INTRODUCTION:
Like everything in today's fast moving world, information has never been more easy to communicate with someone and quickly.
Small business owners are busy! Margins are getting tighter and situations of 'too busy doing' instead of overseeing are getting more and more common. Small business accountants are also seeing this change and are recognising the way their clients are needing their services. Yes everybody wants to minimise tax but the thirst for clients wanting assistance through business advisory services has never been greater.
If you're not on the cloud yet that's ok. However I would ask if your accountant is proactive or reactive? Giving them permission to securely access your numbers has really upped the ante when it comes to having a conversation about how things are going with your business.
How can a small business accountant use the cloud then to really get you on the right path?
Figure 1: Knowing how you are travelling and heading off problems early will save you time and money and provide you moments with ecstasy
1: Virtual CFO Reports
There are many plug in apps that small business advisors have access to that can suck the data in from the cloud application (such as Xero) and produce an analysis of budget versus actual, gross profit and net profit, balance sheet items and cash flow. Graphs are produced that will make it easier for the business owners to understand the numbers and business performance.
A professional month end report with comments and recommendations for improvement is produced just like a virtual CFO. These reports are far more useful than just a balance sheet and profit and loss statement and small business accountants should be all over them.
When the next reporting period comes around actions that were recommended previously are reviewed to determine their effect.
In short, your meetings with your accountants should be far more effective. Providing evidence that you regularly professionally analyse your figures will also give any potential buyer of the business more confidence so in some circumstances can lead to higher business valuations.
2: Predicted Profitability Throughout The Year Updated
A neat feature of the accountants' plug in apps can be that the reports will look at the current year to date actual and then take into account projections from the 3 way budgets when assessing the likely year end result. If the actuals are behind budget, planning can be done in later months to work out how the original budget for the year can be achieved.
Figure 2: Benefits of cloud accounting are endless.
3: Tax Planning Constantly Reviewed
By consistently updating the actuals and having the projections built in for the likely year end result, tax planning should become a much easier task and won't have to be left until the last minute (May/June). Tax payments and the effect on cash flow can then also be taken into account earlier and any shortfalls can be planned for either by borrowing or injecting funds from elsewhere.
4: Prevention Better Than Cure
Monitoring budget versus actual each month should highlight any problems when things aren't going as expected. The following things might be picked much earlier than waiting until after the financial year (sometimes nearly 2 years after they first started to occur!):
- margins down due to unauthorised discounting, supplier price increase or theft;
- cash flow tight due to invoices being sent out late, monies owed not being followed up, purchasing too much stock or paying suppliers early;
- overtime being incurred unnecessarily;
Figure 3: If only he'd had his monthly meeting (grand finals are not won by just turning up!)
5: Correction Of Data Entry
Small business owners are not accountants! Sometimes entries are put to the wrong places and are not fixed up until well after year end meaning numbers are wrong and therefore inaccurate. Having a program in the cloud such as Xero will allow your accountant to log in easily into the system and check to see if things look right and if not, they can advise or do the correction journals themselves.
There is no need to copy the file, download and send to the accountant and then get it sent back etc meaning data entry doesn't have to stop while the errors are being corrected.
This is much easier and convenient for everybody!
CONCLUSION:
Much has been written about the benefits of cloud accounting but really the biggest benefits are getting more reliable business advice from your accountant. Allowing them secure access to the numbers should be like giving them a sixth sense and jumping on problems with the business sooner rather than later. They should not have to wait for you to bring your numbers in which are often forgotten about until the end of the year.
Real time should mean more real profits and cash flow.
Now that's something everybody should be aspiring to!