is done you don’t have to chase up information before you can invoice.
Do you send reminders and follow up on overdue payments?
If you use Xero, switch on the automatic invoice reminders (3 reminders – your choice of when and what they say). There are also a range of other cost effective follow up software programmes to choose from such as www.debtordaddy.com
Send statements regularly so your customers know what’s due.
Have someone on staff responsible for picking up the phone to chase up overdue accounts. It works. Or call Delwyn at her use a pay per hour credit control agency www.backtoblack.co.nz.
Do you pay your bills on time but not before time?
Use your accounting system to track who you owe and when and schedule payments ahead so you keep the money until the day you need to pay.
When you have a good payment record, try negotiating with your suppliers for more flexible payment terms that suit your cashflow cycle.
Enter all your supplier invoices into your accounting system to minimise the chance of accidental overpayments and duplicate payments. If you pay on statements rather than individual invoices, then have a process to check you are paying the correct amount. If you accidentally overpay, and your supplier doesn’t have robust checking systems you may never find out – you just lose the money.

Info out of date:

Is the right person doing the accounts?

Accounts work should be completed quickly and easily by someone who has the right skills and speed.
Review your staff structure. If you have mixed roles combining reception / co-ordination / administration and accounts, it could be worth considering if you can be more flexible about what skills you need, when and where. Most people are good at something, hard to find people who are good at everything. These days staff often really value having flexibility and not everything needs to be a full-time role.
Consider outsourcing – it could save you money as well as stress. Consider tapping into a wealth of skills from people working from home, in the cloud, with flexible hours. This way you can eliminate paying for any down time and at the same time open up the hours staff can be available.

How easy is it to update information?

Use cloud software that allows accounts work to be done from anywhere, anytime.
Have all information digital so no-one is chasing hand written forms or waiting to get info from someone’s individual knowledge or diary.
Make use of the features of your software, or other apps to capture and send pictures and documents immediately into your system so that everyone has access to them. As one example there is affordable software and apps available to automate invoice and expense entry just as one example.
If you have a manual task that involves filling out clipboard forms and then entering in the data – search for an off the shelf software solution! There a multiple of options to put an end to these slow processes and allow even the less tech savvy to get the info correct first time.

Can’t trust the finance system:

If your business has account balances that just look wrong then it’s time to take a closer look. Get help from a certified bookkeeper or accountant to check the records, fix errors and show you where it went wrong and what to do in future. Bookkeepers who are experts with the software can correct mistakes quickly and in bulk. If this is happening in your business there may well be several contributing factors, and if you fix one it will almost certainly help with the others.

Review your accounting software set-up to make sure you’re not doing it the hard way. If you didn’t use a software set-up expert there is a good change you’re not getting full value from your software. Many businesses use less than 10% of the capability of what they already have.
Review your Chart of Accounts. A Chart of Accounts should be set up so that it makes sense to you, and shows you what you need to know about your business. If it’s years old and has been inherited from a previous owner or system there’s a good chance it’s not giving you what you need. Expenses might not be grouped in a way that is helpful, or product lines are not being separated in a way that you need to make decisions.
Review the integrations between multiple systems. If you are using 2 or more software systems (for example Job Management / Inventory / POS ) then use an integration expert to check how the systems pass information between them and what you need to do to keep this in order.
Fix up mis-codings, both one offs and regular. An example of this is sometimes Wages not showing up on the Profit and Loss. This can be because wages have been accidentally coded into a similar sounding but quite different account such as “Wages/PAYE Payable”. This is a common error with Xero Payroll.
Go through old invoices in the system and confirm if the money has actually already been received, can be recovered, or needs to be written off. We commonly find payments have been received but not matched correctly against invoices in the system so still show as outstanding. Sending statements will also often flush these out as customers contact you to advise they have actually paid.

Getting caught with IRD penalties:

Paying fines relating to GST and PAYE non-filing, and spending time dealing with IRD when you don’t have to, is just not productive in any way, shape or form.

Decide who is going to be responsible for filing GST / PAYE and how reminders are going to happen
Change to a payroll provider who is an Intermediary such as www.ipayroll.co.nz They take care of all the IRD compliance and you will never pay an overdue penalty again. You don’t even need to log into the bank to pay staff, or remember to pay PAYE – it’s all taken care of.
Consider using a bookkeeper to prompt you on due dates, set up automated filing and payment through the IRD site, and deal with transactions promptly before you forget what they are.
If you’re on Xero there are some wonderful features that make it very easy to keep your receipts and invoices right where you need them – in the Xero system. No need for your accounts person to be chasing down the paperwork to get the returns filed – it’s all there on-line.

Not able to make good quick decisions:

If you don’t have the information you need to make good quick decisions in your business, this can be costly in many ways. Not only might you be missing important information and not knowing what might be going on, but you will also be less able to take advantage of any passing opportunities. You may need to make changes to multiple areas in your financial system but it will be worth it in saved time, and better peace of mind. As well as all the areas suggested above you could also bring in a software expert to confirm what information you can get out of the systems you have. You might be exporting information into a spreadsheet to get the information you need, where your software is actually capable of generating the report. As an example, the new Xero reports function has a lot more flexibility in what you can generate right out of Xero – budget v actual across selected areas of your business, reporting on individual product lines, individual suppliers or customers are just a couple of options. And yes you can also now add formulas to make up reports showing profit margins across product lines. Ask a bookkeeper to spend some time with you to understand how to find the information that makes sense to you. Good bookkeepers have excellent attention to detail and understand the importance of having meaningful data.

We work with businesses to work out where the inefficiencies are in your financial systems, give you some practical options on how to improve things, and help you put in place supporting software that suits your business needs. Want to get help for your financial system? Book a free one-hour discovery session with us and we’ll help you get started. Call me Helen on 0276005794 or email me on info(at)livingbusiness.co.nz. We work with businesses to understand their financial systems, recommend how to make practical improvements, and stand by to support putting new systems in place.