Cash Flow Forecast: Understanding Your Numbers

As a business owner, it is very important that you know how much money you have left, and if it is sufficient to meet your short-term cash needs. Specially, the recent economic downturn due to the pandemic has made it even more crucial that we are able to project the company’s future financial position based on anticipated payments and receivables. To ascertain if you have adequate cash reserves for short-term viability, it is essential that you have an accurate cash flow forecast set up for your business. 

So, What Is A Cash Flow Forecast? 

A cash flow forecast simply helps you project your company’s future financial position based on your income and expenses. Like a weather forecast predicts the weather for the next week, similarly a cash flow forecast tells you how much money will be moving in and out of your business and how much difference it’s going to make to your ROI.

Why Should You Use A Cash Flow Forecast?

Your cash flow forecast can include your projected earnings, your expenses, and it is usually sketched up to cover the next twelve weeks of spending for a business. It is regarded as one of the most crucial tools a businessperson can have to ensure a steady and stable income in their business. Executed well, your cash flow projections will aid you in having a rich understanding of:

  • . Whether your business is generating enough revenue to stay operational in the long term
  • . Whether your business is developing at the rate you want it to
  • . Whether you need to arrange financing/bank loan to meet short term obligations
  • .Whether you should start considering alternative options and abandon ship. 

Forecasting your cash flow can bring a vast amount of clarity about the future of your business and helps you grasp a comprehensive understanding of where and when your business is losing cash by looking at your projected accounts receivables and accounts payables. 

If you are looking to adopt a proactive financial management strategy into your business, then forecasting your cash flow can be a great asset to bring clarity to your numbers.

What Is A Cash Flow Forecast Used For? 

Informs You Where The Cash Is Going

Cash flow forecasting gives you an exact representation of the comparison between how much you are actually earning and how much you’re spending. With these statistics, you can know whether your business is either under-or over-performing or doing better than expected and allows you to adjust your budget accordingly.

Decreases Production Costs 

Every business operates at its own pace. But having a thorough and rigorous cash flow forecast can help you broadly identify what the base-level needs of your business are to function optimally. It is also handy for identifying opportunities where you can cut back on operating costs and increase your overall ROI.

Identify Future Shortcomings 

Cash flow forecasting is much more than just knowing how much you have left in the bank. It can include all your future expenses, including upcoming payments, bills, and when your business can be expected to experience a little turbulence in its profitability. 

Knowing you have enough cash available to manage your needs can bring a peace of mind and eliminates the day-to-day stress of firefighting short-term cash needs. Through proactive cash flow forecasting, you are able to identify and prevent significant cash shortages before they become a problem.

How To Generate A Cash Flow Forecast?

Through Microsoft Excel

If you’re going to the route of manually creating your forecasts, then using old-school (yet still purposeful) programs such as Microsoft Excel can be a way to get up close and personal with your financial data. Just use a pre-installed template available in the software and forecast your cash flow efficiently. 

  • . But a forewarning, if you’re going to be depending upon this method permanently, then it’s best you be cautious every time you put sensitive financial information into it as this method can result in a lot of human errors.

Through An Accounting Software 

There is no shortage of accounting software programs for accounting and bookkeeping available on the Internet, and most of them will provide you with a vast array of useful options to quickly generate your cash flow projections. But while they are generally easy to use, their projections aren’t what we would call the most accurate or reliable. They’re only suitable to be used as last-minute measures and are not recommended for informed business decision-making.

By Outsourcing To A Financial Management Service

Having a clear idea of your business’s financial health is essential for any entrepreneur. If you do not have an in-house accountant to provide the cash flow for you, then outsourcing your forecasting needs to online financial management services such as Monily can also be really helpful. WHY is this better than the other two options? The accountant will work closely with the business owner to design cash management and cash flow projection tool custom-tailored for the business taking into account the industry-specific variables, needs, and nuances. Our accountants not only create tools and graphical representations in an easy-to-understand format but also provide detailed analysis and identify key action items for optimal cash management based on the report.

See Also: How to Read and Understand the Balance Sheet

Some Important Things To Remember

  • . A cash flow forecast will also reflect your estimated operating costs. So, when you are forecasting, it is essential to remember that these are still projections and are vulnerable to any adjustments or unanticipated cash inflow or outflow. The cash flow report will need to be revised if any new information has come up that impacts the payables and receivables.
  • . Your cash flow forecast can also be used to properly plan out your expenses for months where you will be experiencing slow growth and provides you with a clear idea of how much revenue you will have to set aside in order to cover the expenses of these months. 
  • . More often than not, companies create difficulties for themselves by generating cash flow forecasts that are a tad bit too complicated to be understood by the business owners. So, it is necessary to create forecasts that are more user-friendly and can provide extensive financial insights by viewing them at a glance. 

Final Words

In simple terms, cash flow forecasting gives you useful insights you need to make informed financial decisions such as: will you be able to pay your vendors on time? Or will you have to delay somebody’s payment? A cash flow highlights any cash shortages and enables you to proactively address the situation before it becomes a crisis.

9 Reasons Business Owners Should Consider Outsourcing Accounting

There is no doubt that accounting is one of the most time-consuming and complex operations in business management. Not only do you need to record all transactions accurately in the correct ledgers, but even the slightest errors can cost you significantly in terms of time and money when trying to fix it retrospectively. It is widely cited as one of the business processes that are best suited to outsourcing because of the convenience and efficiencies it brings when your business accounting and bookkeeping is managed by experienced professionals at a cost far less than that of trying to do it in-house. Let’s look at a few of the reasons why business owners should definitely consider outsourcing business accounting:

1. Everything in An Instant:

Most outsourced financial management services consist of dedicated teams of accounting and bookkeeping professionals working collectively to ensure that their clients receive the best possible services for their buck. Moreover, if the business owner has any queries regarding their finances, their accounting professional is just a call or email away and can quickly respond to questions or requests for additional information.

Accounting outsourcing allows businesses to:

  • . Make more time for client interaction and customer acquisition
  • . Focus on things that truly matter: strategy, business development, etc.
  • . Work more efficiently
  • . More time and flexibility to ensure compliance, check and balances
  • . Better work-life balance

The difference you’ll notice in the ease of doing business and the peace of mind from knowing your problem areas are in the hands of experts will be enormous.

2. Time to Focus on Your Business:

It’s incredibly essential for a business owner to be aware of the financial standing of his / her business to make decisions to invest, purchase, hire, expand, etc. But this does not mean that you should be devoting all of your time in tracking every single dollar that goes in and out of your business. After all, you did not start your business venture just to get bogged down in number crunching.

With accounting outsourcing, you and your entire work staff will be able to focus on the stuff that matters the most, and that is running your business and ensuring steady financial growth. Businesses that utilize accounting outsourcing services are able to better focus on increasing their revenue and generating positive customer feedback.

3. Better Understanding of Your Cash Flow:

A reliable accountant helps you have a clear picture of where your cash is flowing from and what your expenses are. He / She uses this information to help you make insightful and strategic decisions that can benefit your business in the long term. They will advise you appropriately on where your money can be optimally spent and where you can cut costs effectively.

4. Freedom from In-House Accountants:

Hiring the right candidate to act as an accountant for your business is not a decision to be taken lightly. And these days, the average salary of an experienced in-house accountant goes up to around $55,000 per year. An accounting outsourcing service comparatively costs a lot less and results in considerable savings. Moreover, investing your savings back into your business can bring additional profits and benefits.

5. Eliminate All Chances of Fraud:

Recently, business scams and fraud have seen a meteoric rise. It is easy to fall prey if you are not continuously watchful and follow preventive policies and procedures. However, when you outsource your F&A, it becomes the responsibility of your service provider. That’s another thing off your plate, and you can have complete assurance that your finances are being managed safely and securely and that you are not leaving any loose ends in your financial security.

See Also: 7 Easy Steps To Safeguarding Your Business Against The Fake Invoice Fraud

6. Helps You with Tax Preparation:

Accountants have in-depth knowledge of the technical nuances and are familiar with all the tax codes relevant to the type of business you have. Also, they take the time to understand new tax laws that they can use to maximize your profits after tax. Outsourcing the responsibility also means that you are not stressed due to impending tax filing deadlines. As a result, you have more time to concentrate on and grow your business and make sure that every single one of your customers is satisfied with your services.

7. Timely Recording of Your Financial Transactions:

One of the worst things you can do for your business is delaying the majority of your accounting to be carried out during the year-end tax season. This way, you’re allowing your finances to be grossly mismanaged during the other eleven months of your financial year. We understand it’s hard to keep up with it if you are doing it yourself, it’s time-consuming, and there is always more urgent stuff that needs doing. Which is why it is so much more beneficial to outsource it to highly trained and professional accountants who will be recording your day-to-day financials and keeping your books updated and not lagging behind many months.

8. Consistently Promotes Efficiency:

One of the valuable benefits of accounting outsourcing is that you are only provided with accountants who are experts in their line of work. These professionals are trained to make use of only the most effective and efficient accounting practices best suited for your industry vertical. They will devote time towards studying recent researches and emerging technologies and will adapt these methodologies to your business accounting to bring improve efficiency and integrity of your financial data and improve your access & visibility of it. 

9. No Burden of Mistakes:

Humans are prone to mishaps and slip-ups. If you get your accounting done in-house, you may find yourself spending countless hours firefighting errors or procedural mistakes. By outsourcing your accounting, you will also be outsourcing the stress and hassle of ensuring accuracy and data integrity. You will not have to worry about continually backing up your financial data in fear of any unexpected network server crashes, as your outsourced accountant will be taking care of that as well.

Conclusion:

Outsourcing accounting is an excellent opportunity for businesses who want continuous growth in their scale and productivity without being thwarted by numerous financial hassles. The outsourced service you choose will ultimately augment your accounting processes and transform your workplace into a productive network. At the end of the day, it’s not just about maintaining your accounting but also about establishing a reliable framework to ramp up profits, improve cash flow and grow / expand your business.

Bookkeeping vs Accounting: The Difference Between Bookkeeping and Accounting

Bookkeeping and accounting are normally used interchangeably, but they are quite different. While their processes are much different, they both work to support a business throughout various stages of its financial cycle.

For one, bookkeeping covers the transactional and administrative side of business finances than accounting. Bookkeeping involves recording financial transactions daily and making sure that all the entries are entered accurately in the correct ledgers.

The work of an accountant builds upon the activities carried out by the bookkeeper and extracts financial insights from the data to provide actionable insights to the business owner. Any entrepreneur person will need both accounting and bookkeeping services to track the financial performance of their business, regardless of whether they’re running a startup or a full-fledged, international company. Some people choose to do it themselves, while some hire bookkeepers or accountants to their team while others outsource it to professionals to do it for them.

Throughout this article, we’ll be delving deeper to identify the key differences between the role of an accountant and the role of a bookkeeper and analyzing in detail how the two professions stack up against one another in terms of their practicality and contribution to a business.

What is Bookkeeping?

A bookkeeper is responsible for accurately recording and updating all financial transactions of a business. Their primary responsibilities include making sure that every financial transaction is entered into the company database and recheck it regularly to ensure it is free of any errors or mistakes. By following upon these responsibilities rigidly, a bookkeeper is able to:

  • . Record and calculate incomes and expenses
  • . Make bank transactions
  • . Create and update daybooks
  • . Process and generate sales invoices
  • . Process payrolls
  • . Create analysis reports and debtor reports
  • . Process financial transactions and prepare statements
  • . Manage accounts receivable and accounts payable 

To be effective in their job, bookkeepers are mandated to have professional expertise to understand how to categorize any transaction correctly in the different ledgers. They must have a good head for figures and must be capable of traversing through multifaceted financial data and to make sure there is a concrete balance in the accounts of a business. 

See Also: 5 Ways a Bookkeeper Can Save You Money

They need to be consistent with their records and ensure that there aren’t any vulnerabilities through which an error can slip in and ruin their books. Some other responsibilities of bookkeepers include preparing and filing VAT returns, sales tax, chasing clients for payments, filing and handling documents, processing requests for expenses, and more.

What is Accounting?

Accounting comes with a wider set of obligations and consists primarily of financial reporting. An accountant analyzes the data collected by the bookkeeper and extracts financial insights and business advice from it to present to the business owner. They are required to break down complex information into simple terms and present it to business owners so that they’re able to understand the current financial standing of their business more clearly.

As bookkeeping is largely focused on transactions, accounting focuses on generating reports that help bring important financial indicators together.

Proper, detail-oriented accounting helps the business owner grasp the actual state of their business’s cash flow and how it can be improved so that it results in increased profitability. Some everyday accounting responsibilities include:

  • . Generating financial reports
  • . Conducting audits
  • . Verifying and reviewing information 
  • . Adjusting entries
  • . Forecasting cash flow
  • . Organizing budgets
  • . Analyzing and projecting financial success

Accountants also prepare financial reporting forms such as tax returns, revenue statements, and balance sheets. They provide estimation for forecasts, industry trends, and prospects for future growth and guide the owners on where to take their business next. Unlike a bookkeeper who is only limited to carrying out his role, an accountant can assume the position of a bookkeeper if there isn’t one available. In their need of strategic financial guidance, a business owner will always turn to an accountant.

See Also: Accounting 101 for Small Business Owners

Accounting vs Bookkeeping: What’s the Difference?

The major differences between these two practices lie mostly in the tasks they accomplish and the skills and expertise that are required to do so. Whereas a bookkeeper is in charge of handling where the money is coming from and where it is going out, an accountant takes care of all the remaining aspects of the finances. They take care of the taxes, provide consultation, assess risks and potential hazards, and generate reports to be passed onto the business owner.

A bookkeeper’s job environment is also much more limited than an accountant’s. If you are a bookkeeper, your services will most likely be sought out by small companies, and you’ll be expected only to have a strong background in math and a high school or college diploma. While a degree is not required, most bookkeepers will pursue a certification or a bookkeeping diploma, whereas some may obtain certifications for QuickBooks and other software. Bookkeepers should also be detail-oriented and demonstrate strong skills in use of computers and technology.

On the other hand, if you are an accountant, you will be required to have at least an undergraduate degree or higher, depending on where you apply for a job. You may be able to apply in places like government agencies, tax companies, and other financial organizations.

Overall, both the role of an accountant and bookkeeper are pivotal for a company’s financial success. Both bookkeepers and accountants are responsible for helping the company expand to new horizons and keep track of its growth.

If you couple correctly arranged financial records put together by a bookkeeper with the financial strategies and tax filing efficiencies of an accountant, you can have guaranteed long-term economic success for your business.

 If you feel that managing your in-house bookkeeper or accountant can be a challenge for you, or are mindful of the cost, it can be far more convenient for you to outsource these tasks to an online financial management service. Not only will you be making considerable savings, but you will also be getting services that are explicitly tailored for you based on the requirements of your business.

Finding the Right Bookkeeping and Accounting Service for Your Business

Investing correctly to streamline your business finances is one of the most rewarding things you can do for your business and for your own peace of mind.  Which is why finding the right, reliable, professional bookkeeper and accountant is a very important task that requires significant time and attention. What usually helps is having both of these services availed from one service provider as it creates synergies, eliminates delays in sharing of information, and errors. Monily has a long-standing record of providing customized financial services to our customers. Our accountants and bookkeepers are equipped with all essential expertise and knowledge to deliver the best service and keep you updated with the financial health of your business. By outsourcing your requirements to us, you will be able to benefit from our best-in-class financial management services so you can focus on growing your business.

10 Helpful Tips in Managing Payroll Effectively

Getting the employee’s payrolls processed on time is one of the major responsibilities of any business owner. However, it is also where usually the most mistakes occur. To manage payroll and getting data ready is one area where there is a high potential for errors, and it can take a lot of effort and time to be done accurately. Whereas it can seem like a grueling process to power through, the last thing a business owner wants to see is frustration in their employees due to repeated some small mistake made while organizing their payroll data.

So how does one manage the payroll of their business effectively? With the ever-changing rules and regulations, experts have deduced some useful tips on managing payrolls without causing any major ruckus or any additional costs to the accounting department. Here are 10 of them:

1. Stay Organized

One of the major sources of errors in payroll processing is not having policies and procedures to collect the information accurately and timely. There’s a lot of important information one must keep track of, names, numbers, social security numbers, timecards, overtime, deductions etc., and it’s easy enough for important information to slip through the cracks if you don’t have proper procedures and data management practices.

2. Digitize Everything

The list of steps, checks and double checks required to process payroll accurately can be quite long. At the end of the day we all aim for the simplest, most convenient methods to run things smoothly and cut costs wherever necessary. That’s why it is essential that your company should try to minimize the dependency on paperwork and rely on digitized processes to transfer employee salaries and communicating with them about their pay. 

For example, Timesheet management apps such as TimeSheets, Timeduty, WeBWorK, and Clockify, can be used to easily track your employees’ clocking in and clocking out timings, performance statistics, attendance overview, idle time usage, web surfing history during work hours, and more.

Moreover, you can significantly simplify your payroll process by outsourcing to a cloud-based service such as Monily that specializes in HR solutions for small businesses and startups. Doing so will allow you to be free from being bogged down in technicalities and provide you complete freedom to run your business.

3. Always Keep Things Clear

Maintain a crystallized understanding with your employees regarding what will be included in their payroll, what will be their deductibles, their salary, gross and net income, and all other important information to stave off any ambiguity in the future. If even one or more employees are facing inconveniences with your payroll processing practices, then it can easily lead to unwarranted frustration in your workplace that can seriously harm morale. Therefore, it’s recommended to have internal policies setup that can determine salaries of employees, as well as how they’re processed and be able to correct them if there any mistakes.

4. Classify Employees

You can also simplify the payroll process greatly by classifying employees into different categories depending on their roles. This can help you separate permanent employees from independent contractors and avoid any haphazard mistakes, such as giving permanent employee benefits to contractual workers.

 5. Create A Calendar

Your company risks being penalized if you’re unable to timely submit payroll information on time. While it is very challenging to keep track of tax deadlines, changing paydays, and quarterly reporting, you have to ensure that you’re actually getting everything done on time. You can create a yearly calendar to keep yourself ahead of things and include all important dates in it, including when timesheets and invoices need to be submitted and when salaries need to be processed. Doing this allows your employees to be aware of when they will be paid and also helps you avoid federal penalties. 

6. Be Your Own Auditor

No owner of a company wants to take the stress of worrying about an audit. Ensure your payroll taxes are calculated accurately and tax payments are made timely. Ensure that a proper record or all transaction is maintained either digitally or paper based. As tax season comes around, performing your own audits will easily help you pass an IRS audit. Assess your payroll management system at regular intervals during the year to search and eliminate any problems that may be causing problems or putting your company at financial risk, and you’ll be completely free from any audit-related stress. 

See Also: Top 4 Benefits of Hiring A Tax Professional for Your Business

7. Timely Issuance of Forms

In proper payroll management, there is so much more than simply sending checks out and paying payroll taxes. As an employer, you are required to issue the necessary W2 forms to employees and 1099 forms to contractors before the February 1st deadline to avoid incurring any penalties. These forms can include Federal Quarterly and Annual Tax Forms, State Withholding W-4 Forms, Direct Depositing Forms, etc. 

8. Align the Different Pay Schedules

It is important to remain disciplined when you are trying to handle and execute payroll processes effectively. Whereas many businesses follow a more varied pay schedule such as weekly, biweekly, semi-monthly, monthly, it has resulted in increased payroll mistakes and ultimately results in an uproar by the employees. Minimizing pay periods and aligning the same payday for each employee can be highly successful in preventing mishaps and miscommunication. Also, it’s much simpler to manage one payroll schedule than four or five at once.

9. Maintain Detailed Personal Records 

While it may seem obvious to make sure you have the correct personal details for every single employee in your company, its importance can still not be overstated. An employee’s personal details can change on a regular basis, and some of that information will likely affect their payroll as well. Regardless of whether this change is due to a promotion, a wage raise, or maternity leave, change of bank account etc. everything needs to be always processed correctly. Although at times it can seem like a juggling act, keeping detailed personal records is something that one needs to definitely stay on top of.

10. Turn to The Experts

Transitioning to an online, cloud-based financial management system such as Monily will help solve your payroll problems altogether. It will help you to get rid of timecards, decrease costs, maintain privacy, and more effectively manage payroll data. This significantly reduces the burden on the business owner and simplifies immensely the regular and repetitive task of payroll processing.

Why Is Proactive Financial Management So Important for Businesses?

No business owner starts their company without having a thorough plan for its execution and management. Understandably so, a business can never achieve its purpose if there isn’t a robust strategy backing it up that dictates every move and financial transaction. Financial planning is inherently related to the core processes of any business. It is a necessary practice that allows business owners to create a revenue model, set realistic goals, and track liabilities. As we find ourselves working in more flexible ways to manage our business operations, it’s also equally important to re-evaluate how our company’s finances operate to improve the way we work and ensure consistent profitability.

Whereas conventional management methods such as reactive management are usually preferred by financial managers to dictate the growth of their company, its effectiveness in the long-term falters steadily due to its failure to keep up with the increasing requirements of a growing business. That’s why financial managers need to adopt a proactive approach to accounting to allow themselves to be prepared for any unforeseen disruptions in the cash flow and highlight financial risks before they become detrimental reality impacting the financial viability of your business.

To understand the importance of proactive business financial management, we first have to analyze it deeply to see how effective it is in its true nature.

What is Proactive Business Financial Management?

At its core, proactive business financial management is financial management, but with an extra pinch of preparedness and provision. Whereas some people rely upon the phrase ‘’Desperate times call for desperate measures,’’ Proactive management dictates taking all the necessary precautions and being prepared beforehand before the situation turns into a crisis. Let’s try to understand this phenomenon with an example.

Understanding Proactive Management Through A Visual Aid

Imagine you’ve just started a small business, and you’re continually investing more and more money into it without accounting for adequate ROI or taking measure of the various KPIs. You may think you have a ballpark estimate of say investing roughly $20,000 in your business, but after calculating, you come to realize you’ve spent nearly three times as much. If you take account for any borrowing costs, the hole in your pocket may be much bigger.

To prevent something like this from happening, proactive management indoctrinates a strategic approach to financial management that allows you to make better & informed financial decisions. This approach enables you formalize your business plan in terms of short term and long-term financial metrics and raises reg flags in case things go off track.

So, What Does a Proactive Financial Manager Do?

A proactive financial manager provides a business owner data that includes:

  • A complete framework of a long-term financial plan.
  • Executional Step on bringing such a plan to life.
  • Offering beneficial investing decisions.
  • Offering solutions on the process of funding such decisions.
  • Advising about strategies to maximize profits.
  • Tackle cash runaways.
  • Ensure steady cash flow.

Now that we’ve examined proactive strategy and its benefits for your business, let’s dive deeper and see how it stands against a reactive strategy.

Proactive Vs. Reactive Business Financial Management

A reactive approach to business financial management is one where your money necessities drive you. As the name dictates, a reactive strategy is the one where you respond to a situation after it has gone south, rather than preparing for it beforehand or setting up countermeasures to prevent a crisis from happening in the first place. It usually does more harm than good, you know as they say: ‘A stitch in time saves nine’. The reactionary approach wastes a ton of time and jeopardizes both the financial opportunities for a business as well as the financial integrity of the business. Instead of having a thorough plan, you’re only left firefighting crises. You find yourself making impulse investment or borrowing decisions and then rush in trying to make ends meet when a financial crisis comes to the surface. In simpler terms, it translates to waiting for a pot of milk to boil until spills everywhere, then trying to clean up the mess.

Shockingly this is the way most businesses operate without realizing there already exists a much more efficient method to handle finances. Transitioning into a proactive financial mindset allows managers and business owners to discover new business opportunities, drastically reduce costs and double the revenue, maximize financial security and minimize the risks.  A Win-Win Approach!!

What Does It Mean Having a Proactive Financial Manager for Your Business?

Proper cash flow management is essential in any business and implementing a smooth and streamlined process for managing accounts receivable is one of the best ways to ensure good and healthy cash flow. Proactive business financial managers utilize concepts such as zero-based budgeting in their planning.  Zero based budgeting is the practice of identifying all expenses that need to be made at the beginning of every new period. Then analyzing these expenses to make  robust cash-flow predictions that are backed up by real data and thorough planning, rather than a shot in the dark estimation.

A proactive financial manager performs:

  • Routine financial analysis to understand the numbers as close to the heart as possible.
  • Upon stumbling onto any miscalculations or intuitions of soon-to-happen errors, reports to the CEO before taking preemptive measures against it.
  • Afterward, they will guide you in running your business by creating a well-defined strategy that only results in profitable growth and new opportunities to seize.

Whereas having a proactive financial management can substantially improve and simplify your finances for the long run, you can streamline your business finances by utilizing and hiring the best talent and expertise to do the job for you. Outsourcing business accounting to a virtual financial management specialist who handle all your financing, accounting, and bookkeeping needs on your behalf while allowing you completely focus on growing your business can be very rewarding.

See Also: Top 6 Small Business Bookkeeping Tips For Steady Financial Success

How to Find a Suitable Proactive Financial Management Service for Your Business?

Choosing the right financial partner to delivery proactive accounting for your business is essential. Online accounting services such as Monily conduct a comprehensive analysis of your company’s financial situation before offering proactive solutions. Our experienced Chief Financial Officers (CFOs), provide regular, detailed financial insights, helping you to maximize bottom-line for your business and much more. With Monily’s excellent track record of helping small businesses and startups, you’ll have complete freedom and independence to pursue new ventures while having up-to-date accounting, bookkeeping, and financial records.

Virtual CFO Services – Why Your Business Needs Them

Every business grows at a different rate. It’s one thing to know where to take your company next and the other how to get there. But the one thing that startup owners are always stumped on is when to hire a CFO for their company. For some, it is a question of whether it’s even worth hiring one, and for others, it’s how long they should wait until they get one on-board to manage their company’s finances. Let’s dive deep and begin with analyzing just precisely what a CFO does in practice in order to resolve these queries one-by-one.

What Does A CFO Do?

The primary responsibilities of a Chief Financial Officer, much like a supervisor, are two-fold. On the one hand, they are responsible for managing the accounting team keeping your books up-to-date, and making sure you’re meeting your tax liabilities. On the other, they act as a financial advisor and provide guidance regarding investment decisions to help keep your company’s economic well-being secure.

Now, as wonderful as that sounds, hiring an in-house CFO requires deep pockets. They are egregiously expensive. A full-time CFO could cost you up to $300,000 yearly, perks included. For startups that are in their early years of operation and have a tight leash on their payroll budget, this kind of investment doesn’t make a whole lot of sense. Plus, the need for a CFO’s services is usually on a contractual basis; ergo, hiring one on a full-time position could seem like overkill.

So, how do you avail the services and essential expertise of a CFO without having it wipe a huge chunk your budget? Simple, until and unless you plan to take your business public within the next few years, consider employing a virtual CFO.

How Is A Virtual CFO Different?

A virtual CFO (also known as a fractional CFO) fulfills all the duties a regular CFO does; providing you:

  • Regular financial updates
  • Maintaining your budget
  • Recommending future investments
  • Creating forecasts of your financials
  • Improving your cash flow
  • Analyzing your KPIs

The only significant difference you’ll notice is that a Virtual CFO will be, you guessed it, virtual. They will be providing their services virtually on a contractual basis rather than working as a full-time employee in your office. A virtual CFO will charge for their services on a per hourly basis instead of demanding a fixed salary in thousands and will be providing the exact same solutions a regular CFO does, without expecting any perks.

So, what’s the catch?

There is none, actually. As surprising as that sounds, it is indeed true. Usually, the needs of many small-time businesses are in areas such as forecasting, fundraising, and budgeting, and they inaccurately estimate the extent to which they’ll be needing the assistance of a CFO.

See Also: 7 Easy Steps To Safeguarding Your Business Against The Fake Invoice Fraud

Benefits of Hiring A Virtual CFO

Moreover, hiring a virtual CFO comes with a couple more extra benefits that provide your business more flexibility and financial leverage.

1) More Opportunities:

The needs of a startup are continually changing. Every day you’re engaging with new clients and see yourself investing in different prospects. Although there is no such thing as doing too much business, but one should always have an eye on the overall picture and put the financial stability of their business at the forefront. A virtual CFO judges your client-engagement based on the stature of your business and helps you stave off any unnecessary meetings or agreements that your startup is financially better off without.

2) A Fresh Perspective:

While this may sound surprising, not having a CFO physically present in your office is actually a great advantage. More often than not, in-house CFOs tend to get lost in the weeds of chasing numbers and firefighting day-to-day issues. This impacts their performance and can be a distraction from the crucial task of keeping an eye on the bigger picture and undertaking measures for long term stability. Having a virtual CFO who isn’t always knee-deep in day-to-day financial hassles can be paradoxically beneficial for they will have an outsider’s perspective on your numbers, and they will be judging your metrics from an objective point of view and provide strategic advice accordingly.

Choosing the Right Virtual CFO provider

Trusting someone with your company’s sensitive financial data is not a decision that is to be taken lightly; therefore, it’s essential that your virtually hired CFO is someone who’s trustworthy, professional, experienced, and ticks off all the right boxes for your business’s demands. Here are a few things to remember while you thin out the herd:

1) Compatible Experience:

No company is the same as another in scale. Different companies have different needs, face different challenges, and hire their employees based on those requirements. A virtual CFO service that has made waves working in big-time companies might not be the most suitable candidate for your startup. It would be best if you looked for someone who bears experience working at small-time companies similar to yours. If your startup is a service business that offers professional skills, advice, or products, then you’ll want your virtual CFO to be familiar with these areas of expertise.

2) The Unique Demands of Your Business:

One of the best things about hiring a CFO virtually is that you have complete control over the extent of the service you actually need from them. Depending on your needs and budget, you will have the availability of hiring either one independent consultant and have constant one-on-one communication with them. Or request the assistance of an entire CFO service team to work collectively and deliver results under tight deadlines. Of course, the cost will be a varying factor here, so it’s better to take as much time as you need to decide on this matter. In the end, you will have full liberty of picking your troops individually and deciding what fronts of your business you want them to guard.

3) Your Personal Goals:

There’s no shortage of services and solutions that a virtual CFO will be able to provide you. That’s why it’s paramount that you know beforehand what kind of solutions your venture needs and what areas you would like them to target. Services like Monily, which provides a wide-range of financial management solutions including accounting, bookkeeping, forecasting, tax preparation; offer you a one-stop shop solution and guide you every step along the way to mold the business plan of your dreams into a reality. Whether your needs are only on a one-time basis, or you’ll be needing constant support to advance your business further, Monily Virtual CFO Services can provide the perfect fit for your needs.

If you’re unsure and would rather have a CFO run diagnostics and identify sensitivities and problem areas for your business; a short-term fixed hours contract can help you find the answers. After all, if you’re careful in picking out the right service to watch over your small business, then you shouldn’t have much to worry about later and you can have the peace of mind, knowing all bases are covered.