4 min read • January 17, 2017 on Financial Post
January is the start of a new fiscal year for many small business owners, with new revenue targets, budgets and financial projections. It’s a good time to assess not only the financial health of your business, but also the tools and resources you’re using to run your accounting. Here’s a checklist of things to consider — and to pay attention to — in order to make 2017 your best year yet.
Start with who’s managing your finances. Increasingly, companies such as Flip Accounting and ConnectCPA are launching to help small-business owners outsource their daily bookkeeping and financial planning, and can be more affordable than hiring staff to do it.
Flip founders Matt Hicks and Mike MacDonald started the company to help small-business owners become more aware of their daily operations, and to help them move to cloud-based and app-based tools for their finances. Flip handles everything from payroll and employee expenses, to invoicing and accounts receivable, to the larger financial modelling and budgets that are key to success.
“The transition of accounting and bookkeeping functions to the cloud has been to the benefit of the small business owner,” says Hicks. “It’s not just your accounting system that’s in the cloud, it’s your entire accounting department. And it’s far more cost-effective than hiring in-house. We focus on value pricing instead of billable hours as we offer fixed monthly fees, which is also great for budgeting.”
ConnectCPA co-founder Mike Pinkus and his team helped That Clean Life founder Abigail Hopkins set up an online accounting system, figure out taxes for their online recipe and meal-planning platform, and to go fully paperless.
“All our meetings are done via video conference, everything is signed via e-signature, all my receipts are captured on my phone (then the piece of paper is thrown away) and everything is secure in the cloud. It’s a beautiful thing,” she says. “And when I need it, there is still a helpful human there to answer my questions and fix my screwups.”
For entrepreneurs who have in-house help, a January checklist should include brainstorming a list of expenses. Flip recommends breaking it down into four categories of fixed costs: operating budget (rent, insurance, supplies), capital budget (costs outlays for major purchases like computers and company vehicles), payroll budget (wages, salaries, employer contributions to EI and CPP, benefits), and discretionary budget (costs that you need to incur to run your business, but aren’t necessary fixed, such as advertising or office snacks).
“Collectively, these budgets will help you figure out your monthly burn rate, which is the monthly amount it costs to run your business,” Hicks says. “Add up all your expenses and find the monthly rate, which will then help establish revenue targets.”
In addition to that monthly burn rate, Hicks says, set a weekly calendar reminder to check cash positions — how much money is in the bank and how much is outstanding in accounts receivable.
Finally, if you manage finances in house, overhaul your financial toolkit. Toronto-based companies Freshbooks and Wave offer such cloud-based tools as invoicing, payroll and expense-tracking solutions, and Quickbooks Online is a popular choice for small business accounting software. Hicks also notes Receipt Bank is one of his favourite apps for employee reimbursements and receipt-tracking — snap a photo of a receipt, and an expense report is created automatically. For payroll, try an online tool such as Wagepoint, which makes pay runs easy and provides employees with access to pay stubs. Hicks recommends Plooto to avoid writing cheques and to send and receive payments electronically.
He often sees small-business owners repeating their mistakes. They fail to create a budget or financial plan (you know the saying — fail to plan, plan to fail). Or if they do, they ignore that budget or plan, or fail to rework it as the business changes. And finally, they use the tax collected from customers as operating cash, and then may not have funds to pay the tax bill when it comes.
While this checklist can’t guarantee you’ll end the year in the black, it can guarantee the process will be more seamless, and that you’ll have more insight into your business’s financial health throughout the year.