Do I Need Business Accounting Software?

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Accounting software helps you gather business insights and run reports efficiently. Learn how to find the right option for your needs.

Key takeaways:

  • The benefits of accounting software include automation, data management, cost savings, report generation, and more.
  • Steps to find the right software:
    1. Outline your goals
    2. Create a budget
    3. Run comparisons
    4. Watch or schedule demos
    5. Talk to an expert

Tax time can be one of the most stressful seasons for business owners. Without a dedicated accounting team member, it may be challenging to aggregate documents, follow every rule, and get things in on time. What’s more, taxes require consistent attention throughout the year, so reports are easy to run and understand, and you aren’t left scrambling to get tax paperwork in order.

A solution many businesses turn to is software integration. A good accounting software program can help you get your time back and stay on top of taxes. Here are the benefits of integrating this technology and a few ways to find the right platform.

The benefits of business accounting software 

New technology may take time to learn. But modern software solutions are simple to master, and accounting platforms immediately take on a lot of time-consuming tasks so that you can focus on other aspects of your business. 

Let’s break down the main benefits of accounting software:

  • Automation: Accounting and bookkeeping processes can be done automatically, saving lots of time on calculations and data entry. 
  • Cost savings: Instead of paying a staff accountant or a contractor to do this work for you, you can save considerable money by allowing software to manage simple tasks.
  • Instant report generation: Manually creating financial documents and reports can take significant time, and it must be done regularly and accurately. Software generates many of these assessments instantly and helps you make them look professional for investors and other third parties.
  • Data management: Financial information exists in numerous locations. With accounting software, you can consolidate and manage data quickly.
  • Easier payroll: Some accounting software platforms can also handle payroll, especially when a business is just starting. Automate tasks like employee payments and calculating paycheck withdrawals. The software also helps keep more accurate payroll tax data.
  • Tax accuracy: Tracking financial data efficiently and utilizing automation helps streamline tax preparation and filing. And you can typically rest assured that everything is accurate. Many software solutions can generate tax reports in seconds. 
  • Better insights: The only way to know how a business is performing is to gather and analyze data. Accounting software helps you view important insights consistently, so you always know what’s going on and which areas need support.

If you’re struggling with bookkeeping and accounting, software integration can be a game-changer. After you’ve decided to automate, it’s time to find the best solution for your needs. 

How to find the best accounting software

As with anything new you bring into the business, there will be a period of trial and error, and you may have to try more than one platform to find one that works best for you. Here are a few steps to getting started:

1. Outline your goals

Not all businesses need the same features in accounting software, so identify your needs to get started. What has been your biggest pain point? Which features aren’t necessary, at least for now? Create a clear list of goals for a new solution. For instance, maybe you don’t need any help with payroll but struggle to generate balance sheets consistently.

2. Create a budget

One of the most important factors will be the cost. Determine what you’re already paying for bookkeeping, if anything. Evaluate cash flow to see how much you could realistically spend each month on a software subscription. The great thing about software as a service (SaaS) platforms is that you can start small and scale up when your business grows. And most solutions are relatively inexpensive.

3. Run comparisons

There are numerous accounting software options out there. Make sure you compare options as you prioritize features and factors. For instance, maybe one platform seems to have much better customer support than another company. Or, one software allows for easier add-ons if you want to try new tools later on.

4. Watch or schedule demos

You may have no real idea how a program works until you see it in action. Many providers will meet with you one-on-one to answer any questions and give a demo; others offer online demos. Numerous brands also have online training videos you can watch at your convenience. Make sure to get to know the interface a little bit before making a decision.

5. Talk to an expert

If you’re overwhelmed by all your options for accounting software, consult with a tax expert or business advisor. Professionals know which platforms may work best for you and what to avoid.

Ultimately, an accounting software platform will make life far easier as a business owner. And remember that going with a monthly subscription for a SaaS platform will provide more flexibility without a purchase or long-term agreement.

The Provident CPA and Business Advisors team helps business owners with strategies and tax minimization, helping them grow while paying the least amount of tax legally possible. Reach out to our team to learn more about our services.

Business Cash Flow Analysis: The Essentials

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A cash flow analysis shows the inflows and outflows to and from your business at a given time. It’s a crucial step in proper cash flow management.

Key takeaways:

  • Cash flow is the money moving in and out of a business.
  • Poor cash flow management is the leading cause of small business failures.
  • A cash flow analysis evaluates what is coming in versus what is going out, which results in positive or negative cash flow.
  • Tips for cash flow management:
    1. Reassess bookkeeping practices
    2. Use software
    3. Look to cut costs first
    4. Don’t confuse cash flow and profit

Cash can make or break a business. In fact, poor cash-flow management results in 82% of small business failures, making it the number-one cause. This is why startups and all small businesses, in particular, benefit the most from detailed cash flow analyses to get a sense of likely growth or problems that need to be addressed. In addition, companies experiencing a major transition or expansion should keep an extra-close eye on cash flow.

Here’s are the essentials of conducting a cash flow analysis that helps create a stable, prosperous future.

What is cash flow?

Cash flow is simply the money that moves in and out of a business. It measures all monthly expenses and business costs against revenue coming in. Positive cash flow occurs when more money is coming in than going out, meaning liquid assets are increasing. Negative cash flow is when expenses exceed income.

A cash flow statement is a crucial document that outlines a business’s cash situation over a set period. It lists all inflows from business operations and investments, and outflows that cover business activities. Note that a cash flow statement doesn’t always show all expenses since not all costs are paid immediately. Transactions are recorded as cash outflows when they actually occur.

How to conduct a cash flow analysis

The basic way to perform a cash flow analysis is to look at revenue and expenses over a set period you want to examine. To assess the upcoming month, you would evaluate unpaid purchases for that month and the total sales and other revenue expected to come in. If you see that you’ll have to pay more than is projected to make, you have a cash flow problem. It is a best practice to perform a cash flow analysis each month.

A few business components are involved in this effort, including accounts receivable, accounts payable, inventory, and credit agreements. Each of these elements should be examined in the overall picture, and analysis can be performed on them separately. Doing this helps you uncover what’s going on with a problem area.

For example, taking a close look at accounts receivable will tell you which clients pay on time and which are usually delayed. Knowing when that revenue is likely to come in helps you plan more efficiently against expenses.

Tips for better cash flow management

Regularly conducting analysis won’t solve a cash flow problem on its own. It simply shows business owners what’s going on and what is likely to happen in the near future. However, this assessment is the first step in uncovering an issue and improving practices to address it. So, it is a critical financial practice.

Here are a few tips to getting a handle on cash flow:

1. Reassess bookkeeping practices

Businesses must keep financial records organized. Otherwise, it’s hard to stay current with reports and statements that guide decision-making. These documents are also crucial when obtaining capital from investors or lenders. Reevaluate your bookkeeping practices. Make sure you’re dedicating enough time to these tasks and are updating the information regularly.

2. Use software

You may not have the time or organizational skills to manage everything manually. Instead, try out an accounting software platform that helps manage cash flow statements using automation. It’s much easier to keep everything up to date and generate reports with a good, dedicated program.

3. Look to cut costs first

When there’s a problem with cash flow, the first place to address the discrepancy should be in your expenses. Look closely to see if there’s anything you can cut, at least for now. Research to see if you could get the same services for a lower price. Reach out to vendors and negotiate. There are many steps you can take to lower expenses.

4. Don’t confuse cash flow and profit

Some months, a cash flow analysis may show that you have positive cash flow, which is good. But this doesn’t necessarily mean that the business is profitable. Profit is the overall amount of money you have left after paying expenses, whereas cash flow measures the net flow of cash in and out of your business at a given time. So, you can still be profitable overall and experience negative cash flow in a given month, for instance. 

A cash flow analysis is essential to determine what’s going in and out of your business so you can keep things trending positive and meet your obligations. This analysis works in conjunction with other financial reports to give you a holistic view of business performance to make informed decisions. 

Remember, cash crunches are the number-one small-business killer. So, it’s crucial to conduct a reasonably simple cash flow analysis regularly and diligently.

The Provident CPA and Business Advisors team helps business owners with strategies and tax minimization, helping them grow while paying the least amount of tax legally possible. Reach out to our team to learn more about our services.

How to Define Your Company Values (and Why They Are Critical)

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Core values help companies make better decisions, practice transparency, and align teams around a shared vision.

Key takeaways:

  • Company values are principles and ideologies that drive decisions and uncover and reflect the business’s identity.
  • Values are crucial because they contribute to better company culture, goal achievement, and brand reputation.
  • Tips for defining company values:
    1. Think about the long term
    2. Make sure they won’t crumble under competition
    3. Ask for feedback
    4. Consider the hiring process
    5. Be as specific as possible
    6. Use phrases
    7. Socialize your core values

Every business starts for a reason, and it’s not just to make money. Maybe its rationale is to provide a crucial service to a community in need or use years of experience and expertise to help other organizations solve a problem. This is the core purpose of the business, which enables owners to set the foundation for what’s to come. 

Digging into these ideas will help you define your core values—those basic principles about why you exist, what’s most important to you and your employees, and how the business fulfills its purpose. Having a solid grasp on these values helps you create and meet your goals and continue growing effectively and confidently. 

What are an organization’s values?

Core values are the lifeblood of your business. They represent why you started the company in the first place and help you define its basic identity. They serve as fundamental principles that guide decisions and goals.

Company (or core) values aren’t dry concepts like a business model or desired revenue. They are beliefs and ideologies. Examples include:

  • Integrity
  • Accountability
  • Reliability
  • Diversity
  • Dedication
  • Efficiency
  • Passion
  • Enthusiasm
  • Loyalty
  • Respect
  • Community

These words can be combined and turned into phrases for a more specific impact. Identifying core values means reckoning with purpose and determining what you want to guide the business and its individual departments and employees. 

Why are company values important?

Core values aren’t just nice additions to an “About Us” web page. They help accomplish many tasks that can make or break the business. Key areas where company values come into play include:

  • Leadership decision-making
  • Company culture
  • Customer service and satisfaction
  • Employee engagement and morale
  • Brand reputation and transparency
  • Behavior norm-setting
  • Recruitment and employee retention
  • Target setting and planning

Having clear values helps everyone stay on the same page when solving problems or interacting with the public. Employees understand what’s most important to the company, and they thus feel a stronger personal connection to the business’s purpose and identity. 

How to define your company values

Identifying your purpose and how you fulfill it may seem straightforward, but it can be hard to come up with a succinct way to say these things. Core values should be simple for people to understand and meld with the business’s actions and priorities. Here are some tips: 

1. Think about the long term

New businesses often define their core values explicitly according to their current goals. But remember that for startups, these objectives may look a lot different once the company is more established. It’s hard to think about much else aside from growing right now and getting new customers. But push beyond those immediate goals to uncover the why and how behind the business.

2. Make sure they won’t crumble under competition

When you come up with a value, think about whether it would hold up if the competition suddenly heats up and you have to make some pivots. If you believe a value could change in different circumstances, it shouldn’t be one of your core values. These principles should stay strong no matter what the climate looks like.

3. Ask for feedback

You don’t have to define values on your own: ask employees and colleagues who have a stake in the company’s success. What comes to mind when they think about the purpose of the business and how its people behave? What guides team members to perform well? What do they think customers need to understand? 

4. Consider the hiring process

Values should help you make hiring decisions. This means looking for candidates who share the organization’s values and are excited about its mission. These principles should help you hire better cultural fits; they serve as a filter. So, explicitly think about whether they align with and aid the recruiting process. 

5. Be as specific as possible

Some values may sound abstract since they are not always measurable items. Sure, every business wants to come off as “honest” and “dedicated.” But can you actually delineate how you’re going to be those things? Be as specific as you can about why a value is vital to the business and how you and your team will express and live by each principle. Think about the daily practices and habits that will lead to these values becoming a reality.

6. Use phrases

Core values don’t have to be one word, like the examples above. They can also be short phrases that better explain your principles. You can combine words into one value when it makes sense, like “creative and driven.” You can then explain that your team is “continually motivated to come up with innovative ideas to serve modern clients.” Remember that you should be able to provide a short description under each value to dig into what a concept means.

7. Socialize your core values

Once you know who you are and what your values are, it’s time to put them into practice. Socializing your values means that the team acts on and discusses them. They’re brought up to motivate employees and inspire customers. Consider implementing a rewards system that provides positive reinforcement for people who prioritize and exemplify the values.

Identifying your core values is a necessary step to knowing why your business exists, its foundational principles, and how you serve clients or customers. They align teams and help you make decisions, both short and long-term. When you feel like your goals are getting off track, you can revisit your values to reassess and make changes as needed. 

Sometimes, you may need a little help defining your core values and aligning them to your business model. Provident CPA and Business Advisors can review your systems and help you establish the right practices to meet your desired outcomes. We utilize the Entrepreneurial Operating System (EOS) to help our clients nail down their six key components of the business: Vision, People, Data, Issues, Processes, and Traction. 

Contact Provident today to learn more.

8 Most Important Small Business KPIs

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It’s impossible to grow without the facts. Learn what essential business data you need to be tracking and how to do it.

Key takeaways:

  • Eight most important KPIs for small businesses:
    1. Customer acquisition cost
    2. Conversion rate
    3. Employee retention rate
    4. Operating cash flow
    5. Net income
    6. Website traffic
    7. Social media engagement
    8. Accountability
  • Tools for tracking these KPIs include social platforms, Google Analytics, and financial software.

A key performance indicator (KPI) is not a number that exists in a vacuum. It’s a metric that tells you how your business is specifically performing against goals and objectives. It measures success and helps you predict the future. KPIs reveal the health of a business so that owners can pivot when necessary.

Without these metrics, businesses can’t know if their strategies are working. KPIs can be linked to the organization as a whole, specific departments, or individuals within the company to determine weak spots, helping business leaders make better decisions and set better goals next time. They also show real-time information about a campaign’s effectiveness or interactions with customers.

So, what small business KPIs should you be tracking? 

8 most important KPIs to track

Every business is different, and the KPIs that are prioritized against current goals will vary from company to company. To start, make sure that all of your objectives are measurable and you know the specific timeline you want to assess. Also, remember that not all crucial KPIs will be strictly related to finances; they may also involve marketing campaigns or customer engagement.

Let’s take a look at the most important KPIs that most small businesses generally need to start tracking:

1. Customer acquisition cost

You should know how much it costs to obtain a new customer. Determine every expense that goes into getting a new sale and divide the sum by the number of new customers acquired. You also need to know the exact period you’re measuring. This is an essential KPI because it helps you understand if sales and marketing tactics are working and are worth all the cost and effort.

2. Conversion rate

Getting people to convert is an integral part of growing a business, and conversion rate is a crucial marketing KPI. It tells you how successful you are at getting people to take the action you want them to take, whether it’s buying something, signing up for a newsletter, or submitting their lead information. Measure conversion rate by taking total conversions and dividing it by total visitors or prospects. 

3. Employee retention rate

If you have employees, it’s vital to track how frequently people leave. The employee retention rate can tell you whether you have a healthy culture, an appropriate workload, or issues that must be dealt with to keep workers satisfied and engaged. Simply divide the number of employees that stayed during a specific period by the number you had on the first day of that period.

4. Operating cash flow

You need to know if you’re going to generate enough revenue to pay all expenses and have some left to grow operations. This measurement is operating cash flow, and you can calculate it by adding operating income and depreciation and then subtracting taxes and changes in working capital.

5. Net income

Net income is how much money you have after paying all expenses. This is your net profit, the money you have when all is said and done. Of course, you always want this number to be high, but if it fluctuates, you can discover what may be causing profit losses. Net income is simple: subtract expenses from revenue.

6. Website traffic

Most small businesses now have a website, so it’s simple to find them online, or they offer an e-commerce option. If you have a website, it’s important to put a process in place to track the traffic numbers. Using website tools like WordPress and Google Analytics gives you instant access to stats like these, and you can see your visitor numbers on a daily, weekly, monthly, and annual basis.

7. Social media engagement

You also may be trying to build up a social media following for your business. Social is a cost-effective way to reach people, and 71% of small- to mid-sized businesses use these platforms in their marketing strategy. Social metrics to track include engagement numbers for each post, follower count, impressions, clicks, likes, shares, comments, reach, and more. Opening a business account on Facebook, Instagram, or Twitter grants access to these analytics.

8. Accountability

One KPI that is too easy for businesses to overlook is accountability. What does this mean, exactly? Your team needs to be held accountable so that tasks are getting done and roles are clear. An accountability chart implemented under the Entrepreneurial Operating System® (EOS®) helps you outline what needs to be done, who will do it, and how that person or team will be held accountable. The Traction component of the EOS is concerned with ensuring discipline and accountability exist, so you become better at executing actions that help you reach your goals.

Tools for tracking KPIs

Knowing what to track is just the first step. How do you start monitoring and learning from data? 

Again, for platforms like social media and your website, you can use built-in tools for businesses that tell you data like engagement, conversions, clicks, and interactions. 

For financial KPIs, consider using cloud-based accounting software that enables you to view the numbers in a simple dashboard whenever you log in. You can decide which metrics you want to track at a given time and run reports. QuickBooks is one example of software that helps business owners keep tabs on essential financial data.

Provident CPA and Business Advisors can help you stay on track

Sometimes, all you need is some guidance from experts. Provident CPA & Business Advisors helps small businesses create the right model and stay on track. We use the six components of the EOS to help our clients clarify their goals and achieve their vision while providing essential tax services and strategies.

Contact our team today to learn more.