Written in conjunction with our partners at CFO Selections

​A cash flow shortage is the number one reason why small businesses fail, but even mid-sized and large companies need smart cash flow management to survive and thrive.
Insufficient cash forces companies to make difficult decisions about who is going to get paid and when. Unfortunately, this can lead to vendors and suppliers being paid late, being overdue on rent, even employees waiting on paychecks.

It is not an exaggeration to say that cash is the lifeblood of any business. Not having enough money to pay for expenses can erode business credibility, which leads to:

• Suppliers refusing to do business
• Credit card companies increasing interest rates
• Vendors tightening payment terms
• Landlords evicting tenants
• Employees leaving

Ultimately, a company’s potential will be stifled if there is not enough capital to invest in the assets that facilitate growth, and its very existence can be threatened as well.
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So, are you ready to manage cash flow for the coming year? 

Are you paying for compliance accounting or advisory accounting? Do you know?

Compliance accounting is straightforward – it deals with day-to-day accounting, reporting, and tax preparation. But what about advisory accounting?
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The Intuit Tax Council defines accounting advisory services as, “Taking client challenges and applying strategies to create opportunities in service to their growth.” Accounting advisory interweaves technology, relationships, communication, and strategy to provide companies the fuel needed for profitable growth. 

The summer months are typically a less busy time for accountants, which means this is the perfect time to do the planning and cleanup work that tends to get pushed to the backburner during the year-end close rush and spring tax season. Use this time to embrace a culture of continuous improvement – looking for places where you can overhaul whatever is broken and streamline areas that are not working optimally.

So, how do you identify where your accounting department needs to improve?

Ask your accounting team and any staff that deals directly with them where their pain points are and what they would prioritize fixing. By including both the team’s feedback and the rest of the organization’s perspective, you will get more balanced input on what kinds of changes should be prioritized.
Focus on operations, processes, and policies with the potential to have a big impact on either efficiency or accuracy. Possible areas to focus on include:

“Finance” is a broad term every business leader has heard, but it can mean many different things.
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Businesses have banking relationships, investments they need to track, fundraising and financial analysis needs. Corporate Financial Planning and Analysis (FP&A), the work performed by Financial Analysts, is a complex specialty within Finance that all successful businesses need in some degree. There are multiple FP&A components of which every business requires a different combination. This complexity makes hiring to satisfy your FP&A needs difficult. To make matters harder, many accounting and FP&A functions can overlap.

So how do you know if you need to hire a dedicated Financial Analyst or a hybrid accountant? It helps to first understand the components of Corporate FP&A, the value each adds, and how much time each activity should take. 

A guest post from our partners at CFO Selections.

With an increased focus on financial planning and analysis (FP&A) in recent years, many companies have begun asking, “Do accountants do financial planning?”

For cash-strapped startups and small businesses the temptation to simply add to their accountant’s workload is strong. However, this is not a wise decision. While overloading any one role presents problems on its own, entrusting accountants with FP&A poses its own unique risks.

The differences between accounting and FP&A necessitate that it be handled by separate personnel with unique skillsets and performance objectives. Understanding what FP&A entails and what is at stake can help organizations make smart decisions about who should handle this critical responsibility.

We see a variety of circumstances in our practice at ASP, whether it be outsourced consulting needs, or an organization growing and needing to consider a fulltime resource. Our recruiting efforts are responding to those fulltime needs daily. The pandemic has shifted the business landscape significantly, making strong financial leadership universally important.
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Small companies that previously had their CEO at the helm of financial operations have realized that they need a fulltime controller to oversee their accounting operations and staff. With the increased demands of operating during financially uncertain times, CEOs need to focus on their core role of running the company overall (pivoting and shifting as needed), while entrusting another professional with the financial management of the company.

As a result, hiring a fulltime controller is no longer optional these days with the following business trends occurring:

Is your cash-strapped business looking for ways to improve cash flow without needing to find additional financing?

Improving your Cash Conversion Cycle (CCC) is a key method for improving your cash flow without having to look externally for assistance, strengthening the business from within. CCC is the measure of how long it takes a company to convert inventory, investments, and resources into cash. Savvy companies will analyze this metric to understand how long money put into the business is tied up before it is converted into sales and cash is received.

Accelerating cash inflows allows businesses to cover payroll and pay operating expenses on time. So, how can you strategically increase your cash position?

There are plenty of resources about the benefits of outsourcing, yet many business owners are still resistant to outsource their bookkeeping.

Even businesses that outsource other activities tend to keep a tight grasp on their financial functions. Because cash flow is so important to small businesses, bookkeeping and accounting tend to be some of the last functions that business owners are willing to relinquish control of when they formulate strategic growth plans.

But why? Why are some business owners still against outsourcing their bookkeeping? 

Since March, 62% of employed Americans have worked from home, which is more than double the previous figures from earlier in 2020. Furthermore, 59% of these employees want to continue to work remotely, moving forward even after public health restrictions are lifted. This sentiment has led businesses to examine the costs of maintaining a remote workforce closely. They are asking:

• Which of our ongoing expenses have been reduced with employees working from home? Which have increased?
• What kinds of new expenses do we have on our P&L statement now?
• Should our company stay virtual even after employees can go back? Does it make financial sense to do so?
• How do we reduce expenses while giving employees what they want?

2020 has been a year of disruptions and reactions. Companies have reacted to supply chain interruptions, new regulations, shifting market demand, and staffing issues, among other challenges with some faring better than others.
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Marcus Wagner explains, “Because of COVID-19, businesses and their accounting departments are going through a cycle of shock (and maybe some denial), survival, learning and adaptation. For those of you who haven’t done so yet, it’s critical to begin the shift into the learning and adaptation phases as quickly as possible so we emerge stronger as a result."

Adapting has been critical thus far and will continue to be as we move into 2021. An adaptation mindset allows your business to respond to current challenges and anticipate future disruptions to generate better financial outcomes. Companies with accounting teams that adapt quickly can minimize revenue loss during a downturn and capitalize on revenue opportunities faster during a recovery period.