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When Is a Sale a Sale?

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:

  1. Time it takes to collect.
  2. Customer satisfaction.
  3. Credit worthiness of your customer.
  4. Your Gross Margin (I will explain…).
  5. The accuracy of your invoice.
  6. Did you fulfill what was agreed upon?
  7. 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.


Because if gross margins are declining it means:

  1. Discounting is happening.
  2. If discounting is happening, margins will be less, and perhaps not enough to cover your fixed costs.
  3. 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.


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:

  1. Received the invoice.
  2. Have any questions?
  3. Is the invoice accurate?
  4. 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…



How is Artificial Intelligence Impacting the World of Accounting?

Artificial Intelligence (AI) is the buzzword in business these days…

Will AI replace human accountants?

The short answer – no.


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:

  1. Machine learning – this is where software recognizes patterns in data.
  2. Predictive AI – this is where the software uses those learned patterns to suggest actions to users.
  3. 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:

  1. Vender name.
  2. Date due.
  3. Total amount.
  4. 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:

  1. 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.
  2. Plooto allows for customizable approval processes. These save time by reducing chasing people physically in different locations to sign cheques.
  3. 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…





An Enterprise Suite of Software for a Fraction of the Cost!

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:

  1. Snap a pic on your phone and upload using the app on your phone.
  2. 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:

  1. If you need to collect your aged receivables better – use an add-on called Chaser.
  2. If you need robust inventory management – consider Unleashed.
  3. For real estate companies – take a look at Loft47.
  4. 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…

7 Reasons to Switch from Wire Transfers and EFTs to Plooto

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:

  1. The lack of physical movement of bills and cheques from office to office.
  2. 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.
  3. 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.
  4. The source documents are all attached to each transaction, so you are no longer hunting around for the physical copies of bills.
  5. 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….


Critical Ratios You Must Track in Your Business for Success – Part 2

Last week I wrote about how the three main financial statements of your business contain five sections as follows:

  1. Assets (the things you own)
  2. Liabilities (what you owe)
  3. Equity (what’s leftover for you)

(the above 3 sections are on the Balance Sheet)

  1. Revenues (the inflows into your business)
  2. Expenses (the outflows from your business)

(the above 2 sections are on your Income Statement)

To understand the story of your business month by month, year by year you need a sharper focus.

That sharper focus can begin with ratios.

Last week I wrote about liquidity ratios and profitability ratios.

To recap, liquidity ratios – the main one being your current ratio – tells you how well you are able to pay your bills as they come due.

The profitability ratios include your Gross Profit Margin, your Net Profit Margin and Return on Equity. These tell you how profitable your business is and what your return on investment is.

This week I will write about…

Activity Ratios

There are three main activity ratios:

  1. Average days inventory
  2. Average days receivable
  3. Average days payable

The above three ratios can be summarized in what is called your Cash Conversion Cycle.

The intent of the above ratios is to show you how quickly you sell your inventory, convert your accounts receivable to cash and the time you take to pay your bills in order to conserve cash.

First, let us look at…

Average Days Inventory

To calculate this ratio, you first take your opening inventory for the period (month or year) and add this to your closing inventory. Then divide by two.

Take this average and multiply by the days in the period (for example 30 or 31 for a month) and divide this by your Cost of Goods Sold for the same period.

The smaller the number the better. A smaller number means you are selling your inventory more quickly. A longer number of days means your cash is tied up in inventory.

The next ratio is….

Average Days Receivable

This measures the average number of days customers take to pay for your goods or services.

For example, if you give your customers terms of 30 days, and your days receivable are running at, say, 25 days, then you are doing great.

You calculate your days receivable as follows:

Opening Accounts Receivable at beginning of the period (month for instance) plus Closing Accounts Receivable at end of the period divided by two.

Now, take the average accounts receivable times the number of days in the period (30 or 31 for a month) and divide that number by your Revenue for that same period.

Even if you have a small number, which is great, it is important to review each aged account receivable.

This is because fast payers can bring the average down, hiding slow payers.

In a tough economy, you are only as successful as your clients are successful.

The other thing to keep in mind is that your accounts receivable is what your customers will want to stretch out as long as possible. Your account receivable is their accounts payable!

The best way to get your receivables paid fast is persistent, constant communication. The cliché “the squeaky wheel gets the grease” applies here.

A large bad debt could cripple your business.

Now, let us examine…

Average Days Payable

This is a measurement of how long you take to pay your supplier bills, on average.

For this Key Ratio, longer is better.

Why? Because it means you are holding onto your cash longer.

However, you will not want to jeopardize your relationships with your suppliers.

You calculate average days payable as follows:

Opening accounts payable plus closing accounts payable (for the period) divided by two.

Take the average as above times the number of days in the period and divide that by the Total Cost of Goods Sold for the period.

Now, we can summarize all three of the above ratios into one number…

Cash Conversion Cycle

Your cash conversion cycle is the number of days, on average, it takes to convert your working capital into cash.

Here is how you calculate this ratio:

You simply add your Average Days Inventory to your Average Days Receivable and then subtract your Average Days Payable.

Let us assume you take 60 days on average to sell your inventory, and 20 days on average to collect your receivables, and 40 days on average to pay your supplier bills.

Your Cash Conversion Cycle is 60 + 20 – 35 = 45 days.

Is it possible to have a negative Cash Conversion Cycle?


Let us say you turn your inventory every 20 days and collect your accounts receivable in 15 days and take 40 days to pay your bills.

Your Cash Conversion Cycle will be: 20 + 15 – 40 = negative 5 days.

This is awesome, and the sign of an extremely healthy business.

Thanks for reading…


Cloud Accounting Hides What is Really Happening Behind the Scenes

As I have written before, cloud-based accounting is a system. You must have a systems mindset to manage it.

Working with cloud-based accounting software is like turning on a firehose of data.

Bank feeds. Credit card feeds. Shopify orders. Document feeds. Plooto feeds (do not worry I will explain!)

The power of cloud-based accounting is this – data from multiple sources can feed into your accounting software.

Why is that good?

It saves your team time. Accounting becomes dynamic, happening in real-time. No clerks entering debits and credits transaction by transaction at discrete times during the month.

And herein lies a problem my friends. Two problems to be precise.

With cloud-based accounting, documents flow into your software without human intervention. Hundreds, thousands if you are a bigger company.

If those systems are not managed or understood a big mess can get created! It is the old cliché, garbage in, garbage out. Except now the garbage is flying in at lightning speed one document after another.
This can be challenging to unravel. And time consuming.

There are three things you must do to manage cloud-based accounting…

Number One – Set-Up Your Systems Correctly

You must design your systems elegantly. You must understand how information flows into your software and how to manage it, in real-time.

For example, when you set up bank feeds your software will (in the background, usually daily) log in to your bank and pull your banking transactions into your accounting software.

It will look for matches to transactions you have entered. When it finds a match, it will suggest you click “ok” to reconcile.

It is important to ensure that the systems of matching are aligned with the actual transactions entered.
This is one system.

You may have invoices being synced from an online shopping system, like Shopify.

Here, if you do not have the syncing setup correctly your inventory, sales tax reporting, accounts receivable, sales orders…pretty much everything…. could end up being a mess.

Number Two – Manage Your Systems

It is imperative that you have a highly focused technician, who understands software to manage the systems.

You will have transactions flowing into your software from various sources (feeds). However, you cannot assume that the transactions are correct. Some transactions can be pre-set to always be posted in the same way. That is fine.

An example would be fixed rent. The rent you pay to the landlord is always the same and will always get posted to the same account. You can set up a transaction like this to flow in without any human intervention.

Does the same apply to telephone bills? You can setup your system to fetch the bill from your phone provider (log in the phone provider and post the transaction). It can be setup for auto pay.

But wait, stop. What if the bill is wrong? What is the phone provider charged you $500 for something you did not use?

You will want your sharp technician to check exceptions to the rules and flag them for review.

Number Three – Technicians Must be Trained in Accounting

It may seem like, with cloud accounting, that you do not need to know how accounting works!

This is not true. Cloud accounting is still accounting. Every transaction in accounting has at least two sides.

For every event in accounting, at least two (often quite a few) things happen. Every single transaction has two sides. There is no such thing as a one-sided transaction in accounting.

Take a sale. You sell a product. What happens?

Someone now owes you something. Accounts receivable has gone up. Sales has gone up.

Taxes were involved, so taxes went up.

Your inventory went down, and at the same time, Cost of Goods Sold went up.

All these debits and credits must balance.

Debits and credits can be very confusing to non-accountants.

Therefore, your accounting technicians must understand basic accounting and how each transaction changes various accounts on your Balance Sheet and Income Statement.

A systems driven person, not understanding basic bookkeeping, will not see the background entries being done by the software.

The problem emerges when you need to unravel a mess.

In Conclusion

Cloud accounting is fast. It is a system. To manage correctly you need to have it managed by people who understand software, systems, and basic bookkeeping.

With one of those three ingredients missing, a mess can emerge.

Thanks for reading…