With a new book, XERO for Dummies, out on the market, Heather Smith is a big believer in cloud accounting, especially for business owners who aren’t comfortable with their financial literacy.
“Accounting is just like driving, you can’t do it without checking the dashboard. When you run your own business, you need to identify KPIs (key performance indicators) you should be monitoring, and cloud accounting helps you easily track your financial ones,” says Smith, who has 22 years’ experience as an accountant and certified advisor for Xero and MYOB, two of the major players in cloud accounting. She has been running her own business for eight years.
Smith spoke to StartupSmart about her top five tips for start-ups setting up cloud accounting, and how they could get the most out of it.
1. Use it to save time and boost growth
“I recommend start-ups, if you’re serious about going into business, get your financial side sorted out as quickly as possible so you have the time to know what’s going on financially, and be scalable,” Smith says. “If you’re doing cloud accounting right, it’ll free up your time to grow your business.”
Smith says cloud accounting, and the opportunity to see at a glance your entire bank feeds, sales data and invoices, will allow start-up operators to strategically grow their business by automating systems.
“There does seem to be a trend in business at the moment to move to subscription payment services and a cloud accounting system can do this without you even thinking about it. This creates a money funnel for your business,” she says.
2. Make the most of plug-ins and report features
Smith says some of the plug-ins, such as the Timely time management plug-in and the debt-tracking options, can boost your cashflow very quickly.
“Personally, I implemented a debtor tracking solution and I was able to improve my debtor days by 10 days, and that was massive,” Smith says, adding the executive reports with detailed KPIs create a goal system for start-ups who are working on their own.
“You can monitor how many and what value of invoices you’re doing a month, or a week. This will enable you to stay focused on constantly pushing up the average value of the total invoices, rather than aiming for more invoices, which means more work and may not be the best way to grow your business.”
3. Getting expert help to set it up properly will be easier and ultimately cheaper
“We have such an onerous tax system in Australia,” Smith says, noting that sitting down with your accountant or bookkeeper now to install a system will save you stress and time next financial year end.
Smith says start-ups who set up a cloud accounting system as early as possible will avoid complicated and costly fixing later on.
“This first stage is the hardest stage. But if you get help after a couple of months, to fix it up takes a lot longer and can be thousands of dollars.”
4. Overcoming data security concerns
Smith says the data security concerns around cloud accounting are minimal, and there are significant data security benefits too.
“Xero data is historical data not future data. Someone who gets in can’t access your bank account and extract money. So if you’re prepared to do online banking you should be set to do cloud accounting,” she says.
Smith says business owners should be more worried about losing their financial data through computer crashes, or natural disasters, adding that she’s based in Brisbane and has seen too many businesses lose their records from flood or fires.
“You need to have a secure back-up plan in place, so use a cloud-based option, backed up in real time in multiple services. I still suggest to people they make their own back-ups, but cloud will be far better.”
5. Take responsibility for the financial management of your business
Smith says many small business owners may want to avoid the financial details of their business and outsource that work to an accountant. While that can work for a few years, Smith says this approach holds businesses back from reaching their full potential.
“Don’t put on blinkers and say you don’t want to learn this stuff. If you are in business you need to know this stuff. But you can take the time you need to learn it slowly,” Smith says.
“Richard Branson doesn’t do his own tax but he does understand the numbers. Don’t abdicate that responsibility.”