According to SunTrust Business Owner Research, most small business owners agree that budgeting expenses and monitoring cash are effective ways to improve cash flow. Yet, two-thirds are not tracking and budgeting expenses tightly enough and most do not track the profitability of their products, customers and markets.
It can be difficult and time consuming to gather all the numbers necessary to manage cash flow and profitability. The information needed is often in multiple places throughout an organization, and most owners don’t have the time or systems available to easily reconcile the information and generate the reports needed for effective tracking.
However, advancements in financial services software and online technology are creating significant opportunities for profit-minded business owners who want to take a more proactive role through delegation.
By working closely with your financial partners, including CPAs and accountants, you can implement financial systems to better control cash flow, budgets and profitability. By linking internal financial operations with smarter electronic systems, you can better protect business assets against fraud and crime, while delegating many of the day-to-day operations.
Business owners see four ways in which CPAs can “operate” more like virtual CFOs:
53 percent want their CPA to help manage cash flow and budget expenses
44 percent want their CPA to help implement systems to manage expenses, speed payments and control cash
38 percent want their CPA to provide capital planning to ensure they have the resources needed to succeed
30 percent want help to protect against fraud, crime and disaster for their business assets
The adoption of integrated, electronic software and online banking services are key elements in making the transition to a virtual CFO. For example:
Most business owners now have PCs, accounting software and online banking accounts.
Many business owners have the ability to connect with their CPA using secure, remote Internet access.
More than 75 percent of business payments take place electronically with credit cards, automated clearinghouse (ACH) transactions, online payments and e-checks, according to a 2010 Federal Reserve Payments study.(1)
The following activities are practical actions you and your financial partners can implement to better control your cash flow, budgets and profitability with less time and effort:
1. Track payables and receivables electronically with an online-banking solution.
Consolidate the literal “pieces of paper” into one virtual source for all deposit and payment transactions, whether by card, paper checks or electronic payments.
Automated daily cash reconciliation, making it easier to spot and stop fraud immediately.
Electronic collections enable faster, lower-risk collections compared to waiting periods associated with customers mailing payment. Electronic collection tools make it easier to identify and accurately reward fast payers who earn payment discounts when you receive the money.
Transaction-level purchasing detail enables smarter buying with historical data on volume, pricing, inventory control and payments.
2. Grant your accountant limited, tiered access to your online banking solution.
Easily collect and track spending and collections information in one place, even for multiple business entities with common ownership. Your accountant can easily consolidate transaction-level details to assemble and track budgets and cash-flow forecasts.
You maintain control of check writing and spending approval. Most financial institutions provide options for your online banking solution that limit purchase authority by establishing clear entitlements, authorizations and spending limits.
3. Online Payroll allows you to export your payroll expense information directly into a spreadsheet or QuickBooks®, which makes it easier for your accountant or bookkeeper to generate reports that help you track, manage and allocate your labor costs by project, customer or product.
4. Have your accountant compile a monthly flash report to track key indicators of financial health, including sales, profitability, performance against budget and cash flow.
5. Have your accountant analyze the sources of profits and positive cash flow.
Which customers, products and projects drive your profits?
Are there drains on your profitability you can address, including customers, inventory or marketing costs?
1 Federal Reserve Study, December 2010
About SunTrust Business Owner Research:
SunTrust surveys small business owners and advisors as part of its ongoing business seminars and symposiums. The small business owners attending these events include both SunTrust client and non-client business owners and are representative of the broad spectrum of businesses located in the SunTrust markets. The research cited in this report is extracted from these 5,425 small business owner surveys collected between 2007 and 2011.
This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.
In your business, every time someone physically handles a check or cash, it increases the opportunity for fraud. To mitigate this risk, consider collecting money electronically — a safer, cheaper, faster and easier way to collect.
Once you have explored your lending options and decided to pursue financing to meet your business objectives, it is important to contact advisors to help get your house on solid ground and gain financing approval.