Business Briefs

Owning and running a company tends to test one’s patience. You wait for strategies to play out. You wait for materials, supplies or equipment to arrive. You wait for key positions to be filled. But, when it comes to sales, how patient should you be? A widely used metric called “sales velocity” can help you decide.

Four-point formula

In a nutshell, sales velocity tells you how quickly deals move through the various stages of your sales cycle to fruition, where revenue is generated.

Putting a number to sales velocity can enable you to benchmark it internally going forward, typically with the goal of speeding it up. Or you may even be able to find industry standards, so you can benchmark your number against those of other similar companies.

So, how do you calculate it? The most widely used formula for sales velocity comprises four components measured over a predetermined period:

1. Number of qualified opportunities (leads that meet certain criteria),
2. Average deal value in dollars,
3. Win rate (percentage of opportunities converted to actual sales), and
4. Sales cycle length in months.

The formula is then expressed as:

Sales Velocity = Opportunities × Deal Value × Win Rate / Sales Cycle Length.

How often you should assess sales velocity depends on your strategic goals. If you really want to improve it, calculate the formula quarterly so you can see how quickly or slowly deals are moving over a year or more. If you’re approaching the subject from more of a curiosity standpoint, you might calculate it annually or semi-annually.

Common challenges

When businesses begin calculating and tracking sales velocity, they run into a variety of common challenges.

First, you might have trouble locating or trusting the four data points included in the formula. If you’re not tracking them regularly, or the information you have is inconsistent or contradictory, you won’t get much benefit from the metric.

In such situations, you’ll probably need to reassess and improve how your business gathers sales data. Make sure you have the right software for your company size and type, and that everyone is using it regularly and properly.

Assuming your data is solid, you might eventually be able to diagnose your business with other typical maladies related to suboptimal sales velocity. One example: lack of alignment between marketing and sales. If the marketing department is focused on certain features or solutions related to your products or services, but your sales staff must constantly readjust the expectations of prospects and customers, closing deals can take much longer.

Other times, sales velocity can reveal issues with the quality or volume of qualified opportunities. It all starts with your leads; bad or shaky ones usually take much longer to turn into qualified opportunities. And even if they do, the criteria used to classify leads as qualified opportunities may be flawed. Also, sometimes businesses overfocus on volume of leads and opportunities. If you’re chasing too many prospects, your sales cycle will tend to take much longer to play out.

Last, there’s the most obvious problem: Your sales processes are too complicated! Sales velocity can often be increased by simplifying workflows, reducing unnecessary steps and redundancies, improving internal or external communication (or both), and upskilling salespeople.

Sweet spot

Although it’s tempting to want to make your sales cycle as short as possible, you don’t want to rush things recklessly. The optimal goal of sales velocity is to find your sweet spot and then make continuous improvements and adjustments to stay there. Our firm can help you gather, organize and analyze your sales data.

© 2024

Controlling costs is fundamental for every business. But where and how to address this challenge can change over time based on various economic and logistical factors.

Earlier this year, global consultancy Boston Consulting Group published a report entitled The CEO’s Guide to Costs and Growth. Within it were the results of a survey of 600 C-suite executives that found, among other things, cost management was a top priority for respondents heading into 2024. According to the survey, three of the top categories for cost-cutting initiatives were:

1. Supply chain / manufacturing. Not every company incurs manufacturing costs, but most have a supply chain. Costs and delays in this area soared during the pandemic because of global disruptions and backups. Since then, some sense of normalcy has returned, though that doesn’t mean managing supply chain costs has become easy.

Many companies find that most of their spending is done with just a few vendors. By identifying these vendors and consolidating spending with them, you may be able to put yourself in a stronger position to negotiate volume discounts. Consolidating your supplier base also tends to streamline the administrative work associated with purchasing.

It also pays to really know your suppliers. One way to gather an abundance of relevant information is to conduct a supplier audit. This is a formal process for collecting key data regarding each supplier’s performance to manage quality control and ensure you’re getting an acceptable return on investment.

2. Labor/nonlabor overhead. Controlling labor costs is tricky in today’s environment. Many industries are facing skilled labor shortages, meaning businesses would love to spend more on labor if they could find people to fill those positions. Nevertheless, with payroll being such a dominant expense category for most companies, it’s critical to monitor these costs and prevent overspending.

A logical first step in managing labor costs is to know how much you’re spending. And the answer isn’t as simple as looking at the total gross wages you pay out every month or year. You need to know the actual and total amount of these costs. Fortunately, there’s a metric for that. Labor burden rate reflects the additional costs that companies incur beyond gross wages. These generally include expenses such as payroll taxes, workers’ compensation insurance and fringe benefits. Knowing your labor burden rate can enable you to truly “right-size” your workforce.

Beyond that, outsourcing remains an option for mitigating labor costs — especially given the vast pool of independent contractors now available. Although you’ll obviously incur costs when outsourcing, the time and labor cost that it saves you could end up a net gain. Carefully chosen and implemented technology upgrades can provide similar results.

3. Marketing/sales. Much like labor, strong marketing and sales are critical to most businesses operating today. So, skimping on their related costs typically isn’t going to pay off. But, of course, you also need to ensure a strong return on investment.

Again, choosing and monitoring the right metrics can prove useful here. The optimal ones tend to vary by industry and company type, but some of the most widely used for marketing purposes include lead conversion rate, click-through rate for online ads and cost per lead. Popular sales metrics include total revenue, year-over-year growth and average customer lifetime value.

Whether it’s sales metrics, labor burden rate or supply chain management, getting objective, professional advice can help you and your leadership team obtain an accurate picture of what’s going on with your costs and target feasible solutions. Please consider our firm for assistance.

© 2024

Every type of company needs to devise a philosophy, strategy and various policies regarding compensation. Family businesses, however, face additional challenges — largely because they employ both family and nonfamily staff.

If your company is family-owned, you’ve probably encountered some puzzling difficulties in this area. The good news is solutions can be found.

Perspectives to consider

Compensation issues in family businesses are often two-pronged because they can arise both 1) within the family and 2) between family and nonfamily employees. Salary inequities among siblings, for example, can breed resentment and fighting. However, simply paying them all the same salary can also create problems if one works harder and contributes more than the others.

Second, family business owners may feel it’s their prerogative to pay working family members more than their nonfamily counterparts — even if they’re performing the same job. Although owners naturally have the best interests of their loved ones at heart, these decisions may inadvertently lower morale among essential nonfamily employees and risk losing them.

Nonfamily staff may tolerate some preferential treatment for family employees, but they could become disgruntled over untenable differences. For instance, nonfamily employees often reach a breaking point when they feel working family members are underperforming and getting away with it, or when they believe family employees are behaving counterproductively or unethically.

Ideas to ponder

Effectively addressing compensation in a family business calls for a clear, objective understanding of the company’s distinctive traits, culture and strategic goals. A healthy dash of creativity helps, too. There’s no one right way of handling the matter. But there are some commonly used strategies that may be helpful in determining compensation for the two major groups involved.

When it comes to family employees, think beyond salary. Many family businesses intentionally keep salaries for these individuals low and make up the difference in equity. Because working family members are generally in the company for the long haul, they’ll receive increasing benefits as their equity shares grow in value. But you also must ensure their compensation is adequate to meet their lifestyle needs and keep up with inflation.

Incentives are usually a key motivator for family employees. You might consider a combination of short-term rewards paid annually to encourage ongoing accomplishments and long-term rewards to keep them driving the business forward.

On the other hand, nonfamily employees typically recognize that their opportunities for advancement and ownership are generally more limited in a family business. So, higher salaries and a strong benefits package can be important to attracting and retaining top talent.

Another way to keep key nonfamily staff satisfied is by giving them significant financial benefits for staying with the company long term. There are various arrangements to consider, including phantom stock or nonqualified deferred compensation plans.

You can do it

If your family business has been operating for a while, overhauling its approach to compensation may seem overwhelming. Just know that there are ways to tackle the challenges objectively and analytically to arrive at an overall strategy that’s reasonable and equitable for everyone. Our firm can help you identify and quantify all the factors involved.

© 2024

From the minute they open their doors, business owners are urged to keep a close eye on cash flow. And for good reason — even companies with booming sales can get into serious trouble if they lack the liquidity to compensate employees and pay their bills. Here are four ways businesses can better control cash flow.

1. Stick with the budget

Although creating and maintaining a detailed annual budget can be tedious and contentious, it’s fundamental to good cash flow management.

Items in your budget should align with your stated strategic goals for the year. If you can’t effectively argue how an item enables a particular goal, question its merit. Doing so will help you avoid unnecessary spending and keep funds available for valid business needs.

Also bear in mind that, for analytical purposes, a budget is useful only if you update it regularly to accurately reflect actual spending. For example, you may have overbudgeted or underbudgeted on some items and, thus, spent more or less than anticipated.

2. Check your statement of cash flows

Most companies should generate financial statements, preferably those that conform to Generally Accepted Accounting Principles (GAAP). Financial statements that comply with GAAP typically have three major parts:

1. The income statement,
2. The balance sheet, and
3. The statement of cash flows.

Naturally, when monitoring cash flow, you’ll want to focus on that last one.

The purpose of this document is to report your business’s net increase or decrease in cash. The statement factors in the cash inflows and outflows of daily operations, asset purchases, sale proceeds, and financing activities. Because it excludes noncash accounting items, you can use it to catch potential cash flow problems.

If you want to get the most from your statement of cash flows, generate one monthly. But quarterly or, at the very least, annual statements can be useful for identifying cash flow trends.

3. Exercise expense management

Maintaining accurate, up-to-date expense records will keep you in a strong position to effectively manage cash flow and strive for profitability. As you review the data, look for ways to reduce day-to-day operating expenses. For example, you may save money by outsourcing areas of the business such as human resources, payroll and benefits management, or information technology support.

If you have inventory, reconsider your approach to its management. Under the “just-in-time” approach, for instance, businesses buy items or materials only when necessary. As a result, your carrying costs for storage, insurance, interest payments and other factors are lowered. This approach isn’t feasible for every company. But if logistical support in your market has improved in recent years, it may be a beneficial option.

4. Mind your timing

At the end of the day, cash flow is all about the timing of revenue coming in and payments going out. Look for ways to stabilize the two.

For instance, conduct credit and reference checks on new customers to validate their payment histories and minimize collection risks. Also, prevent invoicing errors and costly collection delays by maintaining current and accurate customer account data.

Send invoices promptly, using electronic billing methods as much as possible. Establish sound, methodical procedures for following up on past-due accounts. Don’t wait until they’re 60 or 90 days late.

Watch your payables, too. Generally, you shouldn’t pay invoices earlier than required unless offered a discount. As feasible, use your buying power for large-volume or frequent purchases as leverage to negotiate discounts, free or low-cost financing, or extended payment terms.

Go with the flow

Effective cash flow management is something many small to midsize businesses struggle with. But there are ways to put and keep the odds in your favor. For help succeeding at this mission-critical task, contact us.

© 2024

Business owners are rightly urged to develop succession plans so their companies will pass on to the next generation, or another iteration of ownership, in a manner that best ensures continued success.

Ideally, the succession plan you develop for your company will play out over a long period that allows everyone plenty of time to adjust to the changes involved. But, as many business owners learned during the pandemic, life comes at you fast. That’s why succession planning should best be viewed from three separate but parallel timelines:

1. Long term. If you have many years to work with, use this gift of time to identify one or more talented individuals who share your values and have the aptitude to successfully run the company. This is especially important for keeping a family-owned business in the family.

As soon as you’ve identified a successor, and that person is ready, you can begin mentoring the incoming leader to competently run the company and preserve your legacy. Meanwhile, you can carefully determine how to best fund your retirement and structure your estate plan.

2. Short term. Many business owners wake up one day and realize that they’re almost ready to retire, or move on to another professional endeavor, but they’ve spent little or no time putting together a succession plan. In such a case, you may still be able to choose and train a successor. However, you’ll likely also want to explore alternatives such as selling the company to a competitor or other buyer. Sometimes, even a planned liquidation is the optimal move financially.

In any case, the objective here is less about maintaining the strategic direction of the company and more about ensuring you receive an equitable payout for your ownership share. If you’re a co-owner, drafting a buy-sell agreement is highly advisable. It’s also critical to set a firm departure date and work with a qualified team of professional advisors.

3. In case of emergency. As mentioned, the pandemic brought renewed attention to emergency succession planning. True to its name, this approach emphasizes enabling businesses to maintain operations immediately after unforeseen events such as an owner’s death or disability.

If your company doesn’t yet have an emergency succession plan, you should probably create one before you move on to a longer-term plan. Name someone who can take on a credible leadership role if you become seriously ill or injured. Formulate a plan for communicating and delegating duties during a crisis. Make sure everyone knows about the emergency succession plan and how it will affect day-to-day operations, if executed.

As with any important task, the more time you give yourself to create a succession plan, the fewer mistakes or oversights you’re likely to make. Our firm can help you create or refine a plan that suits your financial needs, personal wishes and vision for your company.

© 2024

For businesses, cost-effectively sponsoring a health insurance plan for employees is an ongoing battle. In the broadest sense, you have two options: fully insured or self-funded.

A fully insured plan is simply one you buy from an insurer. Doing so limits your financial risk while offering the most predictable costs. The other option is what’s commonly known as “self-insurance.” Under this approach, your company funds and manages the plan, usually with the help of a third-party administrator.

If you’re tired of dealing with big insurers, and you’re prepared to design your own plan and handle the claims process, self-insurance may be for you. However, bear in mind that your business will incur the full financial risk of a self-funded plan — and health care costs can be unpredictable and potentially catastrophic. That’s why, if you’re seriously considering self-insurance, you’ll also need to familiarize yourself with stop-loss coverage.

Basic features

Stop-loss coverage is essentially insurance for your health insurance. These high-deductible policies help protect against unpredictably high or catastrophic losses.

More specifically, stop-loss coverage kicks in once an individual claim and, if the self-insured policy is so designed, annual aggregate claims reach a contracted threshold known as the “attachment point.” Some stop-loss policies cover only individual claims — known as “specific” coverage — instead of providing both specific and aggregate claims protection.

Typically, the larger and more profitable the business, the higher the stop-loss deductible and attachment point. This is because larger companies are usually less financially vulnerable to an occasionally catastrophic medical claim. Self-insurance generally isn’t economically advantageous for companies with fewer than about 75 employees.

Claims and coverage

Aggregate claims protection typically works like this: You and your broker or claims administrator agree on an estimate of what total claims will be in the upcoming year, based on your recent claims experience. Let’s say it’s $1 million. The aggregate attachment point generally will be set at 125% of that amount — that is, claims will be covered when you have already paid out $1.25 million.

There can be a complicating factor, however, known as a “laser.” A stop-loss carrier, or you, might decide that an employee with a high medical risk profile needs to be “lasered” out of the terms that apply to other employees covered by the stop-loss policy. Instead, you’ll remain on the hook for a much higher amount before stop-loss protection kicks in. You might request a laser to lower your premium, or the stop-loss carrier might demand it to manage its risk.

What’s a typical specific coverage amount? As with the decision of whether to include an aggregate claims limit on your stop-loss coverage, the answer generally varies according to business size. Many stop-loss buyers pick an attachment point for individual claims at below $250,000, with some businesses setting the limit below $75,000. However, some set higher limits as well.

Basically, it’s a question of how much financial protection you’re willing to pay for. Going with a higher attachment gets you lower premiums. For example, a premium per covered employee with a $100,000 deductible might be around twice as high as it would be for one with a $200,000 deductible, and more than five times as high as one with a $500,000 attachment point.

Many challenges

As you can see, self-insurance has many challenges — starting with stop-loss coverage, which is a necessity. Nevertheless, it can be an effective approach under the right circumstances. We can help you assess the costs, risks and potential advantages of self-insuring vs. fully insuring.

© 2024

If your company has been in business for a while, you may not pay much attention to your payroll system so long as it’s running smoothly. But don’t get too complacent. Major payroll errors can pop up unexpectedly — creating huge disruptions costing time and money to fix, and, perhaps worst of all, compromising the trust of your employees.

For these reasons, businesses are well-advised to conduct payroll audits at least once annually to guard against the many risks inherent to payroll management. Here are seven such risks to be aware of:

1. Inaccurate recordkeeping. If you don’t keep detailed and accurate records, it will probably come back to haunt you. For example, the Fair Labor Standards Act (FLSA) requires businesses to maintain records of employees’ earnings for at least three years. Violations of the FLSA can trigger severe penalties. Be sure you and your staff know what records to keep and have sound policies and procedures in place for keeping them.

2. Employee misclassification. Given the widespread use of “gig workers” in today’s economy, companies are at high risk for employee misclassification. This occurs when a business engages independent contractors but, in the view of federal authorities, the company treats them like employees. Violating the applicable rules can leave you owing back taxes and penalties, plus you may have to restore expensive fringe benefits.

3. Manual processes. More than likely, if your business prepares its own payroll, it uses some form of payroll software. That’s good. Today’s products are widely available, relatively inexpensive and generally easy to use. However, some companies — particularly small ones — may still rely on manual processes to record or input critical data. Be careful about this, as it’s a major source of errors. To the extent feasible, automate as much as you can.

4. Privacy violations. You generally can’t manage payroll without data such as Social Security numbers, home addresses, birth dates and bank account numbers. Unfortunately, possessing such information puts you squarely in the sights of hackers and those pernicious purveyors of ransomware. Invest thoroughly in proper cybersecurity measures and regularly update these safeguards.

5. Internal fraud. Occupational (or internal) fraud remains a major threat to businesses. Schemes can range from “cheating” on timesheets by rank-and-file workers to embezzlement by those higher on the organizational chart. Among the most fundamental ways to protect your payroll function from fraud is to require segregation of duties. In other words, one employee, no matter how trusted, should never completely control the process. If you don’t have enough employees to segregate duties, consider outsourcing.

6. Legal compliance. As a business owner, you’re probably not an expert on the latest regulatory payroll developments affecting your industry. That’s OK; laws and regulations are constantly evolving. However, failing to comply with the current rules could cost you money and hurt your company’s reputation. So, be sure to have a trustworthy attorney on speed dial that you can turn to for assistance when necessary.

7. Tax compliance. Employers are responsible for calculating tax withholding on employee wages. In addition to deducting federal payroll tax from paychecks, your organization must contribute its own share of payroll tax. If you get it wrong, the IRS could investigate and potentially assess additional tax liability and penalties. That’s where we come in. For help conducting a payroll audit, reviewing your payroll costs and, of course, managing your tax obligations, contact us.

© 2024

Few and far between are businesses that can either launch or grow without an infusion of outside capital. In some cases, that capital comes in the form of a commercial loan from a bank or some other type of lender.

If you and your company’s leadership team believe a loan will soon be necessary, it’s important to approach the endeavor with confidence. That starts with having valid, well-considered strategic reasons for borrowing. From there, you need to engage your bank or a prospective lender with a strong air of professionalism and certainty.

Essential questions

First, familiarize yourself with how the process works. It’s essentially built on four basic questions:

1. How much money do you want?
2. How do you plan to use the loan proceeds?
3. When do you need the funds?
4. How soon can you repay the loan?

Your loan officer will also likely ask about your business’s previous sources of financing. So, be ready to explain how you’ve financed your company to date. Methods may include personal cash infusions, forgone salaries and sweat equity, as well as any equity contributions from friends, family members and outside investors.

Loan products

As you’re probably aware, banks and lenders offer a variety of commercial loan products. Another way of expressing confidence is to know what you want. Common options include:

Lines of credit. One of these gives you access to an agreed-upon amount of funds that you can draw on as needed. As is the case with a credit card, you pay interest only on the outstanding balance.

Traditional term loans. These are what most people likely envision when they see the term “commercial loan.” You receive a lump sum with repayment terms, which include a payment schedule and interest rate.

Asset-based loans. True to the name, asset-based loans typically fund equipment purchases or plant expansions. The length of the loan is usually tied to the life of the asset being financed, and that asset is usually pledged as collateral.

Supporting documents

No matter the product, banks and lenders want to work with serious borrowers who are deeply knowledgeable about the financial condition and projected performance of their businesses. To this end, don’t go into the initial meeting empty-handed. Prepare a comprehensive loan application package that includes:

• A “statement of purpose” explaining your strategic plans for the funds,
• Your business plan,
• Three years of financial statements, if available,
• Three years of business tax returns, if available,
• Personal financial statements and tax returns for all owners,
• Appraisals of any assets pledged as collateral, and
• Carefully prepared, reasonable financial projections.

Remember that most loan officers have been around the block. They know how to critically evaluate financial documents and prospective borrowers’ underlying assumptions. As much as possible, support your case with market research and data. Be confident — but realistic — about your strengths and market opportunities, as well as forthcoming about the challenges you’ll likely face in accomplishing your strategic objectives.

If your bank or lender finds your business a viable borrower, your application will be given to an underwriting committee or department. Underwriters will have greater confidence in your financial statements if they’re prepared by a CPA and conform to U.S. Generally Accepted Accounting Principles. Professionally prepared financial projections are also recommended.

Shop around

Underwriters don’t approve every loan application, so don’t give up if a bank or lender turns you down. In fact, it’s a good idea to shop around. For help preparing to apply for a commercial loan and managing the approval process, contact us.

© 2024

Many small business owners run their companies as leanly as possible. This often means not offering what are considered standard fringe benefits for midsize or larger companies, such as a retirement plan.

If this is the case for your small business, don’t give up on the idea of helping your employees save for retirement in a tax-advantaged manner. When you’re ready, there are a couple account-based options that are relatively simple and inexpensive to launch and administrate.

SEP IRAs

Simplified Employee Pension IRAs (SEP IRAs) are individual accounts that small businesses establish on behalf of each participant. (Self-employed individuals can also establish SEP IRAs.) Participants own their accounts, so they’re immediately 100% vested. If a participant decides to leave your company, the account balance goes with them — most people roll it over into a new employer’s qualified plan or traditional IRA.

What are the advantages for you? SEP IRAs don’t require annual employer contributions. That means you can choose to contribute only when cash flow allows.

In addition, there are typically no setup fees for SEP IRAs, though participants generally must pay trading commissions and fund expense ratios (a fee typically set as a percentage of the fund’s average net assets). In 2024, the contribution limit is $69,000 (up from $66,000 in 2023) or up to 25% of a participant’s compensation. That amount is much higher than the 2024 limit for 401(k)s, which is $23,000 (up from $22,500 in 2023).

What’s more, employer contributions are tax-deductible. Meanwhile, participants won’t pay taxes on their SEP IRA funds until they’re withdrawn.

There are some disadvantages to consider. Although participants own their accounts, only employers can make SEP IRA contributions. And if you contribute sparsely or sporadically, participants may see little value in the accounts. Also, unlike many other qualified plans, SEP IRAs don’t permit participants age 50 or over to make additional “catch-up” contributions.

SIMPLE IRAs

Another strategy is to offer employees SIMPLE IRAs. (“SIMPLE” stands for “Savings Incentive Match Plan for Employees.”) As is the case with SEP IRAs, your business creates a SIMPLE IRA for each participant, who’s immediately 100% vested in the account. Unlike SEP IRAs, SIMPLE IRAs allow participants to contribute to their accounts if they so choose.

SIMPLE IRAs are indeed relatively simple to set up and administer. They don’t require the sponsoring business to file IRS Form 5500, “Annual Return/Report of Employee Benefit Plan.” Nor must you submit the plan to nondiscrimination testing, which is generally required for 401(k)s.

Meanwhile, participants face no setup fees and enjoy tax-deferred growth on their account funds. Best of all, they can contribute more to a SIMPLE IRA than they can to a self-owned traditional or Roth IRA. The 2024 contribution limit for SIMPLE IRAs is $16,000 (up from $15,500 in 2023), and participants age 50 or over can make catch-up contributions to the tune of $3,500 this year (unchanged from last year).

On the downside, that contribution limit is lower than the limit for 401(k)s. Also, because contributions are made pretax, participants can’t deduct them, nor can they take out plan loans. Then again, making pretax contributions does lower their taxable income.

Perhaps most important is that employer contributions to SIMPLE IRAs are mandatory — you can’t skip them if cash flow gets tight. However, generally, you may deduct contributions as a business expense.

Is now the time?

Overall, the job market remains somewhat tight and, in some industries, the competition for skilled labor is fierce. Offering one of these IRA types may enable you to attract and retain quality employees more readily. Some small businesses may even qualify for a tax credit if they start a SEP IRA, SIMPLE IRA or other eligible plan. We can help you decide whether now is the right time to do so.

© 2024

By now, just about every company uses some kind of accounting software to track, manage and report its financial transactions. Many businesses end up using several different types of software to handle different accounting-related functions. Others either immediately or eventually opt for a comprehensive solution that addresses all their needs.

Although there’s some truth to the old expression “if it ain’t broke, don’t fix it,” companies often soldier on for years with inefficient or outdated accounting software. How do you know when it’s time to upgrade? Look for certain telltale signs.

It’s slowing us down

Accounting software is intended to make your and your employees’ lives easier. Among its primary purposes are to automate repetitive tasks, save time and provide quicker access to financial insights. If you or your staff are spending an inordinate amount of time wrestling with your current software to garner such benefits, an upgrade may be in order.

There’s also the issue of whether and how your business has grown recently. While some software developers market their products as “scalable” — that is, able to expand functionality right along with users’ needs — your mileage may vary. Keep a running list of the accounting functions your company needs and use it to assess the viability of your software.

Some lack of functionality can be relatively obvious. For example, many employees today need mobile access to accounting data, whether because they’re working remotely or traveling for the business. If your software makes this difficult — or, more dangerously, lacks trustworthy cybersecurity — it may be time to upgrade.

In addition, think about integration. As mentioned, some companies wind up using several different kinds of accounting-related software, and these various products may not “play well” together. In such cases, upgrading to a broader solution is worth considering.

There are various products specifically designed for small businesses. Growing midsize companies might be ready for enterprise resource planning (ERP) software, which integrates accounting with other functions such as inventory, sales and marketing, and human resources.

It’s getting us in trouble

The accounting software needs of most businesses tend to gradually evolve over time, making it tough to decide when to invest in an upgrade. However, there are some glaring red flags that can make the decision much easier — though they can also pressure companies into making a rushed purchase of new technology.

For instance, though privately owned companies aren’t required to follow the same accounting standards as publicly held ones, they still need sound financial reporting for tax purposes and possibly to comply with state or local regulations. If you’ve run into trouble with tax authorities or other agencies because of accounting mistakes or inconsistencies, an upgrade could help.

And, of course, financial reporting isn’t only about taxes and compliance, it plays a huge role in obtaining loans, attracting investors, and perhaps winning bids or arranging joint ventures. If you and your leadership team believe you’re being outcompeted because you can’t make the right strategic moves, investing in better accounting software may be one of the steps you need to take.

Last but not least, we mentioned cybersecurity above, but it bears repeating: Any indication that your accounting software is vulnerable to hackers or internal fraud should be regarded as an immediate call to action. Fortify your existing software or find a more secure product.

Business imperative

Long gone are the days when companies could rely on a dusty ledger and ink to record their financial transactions. The right accounting software is a business imperative. We’d be happy to help you assess your current needs and decide whether now’s the time to upgrade.

© 2024