How Smart Bookkeeping Leads To Business Insights
Would you like to own a company that is growing at least 100 percent each year? That’s the happy situation of GoBeyond SEO, a Charlotte firm founded in 2010 that specializes in web design, social media campaigns and content marketing. GoBeyond serves private and public companies in an array of industries; its clients include the jewelry manufacturer Richline Group Inc., a Berkshire Hathaway company.
Such fast growth comes with challenges. The co-owners, Brian and Trish Saemann, found their bookkeeping had become too time-consuming to handle on their own. They also knew their accounting and other business procedures needed to keep pace as they added more and larger clients.
Brian and Trish decided to hire Lucrum Consulting to help GoBeyond establish smart business processes and allow even more growth. We talked with Brian and Trish about what they learned – and these ideas can apply to all types of businesses. Here are six areas where they increased their financial intelligence:
1. Understand expenses by coding the company’s payments. “We weren’t coding our bills at all before working with Lucrum,” Brian says. “Now our system shows whether an expense is for marketing, software, a capital expenditure, or something else. We can better see where our money is going.” The data allows Brian and Trish to look at their expenditures by category, by vendor, or by purpose to help forecast future expenses or cut wasteful spending.
2. Sometimes simpler is better in accounting. It’s possible to have so many categories under both revenue and expenses that the data is no longer useful. Create categories that are meaningful for your company, but remember the goal is to obtain data that leads to good decisions. Accounting can be a valuable tool, not just an obligation. For GoBeyond, reducing the number of categories in their ledger made the financials easier to understand.
3. Hold clients accountable for paying on time. Trish and Brian realized that positive cash flow was essential to keeping their business healthy. As a result, timely payments from customers became a focus for them. GoBeyond’s invoices to clients are considered past due after just ten days. Lucrum Consulting “was instrumental in showing us how to enforce our deadline and ask for payments on time,” Brian says. “As soon as a payment is late, our administrator reaches out to our client’s administrator. If there’s no resolution, it becomes a business owner-to-business owner conversation quickly.” As a result, Trish and Brian spend less time worrying about AR and cash flow which frees them up to find new clients or better serve existing ones.
4. Consider tracking costs by client. Many business owners know the revenue that each client brings in, but not the expenses that each client causes. Tracking expenses by client is one way to help determine which clients are most profitable. The information can be used to develop more effective marketing campaigns that target the best prospects. After all, every company wants to attract and retain the most profitable clients. GoBeyond now has the capacity to add a profitability by customer component to their reporting.
5. Know the difference between historical versus ongoing bookkeeping. Historical bookkeeping occurs after the month is over. Ongoing bookkeeping happens during the month, so the data isn’t thirty days old when the business owner reviews it. Both methods can be effective, depending on how the information is used. Establish a system that works for your company and stick to it.
6. Consider outsourcing. As a small business grows, paying bills and cutting checks may not be the best use of executives’ time. Trish didn’t think they had the budget for an outsourced accounting department but she also knew she wasn’t satisfied with the status quo. “When you don’t challenge convention, you live with convention,” she says. “By challenging yourself to look at the business with a fresh eye, you open yourself to new perspectives and a better way.”
GoBeyond decided to turn over those tasks over to an outside agency. Now Brian and Trish have more time to concentrate on their customers’ needs.
Six small improvements combined to help GoBeyond increase their understanding of business performance. Now they are ready for the future knowing their accounting department will keep pace.