by MHolland | Jun 20, 2024 | Accounts Receivables, Cash Flow, Cloud-based Accounting
When is a sale a sale?
When the services are completed and you send an invoice?
Okay, that may be when you book the sale in your accounting ledger, true.
Consider this…
A sale is not a sale until the money hits your bank account.
This is not how we do it in accounting unless we are running a cash business.
I have witnessed many businesses get aggressive in selling just to report impressive top-line growth.
What gets missed are these things:
- Time it takes to collect.
- Customer satisfaction.
- Credit worthiness of your customer.
- Your Gross Margin (I will explain…).
- The accuracy of your invoice.
- Did you fulfill what was agreed upon?
- Follow-up.
Time To Collect
The longer it takes to collect the less likelihood you will collect.
On a graph it will look like a Black Run downhill ski slope. As time goes on the percentage declines drastically.
Again, a sale is not really a sale unless you can collect it!
Customer Satisfaction
What the heck does customer satisfaction have to do with getting cash in the bank?
Well, when you think about it, an unhappy customer/client will likely resist paying you on time.
This loops back to number 1 above, “Time to Collect”.
This is a toxic cycle where an unhappy customer ignores your invoice and then refuses to pay down the road.
One way to avoid, is an outgoing customer satisfaction survey at the point of sale or shortly after.
Unhappy results can be nipped in the bud before it is too late.
Credit Worthiness of Your Customer
Have you done a credit check?
I remember checking the books of a business in a small town that sold electronics and home appliances.
Their sales were terrific! As in, off the charts for a small-town store.
The problem was that (on further examination of their accounts receivable) the sales staff were paid solely on sales commissions. It did not matter if the customer paid or not.
Credit sales were accepted often without background checks.
We discovered a TV had been sold to a fellow in prison! 😊
Hmmm, try collecting that one without backup!
Can these really be considered sales? More like store theft…
Your Gross Margin
Look at your Gross Margin as a main Key Performance Indicator by product line every week/month.
I know that this has less to do with, “when is a sale a sale” and more to do with cash in the bank.
Why?
Because if gross margins are declining it means:
- Discounting is happening.
- If discounting is happening, margins will be less, and perhaps not enough to cover your fixed costs.
- It also could mean that the business is less competitive and getting desperate to make sales at a lower margin.
The Accuracy of Your Invoice
Sales invoices should be sent out with 100% accuracy and fast. At the point of sale or rapidly after.
If you send out invoices that are inaccurate, your customers may, again sit on them, and refuse to pay.
The longer they are outstanding, remember the likelihood goes down that you will collect.
Did You Fulfill Your Agreements?
If the expectations of the sales transaction were not met, or there was any underperformance, then your customer/client may refuse to pay.
And often they do not tell you when they are irritated by underperformance, They just do not pay.
Again, a sale is not sale until the money hits your bank account.
Follow-up
When should you follow-up on your sales?
Within days.
Ask the correct person (usually an accounts payable clerk at your customer’s office) if they:
- Received the invoice.
- Have any questions?
- Is the invoice accurate?
- When can you expect payment?
By being proactive you set the stage for early payment.
The follow-up on their promises!
And keep following up. With persistent, firm kindness.
The old cliché “the squeaky wheel gets the grease” is applicable in getting paid on your receivable.
Remember, a sale, from a business point of view, is not a sale until it is in your bank account!
Thank you for reading…
by MHolland | Jun 11, 2024 | Accounting Software, Accounts Payables, Accounts Receivables, Cloud-based Accounting
Artificial Intelligence (AI) is the buzzword in business these days…
Will AI replace human accountants?
The short answer – no.
Why?
Because AI cannot flag errors, recode, interpret data correctly all the time, nor communicate with emotional understanding.
By the way, did you know that there are three different types of AI?
They are:
- Machine learning – this is where software recognizes patterns in data.
- Predictive AI – this is where the software uses those learned patterns to suggest actions to users.
- Generative AI – where software uses learned patterns to create new content, i.e. writing text and creating images.
AI in accounting is largely of the Predictive type. It is used to extract data from source documents, and to suggest actions (in coding and matching transactions).
Let us explore how AI is used in the suite of software we use for our clients at ControllershipPLUS.
Source Document Extraction
Here in our front-end software called HubDoc AI goes to work in extracting the core details from supplier bills, in addition to other source documents.
Within seconds of a supplier bill being uploaded or emailed to HubDoc the key details are extracted automatically:
- Vender name.
- Date due.
- Total amount.
- Taxes, including GST, PST, and HST.
HubDoc, based on predictive AI will suggest the account code to code the expense to. It will suggest this based on the past coding of that supplier.
For instance, Telus, a large telecom provider in Canada will usually be coded to “telephone” expense, if that is where you coded it in the past.
However, if the Telus bill is not for a telephone expense, rather it is for cell phones purchased, it may need to be coded somewhere else, like a capital account, “Telephone equipment.”
Human intervention is needed at this point because although predictive AI is good at extraction and making suggestions, it is not smart enough to know what to do with a new situation!
A highly intelligent accounting technician is needed to review and watch for exceptions and recode the suggested coding by AI.
In accounting, our human technicians are definitely much smarter than the AI.
Where predictive AI shines here is in the time saving of mind-numbing data entry tasks.
Okay, let us head on over to Xero next, where these extracted documents have been sent to within these now coded transactions….
Xero – Here AI Makes Suggestions
Inside Xero, the predictive AI matches transactions fed into it directly from the bank feeds.
It suggests which transactions likely match what went through your bank accounts.
The risk here in relying on AI is that the AI is not that smart. It only can suggest a match. If there are multiple transactions with the same dollar amount if you blindly accept the suggestion from AI, you may be wrong.
Here again, human intervention is required to manage and review, and not unconsciously clicking the “OKAY” button.
Xero and Accounts Receivable
Inside the bank feeds, Xero’s AI will suggest matches of deposits. This saves time in looking up the correct transactions to reconcile.
Unpaid deposits remain in aged accounts receivable.
Xero sends reminders of outstanding invoices to your customers and clients. I am not sure how this can rightly be called AI as it is just a routine, fixed scheduling task. Nevertheless, it does save time for the accounting technician.
Bills approved for payment now are sent over to Plooto…
AI and Plooto
The key features of AI in Plooto are:
- Two-way synchronization. Bills are automatically synced to Plooto from Xero, along with all attached source documents. Once they are paid in Plooto, they are synced back to Xero and recorded as a payment against the bill just paid.
- Plooto allows for customizable approval processes. These save time by reducing chasing people physically in different locations to sign cheques.
- Plooto leverages AI to encrypt all date keeping everything tight and secure.
The predictive AI here is not really thinking for you in a way that you might imagine AI to be working. It does, though, save accounting technicians from doing boring, repetitive tasks.
Fathom and Smart Prediction
Our high-end reporting software, Fathom, picks up all the month-end date from Xero on a regular, automated basis.
Inside of the forecasting module of Fathom it uses what it calls Smart Prediction to predict future revenue and expenses when doing a forecast.
Again, highly intelligent accounting technicians are required to intervene and not assume that the software’s predictions are written on stone tablets!
In Summary
Predictive AI really has stripped many mundane, repetitive tasks from accounting technicians. It has freed them up to add true intelligence to the mix. To analyse and override and to ensure that transactions are coded correctly, and that cash-flow projections make sense based on our knowledge of our client’s businesses.
Thank you for reading…
by MHolland | Jun 5, 2024 | Accounting Software, Cloud-based Accounting
Enterprise software is expensive! Think SAP for Fortune 500 companies. Think NetSuite for mid-tier companies doing $100 million plus in sales.
At ControllershipPLUS what we have cobbled together is a stunning suite of software that links, communicates, and integrates flawlessly, efficiently, and seamlessly. Without a glitch.
Today I am going to summarize the benefits of this suite of software tools, how they integrate, and exactly what they do for you.
At the heart of it all is our favorite accounting software….
Xero, “To Do Beautiful Business”
Xero is a beautiful piece of software – built with the end user in mind. It is simple, elegant, and intuitive.
What does Xero do?
I am glad you asked!
By the way, Xero, is not an ERP (Enterprise Resource Planning) software.
What it does, beautifully, is manage your bank accounts, accounts payable, accounts receivable, and customizable reports.
You can also do Purchase Orders, basic projects tracking, simple inventory management, divisional tracking, tax reports, and short-term cash-flow management.
Now here is where it gets interesting – as we add other specialized software programs into the mix, then Xero transforms into an ERP for small to mid-sized businesses.
The first essential partner program to Xero is….
HubDoc, Your Document and Data Capture System
All of your supplier bills and even bank statements can be uploaded to HubDoc in one of three ways:
- Snap a pic on your phone and upload using the app on your phone.
- Upload directly from your desktop computer.
HubDoc gets to work extracting the details on the document – date, taxes, amount, supplier name.
Using artificial intelligence (AI) it then codes the transaction in the same way you did last time.
Now, one of our highly trained cloud-based accounting specialists will review each transaction to ensure that the AI coded it correctly. If not, they recode inside HubDoc.
The transaction, along with the source document is seamlessly posted to Xero, attaching the original source document to the transaction inside Xero.
This is where the handoff to the next add-on happens…
ApprovalMax, Robust Financial Controls Made Easy
All the transactions from HubDoc, posted to Xero go into a “holding tank” called “awaiting approval.”
ApprovalMax steps in and automatically pulls all these unapproved transactions and routes them to the internal approvers before they are ready to pay.
The setup matrixes inside ApprovalMax can be as simple or as complex as you need them to be.
The supplier bills get sent to users like Department Heads, frontline approvers, managers, accountants, and ultimately owners (if desired).
An audit report after the transaction has been approved gets attached to the transaction along with the source document from HubDoc.
These transactions now move to the next “holding tank” called “ready for payment” …and now the next heavy-duty add-on software kicks into gear…
Plooto, Your Business Payments Streamlined and Simplified
Plooto pulls all those bills ready for payment along with the source documents and audit report.
It then routes those bills for payment to the proper approvers and e-signers.
Your suppliers get paid automatically by deposit into their bank account.
The payment is then synced back to Xero to record against the outstanding bill.
All this happens without human intervention, aside from the approval itself.
Now, Back to Xero
Now that all your transactions are entered through HubDoc, approved through ApprovalMax, paid by Plooto, it is time to reconcile the bank.
(By the way, all your customer invoices, sent out through Xero by email, can be paid by your clients/customers using Plooto).
Reconciling the bank is easy with bank feeds inside Xero.
Xero will match transactions it pulls from the bank automatically through its feeds and all you have to do is review and click “okay.”
Now, you re ready to ensure everything is accurate and create reports. Custom reports can be setup once and used over and over again.
From Xero and our core add-on programs we re now ready to hop over to….
Fathom, All in One Reporting, Analysis and Forecasting
Fathom is our powerful high-end reporting add-on.
The end results from Xero are synced over regularly to Fathom.
From there, Key Performance Indicators, Cash-Flow Statements, Complex Forecasts, and incredibly beautiful month end reports are created.
The Fathom reports are what we review with our clients monthly and provide coaching from the numbers…
A Quick Summary
Each software described above talk seamlessly with each other.
Each has its own unique role to play. Because they are highly specialized, these software programs do things that all-in-one software can never compete with.
It is the difference between building a house with a jack-of-all-trades versus using a skilled plumber, a skilled electrician and so on.
Together these powerful add-ons transform Xero into a mini-ERP!
In Conclusion
In addition to the core programs above, the marketplace for Xero add-ons offers solutions to a myriad of challenges…
For example:
- If you need to collect your aged receivables better – use an add-on called Chaser.
- If you need robust inventory management – consider Unleashed.
- For real estate companies – take a look at Loft47.
- Do you sell goods online using Shopify? – these can be linked to Xero.
There are hundreds of add-ons in the Xero marketplace.
Finally, many front-end operational software that are highly industry specific will often sync their transactions directly into Xero.
Thank you for reading…
by MHolland | May 30, 2024 | Business Tips, Cash Flow, Selling Tips
What? Track only ONE Key Performance Indicator? That is like flying a jet plane with, say, a choice of fuel level, altitude, airspeed. Pick one, and good luck. Crazy, right?
A business is like a jet airplane in that to hit its target with accuracy it needs more than one Indicator to really fly. Likely about 8-12 Key Indicators.
I agree with that.
However, there may be one Super Key Performance Indicator that if you could discover it, it would be a kind of early warning siren for your business.
This early warning would wake you up to take immediate corrective action if it is off target or relax with a glass of wine if it is on target.
Let us take a look and explore this concept together…
Super Key Performance Indicator
Behind every business, in every industry there may be a kind of magic number. A Super Key Performance Indicator.
This number will act like an early warning sign of trouble brewing.
A Super Key Performance Indicator for an Airline
I read once that the CEO of British Airways looked daily at this Super KPI – flights leaving on time.
If flights did not leave on time, everything spilled out of control:
- Costs went up from the delay.
- Passengers would be irate and expect refunds.
- Passengers would need meal tickets and sometimes hotel costs covered.
- Employees may have to be paid overtime and booked in hotels with meals.
A flight not leaving on time does not arrive on time, adding more costs from the bottleneck.
You can imagine the snowball effect of one flight not leaving on time.
An Unusual Super Indicator for a Restaurant
Super Key Performance Indicators can be incredibly unique!
I heard of a restaurant owner who could roughly predict the number of guests he would get at his restaurant on Saturday from how busy Monday was.
Honestly, I have no idea how the two interrelate.
And that, in part, is the key.
An Accounting Firm Super KPI
For an accounting firm longing for long-term client retention, a Super KPI could be a simple one – the growth rate of sales combined with cash in the bank (cash in the bank of the clients, not the business).
Okay, okay I know that is two – sales growth and cash on hand.
Cash on hand (from sales growth) could indicate the following:
If the client’s cash is declining:
- Low cash causing stress paying bills including the accounting firms.
- Higher demands for the accounting firm to help them attain positive cash flow.
- Loss of the client if they go bankrupt.
On the other hand, high monthly cash flow means:
- A happy client eager to listen to your advice.
- A client who is growing and will likely expand their demand for more services from you.
A Super KPI for All Businesses
In the area of marketing, it will be relatively easy for a business to find a Super KPI…
To find your unique Super KPI in the marketing area do this – find the one activity that drives sales more than any other.
It could be phone calls, direct mail, events, or website contacts.
Find the activity that gives you the most sales.
To get more business, first track that activity and then increase the activity to grow your business.
Simple, right?
Lastly, keep examining new and innovative ways to market because your business tools might change. Phone calls that worked last year, might not now. Perhaps it is something online.
The key is to keep looking.
How to Find Your Super Key Performance Indicator?
A Super KPI will emerge for your business by you thinking deeply about and examining patterns.
To help you find the patterns ask yourself some questions:
- What one thing that we are doing as a business has the greatest impact on our business within the next 12 months?
- What one thing that we could do would have the greatest impact on our business results?
- What bottlenecks do we have?
- What is the single thing that drives our clients/customers crazy when we do not do it? (i.e. it could be on-time delivery, or what is delivered is not high-quality).
- What is our review score on Google?
- What strange pattern is there in our business (like Monday guests as an indicator for Friday guests!) that I have not seen yet?
- Ask your Team for patterns they may see that you do not.
Thank you for reading…
by MHolland | May 23, 2024 | Accounting Software, Accounts Payables, Business Tips, Cash Flow, Cloud-based Accounting
We live in a fast-paced digital world, and cheque writing has gone the way of the horse and buggy (sorry to all pen and paper lovers).
The fact is that paper cheques, sent in the mail, are significantly more insecure than paying and receiving money online. Physical cheques are stolen from mailboxes, acid washed, re-inscribed and cashed by the thief.
For our clients, we have been paying all their bills online for years. The service we use for this is called Plooto, and they are awesome!
Paying bills via wire transfer or Electronic Funds Transfer (EFT), using the big Canadian Chartered Banks is time consuming and expensive. And it is not automated. Well, okay, it is partially automated in the sense it is digital. It is just not synced to your accounting system. Plooto is.
Here are 7 reasons to make the switch from cheques and EFTs to Plooto….
Reason Number One – It is Fast
All of your bills in Xero (or QuickBooks Online) are synced to Plooto. The instant you log into Plooto, there are all your approved bills, ready to pay.
When you are an e-signer (like a cheque signer only online) you will receive an email showing you the bills that are ready to be e-signed.
You login directly by clicking a link in your email.
You will see each bill that is ready to pay, with the source document attached.
Think of it like this. It is like your bookkeeper has recorded all the bills, printed the physical cheques, and brought the cheques with source documents attached to the cheque. He or she places on your desk, and you sign away.
The difference is that you can be anywhere.
All of this processing is fast!
Reason Number Two – It Saves Time
Because Plooto processes are online and fast, it saves time…
Time is saved in a few ways:
- The lack of physical movement of bills and cheques from office to office.
- The fact that the payment is synced back to your accounting software and recorded as a payment against the bill being paid saves the time of the bookkeeper having to record each payment as in the old systems.
- You can have multiple approvers and the flow is all digital, online. Once you approve, if you have a secondary approver, the bills will instantly go to them to e-sign. This saves a lot of time.
- The source documents are all attached to each transaction, so you are no longer hunting around for the physical copies of bills.
- You can pay multiple bills at one time, which saves time.
Reason Number Three – Pay Bills From Anywhere
Your bookkeeping Team can be in Vancouver. Your headquarters could be in Toronto. No problem.
Everything flows online and is accessible on your browser and through a browser app on your phone.
You can be on holidays and ensure bills get paid on time.
First and second approvers no longer need to be in the same office. They can be separated by oceans!
Reason Number Four – Multi Person Approval Workflows
You can set up a complex Approval Matrix with bookkeepers setting up the bills which in turn go to, for instance, a Department Head.
From there it can be routed automatically to the e-signers. For payments under, say, $1,000 perhaps maybe only one signature is required. If it is greater than $1,000 then 2 e-signers.
You have the power with Plooto to set up as simple or complex a Matrix as you want or need.
Reason Number Five – It Avoids Errors
Errors are avoided as follows…
Once the bill is recorded, checked, and approved in your accounting software, the source document gets attached to each transaction in Xero or QuickBooks.
This source document is attached to each transaction in Plooto, so you can look one more time before paying.
Multiple approvers means more than one set of eyes on each transaction.
The payment is synced back to Xero or QuickBooks which avoids duplicate entries.
To summarize, recording data once only, having multiple approvers looking, and source documents attached for a final look all lead to error avoidance.
Reason Number Six- It is International
Plooto can easily and seamlessly pay vendors and contractors in over 50 countries.
You do not need to call your bank manager to assist with a wire transfer and all this entails.
We have made many international payments with Plooto, and we have encountered no errors in doing these transfers. It is like paying a local supplier.
Reason Number Seven – It is Secure
Plooto uses Multi-Factor Authentication to login to its platform. The money is transferred directly form your bank account into your supplier’s account.
By the way, if they do not want to give you their banking information, as long as they have online banking, you can just email them the transfer and they login to their bank and deposit the funds themselves.
Multiple approvers make it more secure because more eyes have been on each transaction.
There is no risk of physical interception of cheques.
Plooto has banking level security and encryption running in the background.
They started in Canada in 2015 and have been a reliable and trustworthy partner of ours for many years now.
Thanks for reading….
