13 Key Financial Metrics & KPIs for Professional Services

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professional service business working at a table

Managing a professional services firm often involves moving at a frenetic pace. You must be able to seamlessly transition from things like reviewing a client proposal to reporting campaign results to business partners.

While these tasks are an essential part of managing your business, tracking financial metrics is equally important. These financial metrics allow you to stay apprised of various components of your firm’s overall performance. The practice of tracking this data is often referred to as online bookkeeping.

Chances are that you are already tracking a few business financial metrics. However, you may not be confident that you are monitoring the best data points.

Below, we have compiled a list of 13 key financial metrics that your business can leverage to help facilitate growth and improve profitability.

How to Check Your Financial Health

Thanks to modern software, there are plenty of options for checking the financial health of your professional services firm. You can track various metrics independently or partner with a firm that provides bookkeeping for professional services.

Many professional service providers find that allocating this responsibility to a third-party provideris the most pragmatic approach. These teams specialise in online bookkeeping services and can help find the perfect software for your industry. 

You can access this data from anywhere and detect concerning trends early on. This allows you to be proactive in taking control of your firm’s financial future.

How Often Should You Check Core Financial Metrics for Your Professional Services Business?

Many professional services business owners wonder how often they should check their financial metrics. You may even find yourself asking these very same questions. The simple answer? Frequently.

You can collect information about all of the best business financial metrics in the world. However, they will not do a bit of good unless you analyse them to gain insights about your firm.

Generally, we recommend assessing key performance indicators (KPIs) at least once per week. Develop a routine and check your metrics on the same day each week. While many of the data points outlined below may not show significant changes on a weekly basis, it is still important to review them regularly.

Some of the metrics detailed below may only need to be checked monthly or quarterly. Others, such as annual recurring revenue, can only be assessed yearly.

By routinely checking your business’ financial metrics, you can help increase revenue and improve profitability.

Metrics

1.   Revenue

Of all of the business financial metrics, revenue is one that all professional services firms should track. 

Revenue is an important data point to track. However, it does not provide a complete picture of your business’ overall performance. When it is paired with additional key performance indicators outlined below, revenue can tell you a lot about your current business model.

2.   Annual Recurring Revenue (ARR)

When you’re organizing your online bookkeeping services, it is also important to track ARR. ARR is a metric that quantifies income from annual services. 

For instance, let’s say that a particular client signed a two-year contract for $100,000. The ARR for that client would be $50,000 because that would represent how much you earn from that account per year. ARR is a predictable income stream that can help you to grow your business.

3.   Profit

When it comes to key business financial metrics, perhaps none is as important as profit. This data lets you know what your net income will be after expenses. Unlike revenue, profit gives a much clearer view of the health of your professional services firm. 

When you’re calculating profits, make sure to account for all expenses. This includes customer acquisition costs and costs of goods sold (COGS). If you offer ongoing service, COGS can be substituted for the cost of creating and maintaining your software.

4.   Qualified Leads:  MQLs and SQLs

Qualified leads are target clients that are primed to make a purchase. These buyers are already actively seeking information about your services and are deep in the sales funnel.

There are various types of lead-related business financial metrics available, depending on which types of services you provide. 

Marketing qualified leads (MQLs) are buyers that fit your defined target audience to a ‘T’.  Consumers in the MQL phase are aware that there is a solution to the problem they are facing. However, they are not completely aware of your product offering. 

Sales qualified leads (SQLs) are the B2B variant of MQLs. An SQL is a person with the authority to make a buying decision. Once you identify clients that are SQLs, it is time to present them with quality content to close the deal.

5.   Customer Acquisition Cost (CAC)

When a firm’s revenue is high, but profits are low, it is time to assess additional business financial metrics to identify the root cause of the problem. One such KPI is CAC.

CACrefers to the average amount spent to obtain new clients. Ideally, you want to have a low CAC and a high purchase rate per consumer.

For instance, let’s say that your CAC is approximately $15. This means it costs your firm $15 to acquire a single customer. If the average client is spending $100 AU, then your CAC to purchase ratio is good. However, if average purchase amounts and CAC are nearly even, then you may need to reevaluate your business strategy.

6.   Customer Lifetime Value (CLV)

Most of the business financial metrics on our list are great for all professional services firms. However, our next KPI is geared specifically toward established firms. 

CLV outlines how much a client spends on your services throughout their lifecycle. The lifecycle of your clients will be heavily dependent on your industry. Some professional services businesses will retain customers for years.

In order to calculate CLV, subtract CAC from the amount of total revenue earned from that customer. Acquiring customers cheaply and retaining them for years can help your business improve profitability.

7.   Proposals Sent

One of the more basic business financial metrics that we recommend tracking are proposals sent. Contrary to popular belief, the goal is not to send out an absurdly high number of proposals. Instead, you should focus your attention on targeting quality leads. 

If you find that your “proposals sent” metric has dropped, review your lead-generating practices. Meet with your sales team and seek out their feedback. Is the issue that they are not getting enough leads? If not, perhaps they need to refine their outreach practices.

8.   Win Rate

Win rate is a great KPI that can be used to hold your sales staff accountable. In order to calculate win rate, divide deals closed by the total number of proposals sent. 

Much like the proposals sent metric, the higher the better is not necessarily what you’re aiming for. If your rate is over 90%, then your services may be priced too low. You do not want to sell your business short and hinder profitability. Increasing your rates slightly may reduce the win rate, but it will lead to higher revenue in total.

On the other hand, win rates below 50% are a sure sign that something is awry with your sales practices. Once a high-quality lead is identified, your sales team should be able to close a good number of the deals they present. An ideal win rate is approximately 70%.

9.   Net Margin

Unlike win rate, some business financial metrics are a bit more difficult to calculate. Net margin is a prime example. However, it is an important KPI to track.

Net margins translate your revenue to actual profits. In order to calculate this figure, you must have a firm grasp on CAC and COGS. Unhealthy net margins can prevent you from scaling your business.

10.  Cash Flow from Operations

Your business must maintain a positive cash flow to meet deadlines, hire new staff, and grow. Firms without strong cash flow are not flexible, which can hinder performance.

An important part of managing cash flow includes deciding when you are going to charge clients. If you take on a large number of new accounts and do not charge anything upfront, your firm may quickly have a cash flow deficit. 

11.  Client Retention Rate

Acquiring new clients is costly. Retaining existing customers is much more efficient and practical. If your client retention rate is low, then it is time to find out why.

In order to calculate client retention rate, subtract the number of clients at the end of a period from the number of clients obtained during the same period. This will yield the number of starting clients. Next, multiply that figure by 100. This will be your client retention rate.

12.  Average Churn Rate

The churn rate is also referred to as the rate of attrition. Professional service firms use this metric to determine how many clients cancel services during a given period of time. 

A high churn rate may be a sign that your sales team is closing deals with clients that are a poor fit for your company.

13.  Revenue per User (RPU)

RPU is one of the best business financial metrics for professional service businesses. As the name implies, RPU indicates the amount of income generated on a per-client basis. 

You can utilise this metric to project future profits as you scale your business. You can also make decisions about possible pricing adjustments to ensure net margins are sustainable.

Closing

By incorporating these KPIs into your online bookkeeping services, you will be able to more effectively track the financial health of your firm. You will gain key insights into what your team is doing well. Your management team will understand how to improve the client experience and generate additional profit.

If you want to optimise your ability to leverage these metrics, consider bookkeeping for professional services from Visory. Our experts can supercharge your financial back office and give you the tools needed to grow your business! Contact us to learn more about customised online bookkeeping for professional services.

10 Key Financial Metrics and KPIs for eCommerce Business Owners

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Financial Metrics and KPIs for eCommerce Business Owners

Running an eCommerce store is an incredibly challenging venture. You must monitor sales, oversee the latest marketing efforts, and make sure your team has the tools they need to perform at peak levels. 

In order to effectively accomplish all of these various tasks, you must become an expert at eCommerce bookkeeping.

Put simply, eCommerce bookkeeping refers to the process of tracking various financial metrics that impact the success of your business. Without a strong understanding of these indicators, effectively managing your online store will be nearly impossible.

With that in mind, the experts at Visory have created this helpful guide. Our team specialises in online bookkeeping services that help eCommerce sites track essential data.

Below, we’ll outline the ten key eCommerce financial metrics that you should be tracking. 

How to Measure eCommerce Success

If you have been searching for a way to quantify your eCommerce success, online bookkeeping is the answer. It is important to thoroughly track relevant data about your business’ performance and sales. Each category of data is known as a key performance indicator (KPI).

With modern software, you can collect information on just about any metric imaginable. However, not all eCommerce financial metrics give accurate insights into your business. If you pay too much attention to the wrong KPIs, then you will have an incomplete picture of your store’s overall health.

Many eCommerce stores opt to use third-party eCommerce bookkeeping services. These firms specialise in monitoring KPIs and compiling relevant data for your business. They can provide you with regular reports on your business performance. You can then use this information to detect trends, refine your business model, and generate more revenue.

How often should you check your eCommerce financial metrics?

 This depends on a few factors. 

For instance, if you have just switched to a new page theme, then you should check your metrics each week. This is because a new theme can drastically impact the way consumers interact with your content. Your new theme may lead to changes in traffic volume or cart abandonment rates.

More established eCommerce stores may only need to check eCommerce financial metrics bi-weekly or monthly. There is no one-size-fits-all answer. The best solution will depend on your business’ current health and growth projections.

Metrics

Now that we have covered online bookkeeping services and how often you should check your KPIs, let’s dive into the list. Our top ten eCommerce financial metrics include:

1.   Revenue

Our first pick is pretty straightforward. Every business owner actively tracks their overall revenue (even those who are not very interested in analysing data).

However, revenue gives a very narrow view of an eCommerce store’s performance. Having high top-line revenue is great. But it is a useless statistic unless it’s paired with other eCommerce financial metrics. 

2.   Profit

Profit gives a much better picture of your eCommerce store’s health and performance. If your revenue is rising, but your total income is not, it is likely because you are leaking money in another category. This inconsistency may be due to unusually high operating expenses or disproportionate acquisition costs.

When you’re calculating profits, make sure to account for all expenses. We suggest monitoring profits weekly, especially when your business is young. That way, you can continually look for ways to reduce expenses and improve profitability.

3.   Average Order Value (AOV)

Average order value is one of the best eCommerce financial metrics for gauging customer loyalty and interest in your products. The AOV refers to how much the average customer is purchasing each time they checkout.

Driving up your AOV is a simple, but effective alternative to generating new site traffic. There are several great ways to boost AOV, such as:

  • Rewards programs
  • Selling bundled items
  • Upselling with add-ons at checkout
  • Mix-and-match deals

If you find that your AOV is low, using the techniques above can incentivise consumers to buy your products in larger quantities.

4.   Customer Lifetime Value (CLV)

Most of the eCommerce financial metrics on our list are great for just about any business. However, this next one is most suitable for established online stores with a strong customer base. 

CLV refers to the total amount that a consumer spends at your store throughout their entire “lifecycle.” The CLV will vary greatly, depending on what industry you are in.

eCommerce stores that sell consumables and health products may have customer lifecycles of five years or more. On the other hand, a business that sells specialty automotive parts may have extremely short customer lifecycles.

5.   eCommerce Conversion Rate (CVR)

Ever wondered how many visitors to your site are actually making a purchase? If so, then you need to be tracking your eCommerce conversion rate (CVR). 

Like most eCommerce stores, you probably get a lot of passive traffic. We are referring to the customers that “browse” your site for 30 minutes to an hour, only to leave empty-handed. That is okay because some of these consumers will likely return and make a purchase at a later date.

Still, it is important that your business has a healthy CVR if you want to remain profitable. We consider a CVR of about 5% to be a healthy start. 

If your CVR is below this baseline, then it is time to make some improvements. Even a small rise to your CVR can translate to a huge increase in profits.

For example, let’s say that your site earns 500 visitors per day. A CVR of 3% means that only 15 people are making a purchase. By increasing your CVR to 5%, your business will facilitate 25 purchases per day. If each client is spending $100, that is a revenue increase of $1,000 daily! 

6.   Customer Acquisition Cost (CAC)

Many new entrepreneurs tend to overlook a few vital eCommerce financial metrics. CACis definitely one of them. CAC is a pretty simple KPI at face value. Low CAC is great for profits. 

Your CAC should be much lower than your revenue. Let’s say you are spending $20 AUD to acquire each customer. If the average consumer is buying $100 worth of goods, then your CAC ratio is good. However, a CAC that is nearly even with or higher than a consumer’s average purchase amount, could put your business in trouble!

7.   Return Rate

In addition to watching your CAC, you need to track your return rate. If you are processing lots of exchanges, chargebacks, and refunds every month, your profits will suffer. Processing returns are a real pain for your service staff to deal with, too! 

Refund rates vary greatly by business type. When you first begin tracking eCommerce financial metrics, look for comparable stats within your same industry. If you sell apparel and your top competitors have a refund rate of 5%, try to keep your numbers below that level. If your rate is higher, you also need to look at the reasons why. Is it quality, change of mind, wrong product?’

8.   Cart Abandonment Rate

Modern eCommerce software allows business owners to track cart abandonment rates. This occurs when consumers put items in their online cart and leave your store without completing their purchase.

While a high cart abandonment rate may be a bit concerning, it also presents an opportunity. If consumers are loading their carts up with your products, they have a high interest in making a purchase. You may just need to give them a little extra incentive to follow through.

We recommend implementing an automated email campaign. This strategy will target consumers that abandon their carts. You can send them encouraging messages that will prompt them to complete their purchase. 

If you really want to sweeten the deal, include a digital coupon or shipping discount.

9.   Gross Margin

If you plan to scale your business, then gross margin is one of the most important eCommerce financial metrics to track. 

Gross margin is the profit that you are left with after factoring in the cost of goods sold. Unlike some other metrics, gross margin accounts for the cost of acquiring inventory. 

By examining gross margin, you can determine whether your current level of growth is sustainable. Make sure that you have strong margins before you attempt to scale your business. Otherwise, you may find that you do not have the funds needed to keep inventory in your warehouse.

10. Traffic Volume

Traffic volume is a broad KPI that refers to how many visitors your site receives. You can break this stat down into smaller metrics, such as bounce rate, time spent on site, and average page views. Each of these KPIs can help you understand exactly when consumers are leaving your website. 

For instance, bounce rate refers to the number of users that navigate to your site and leave before viewing additional pages of content. A high bounce rate may be a sign that your site is not visually appealing enough. It may also indicate that page load times are slow, which quickly discourages potential customers. 

Increasing your site’s traffic volume is an essential part of growing your eCommerce store. You can drive more traffic by leveraging various marketing efforts, including paid ads and search engine optimization (SEO) practices.

Closing

That rounds out our list of the top ten eCommerce financial metrics that you should be tracking. 

Now that you know which data to monitor, it is time to put these numbers to use. Leveraging these KPIs can reveal how well your business is really performing. You will be able to identify what you are doing well and which areas need to be improved upon.

If you are still unsure how to begin tracking your eCommerce financial metrics, contact the team at Visory. We offer our clients exceptional online bookkeeping services at affordable prices. 

Our team will provide you with detailed reports on the health of your online store and regularly check your key metrics. This means that you will have more time to focus on other important tasks, like scaling your business. Supercharge your financial back office with Visory!

Financial Analysis for E-Commerce Businesses

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Understanding where your money is coming from and where it’s going is crucial for any business. But financial analysis has a different meaning for online businesses. Why? You have so many more performance indicators to analyse than a brick and mortar business. 

Imagine you have a billboard on the side of a major motorway. If you see an uptick in sales, it’s difficult to link those sales back to the billboard. If you place a Google Ad, however, you can see exactly how many people clicked on it and then made a purchase. More information means more analytics. 

Financial analysis for e-commerce businesses ranges from tracking sales to analysing shipping costs and everything in between. Read on to learn more about eCommerce bookkeeping and more.

What is a financial analysis? 

Financial analysis is the process of evaluating all of your business financial transactions. You can do this for a few purposes. Some of the most common reasons an organisation will initiate a financial analysis include end-of-year reconciliation, determining solvency (do you owe more in debt than you have in assets?), and determining the general stability of the business. 

Financial analysis for e-commerce businesses may also be done to check for inefficiencies in shipping and advertising. A financial analysis can help you plot your future course and create the reports you need to attract investors. 

What are e-commerce KPIs?

There are lots of metrics available for online businesses, otherwise known as measurable components that can indicate success. For e-commerce businesses, these often include things like the number of ad impressions, cart abandonment numbers, and organic traffic. KPIs are key performance indicators — in other words, your most important indicators of success. 

Your financial analysis can reveal how you are performing using KPIs like average size order, profit margins, conversion rates, and new customer orders. 

How to get an overview of your business finances 

Current online bookkeeping starts you off on the right foot — inaccurate books can’t yield accurate analysis. So, make sure you are tracking your general ledger and using double-entry bookkeeping tof each transaction. 

Once you have your bookkeeping for e-commerce transactions in order, you can start figuring out what the numbers mean for your financial health and future. 

Key factors to consider during a financial analysis for e-commerce businesses include:

  • Sales by category: Figure out which of your sales categories and items are most popular. This allows you to make decisions on expanding your most lucrative categories with similar products and services. Likewise, you may want to discontinue your least lucrative products.
  • Average dollar spent per transaction: Are your customers spending just a few dollars per transaction? Determining the average dollar amount spent per sale helps to let you know if your future strategy should include encouraging add-ons and targeting customers with similar products for sale. 
  • Product margins: For e-commerce businesses, the cost of goods sold (COGS) includes things like Google Ad costs, email lists, and shipping. When you subtract your total costs from your revenue, you can determine your profit margin. E-commerce margins can be as high as 6.5%.
  • Shipping: Shipping costs are a part of your overhead that can’t be avoided if you’re selling physical products online. Are you paying too much? Your financial analysis can help to reveal if you’re paying more than average for shipping and handling. If you are, you can either seek shipping alternatives or consider increasing shipping costs for your customers. 
  • Returning customer orders: How many of your sales come from new customers vs. returning customers? Return visitors cost less per transaction, because you don’t need to put out a new ad spend to attract them. If you are only bringing in new customers, you may want to create a new loyalty program to increase retention. 
  • Inventory turnover: Your financial analysis can also reveal if you are managing your inventory in an efficient manner. Higher turnover rates are better, because they can mean you’re selling your items more quickly. This can help to reduce your storage costs and other fees associated with holding on to products (heating, cooling, inventory counts, etc.) 
  • Revenue: Tracking your income, or revenue, lets you know if you’re growing at a steady pace or not. While your revenue doesn’t represent your actual profits, it’s still a good indicator of whether your finances are headed in the right direction.  

Personalised financial advice is more important than ever when it comes to financial analysis for e-commerce. Not all online stores operate on the same margins or have the same needs. Having a dedicated online bookkeeper from Visory, or using CFO services, can help you analyse your financial state and make strategic moves for the future. 

Time to Reconcile: Importance of Bank Reconciliation and How a Bookkeeper Can Help

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Are you reconciling your bank accounts once per year? This may get you ready for tax time, but annual bank reconciliation is just the beginning. In order to grow your business at a responsible rate, you need to get a clear picture of your cash flow, understand the types of fees you’re paying, and catch fraud before it goes too far to fix. 

When you’re doing catch-up bookkeeping instead of regularly reconciling your books, you may think you’re in better shape than you are. Imagine hiring a new full-time staff member only to learn you can’t afford them? Learn more about the importance of regular bank reconciliation and when to call in a bookkeeper. 

What is bank reconciliation?

Reconciling your bank records means comparing what the bank has on record with your own internal reports. If you have a bank feed with an accounting service, you still need to reconcile your bank feed with your official bank statement. 

A lot of transactions are included in a reconciliation. According to The Institute of Certified Bookkeepers in Australia, you should periodically reconcile your internal records against the records of:

  • Banks 
  • Credit Cards
  • Barter Cards
  • Bank Loans
  • Petty Cash
  • Cash Drawer
  • PayPal

Why do you need to reconcile your bank accounts?

Your accounting records are only as useful as they are accurate. Sounds obvious, right? You’d be surprised how much missed bank fees and other small discrepancies add up and how many business owners may wave them off as unimportant. In reality, bank reconciliation can save you thousands of dollars per year. Combined with double-entry bookkeeping, which creates two records of every transaction, regular reconciliation keeps your books tidy. 

Here are some of the reasons reconciling your bank statements is so important. 

A bookkeeper looks over a bank reconciliation statement.

Catching Discrepancies

Your internal ledger says you spent $10,000 last month, but your bank statement says you paid fees totalling $500. This difference may seem small in the grand scheme of things, but if you make the same mistake each month — you’ll be off by $6,000 by the end of the year! Discrepancies can result from honest human error or fraud. If someone is skimming money from one of your accounts, you’ll notice it faster with a monthly reconciliation process. 

Tracking Cash Flow

Reconciling accounts each month gives an accurate picture of the amount of cash flowing in and out of your accounts. You’ll see if you’re actually in the black — or just thought you were. You can also reconcile your credit card receivables as a part of this process to make sure that everything has cleared that was supposed to. 

Managing Accounts Receivable 

One major source of reconciliation discrepancies is a cheque that did not clear because the account had insufficient funds. Checking your accounts receivable as a matter of routine allows you to catch these problems so you can either rebill the vendor or customer or write off the discrepancy as a bad debt. 

Making Sure Payable Transactions Have Posted

Comparing your statement balance to your internal records often also lets you confirm that important transactions have posted to your account. It would be a shame to forget that you still have an outstanding cheque out in the world — you could easily overspend on an account when it finally posts. 

Finding Systemic Issues

If you notice a pattern of individual errors or discrepancies, you may also catch a structural issue within your accounting system. Perhaps you need to change payment services or use a different bookkeeper if the same issues arise time and again. 

How often should I reconcile my bank statements?

The Australian government only recommends that you reconcile accounts “regularly,” which is a bit vague. Ideally, you should reconcile your accounts each time you receive a bank statement. If your accounts bill on different schedules, an end-of-month reconciliation is a good habit to get into. 

How can a bookkeeping service help with bank reconciliation?

An outsourced bookkeeping service can provide reporting and insights that your current staff aren’t able to keep up with. Partners like Visory provide an outside set of eyes to give your company an objective view of your financial affairs while saving you time and internal resources. Your team gets to use the insights and reporting to make smart decisions without having to do any of the work to create them. We call an outsourced bookkeeping service a win-win. 

Let’s Play Catch-up: What is Catch-up Bookkeeping?

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Has it been a while since you cracked open your accounting software? Oops. When your business grows exponentially, or your bookkeeper hits the road, it doesn’t take long for your books to fall behind. And that can lead to catastrophic results. Catch-up bookkeeping helps you right the ship and make sure you can still keep the lights on. In short, it’s the process of getting your books current and catching any mistakes that you may have missed. 

Not only can catch-up bookkeeping give you a clearer picture of your revenue and overall financial health, but it gets your accounts receivable and accounts payable back on track. In addition, managed books make it easier to grow and help you stay compliant when tax time rolls around. Learn more about catch-up bookkeeping and when you might need it. It might be more often than you think.

What is catch-up bookkeeping?

Catch-up bookkeeping is the process of getting your financial records up to date. This necessary part of bookkeeping includes everything from analysing bank statements to reconciling your accounts receivable.

You don’t just require catch-up bookkeeping after a sustained period of neglected books. Rather, anytime you need to reconcile your accounts or migrate your data, you can use a catch-up bookkeeping service to confirm that you’re working with current information. If you have even a short period between a new bookkeeper, you’ll also want to do some catch-up bookkeeping to start your new staff member off on the right foot. 

When does your business need catch-up bookkeeping?

There are lots of times when you might need to catch up on your books. Some are for your own convenience, while others relate to serious government penalties. Under Australian and New Zealand laws, you have a responsibility to maintain accurate business records. You’re also required to track any transactions related to taxes and superannuation. Your organisation should be prepared to substantiate any of the information submitted on your tax return. 

Tax ready strategy aside, here are some of the most common times we recommend catch-up bookkeeping:   

  • When you need to add accounts. Are your records incomplete? If you’ve been using a new business credit card for a while and haven’t added it into your accounting software then you may be missing months of transactions. You can’t have accurate financial reporting if you don’t actually know what’s coming in and what’s going out. 
  • When you have unreconciled transactions. Whether it’s for a month or just a few days, your general ledger should contain all receipts, payments, and invoices listed by transaction. Missing transaction data could throw off your entire financial picture. Bringing the data up to date means your ledger is back in business. 
  • When you’re migrating to a new software system. Moving over to Xero or similar accounting software? You want your data labelled properly, and that means a little catch-up bookkeeping to make sure you’re entering the most recent and accurate figures. It’s much easier to get everything up to date in your existing software than fix it in your new software than to determine what went wrong in six months. 
  • When you need to prepare reports. If you’re seeking additional funding or want to show stakeholders the financial state of your company, playing catch-up on missing data is crucial. You can’t generate an accurate report without up-to-date figures. You could miss out on an investor if you’re using incomplete reports. 
  • When you aren’t being paid correctly. When your business is not being paid correctly, you may not be able to operate. If you suspect your customers owe you money, you need to catch up fast! Not only could your reporting and tax obligations be incorrect, but you could be leaving money on the table which could be put towards extra staff or growing your business. 

After my books are caught up, what is next?

Once you’re confident your books are caught up, you’re ready to sail, right? Not so fast. Bookkeeping is never a “set and forget” process. In fact, it never ends. Therefore, having a good bookkeeping service at your side is essential to ongoing success. 

At Visory, we partner your organisation with a team of bookkeepers who know your industry inside and out. They can complete catch-up bookkeeping on your struggling records and help to keep everything accurate moving forward.  

Catch-up bookkeeping is essential if you know if your books are unreconciled, payroll hasn’t been processed or your tax office is knocking. Catch-up bookkeeping also comes in handy when you’ve simply been short-staffed, and you know some receipts might have slipped through the cracks. Contact Visory to complete your catch-up bookkeeping, get your books ready for new software or to enable accurate reporting and insights. We’re always here for you.

Seeing Double: Why You Need Double-Entry Bookkeeping

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Your business is growing, which is good for your bottom line. It may not be good for your limited accounting staff, however. Especially if they’re not keeping accurate, double-entry books. Thankfully there is a lot of help out there for medium-to-large businesses that need assistance scaling up while keeping their books straight. 

Online bookkeepers can save the day when it comes to the fundamentals of business accounting, such as double-entry bookkeeping. This style of accounting is necessary for any growing company with both accounts payable and accounts receivable. Basically: every transaction is recorded twice. We’ll explain the principles of double-entry bookkeeping, how it differs from single-entry accounting, and why knowing more about double-entry matters for your business. 

What is double-entry bookkeeping?

Double-entry bookkeeping is a system where you are recording transactions in terms of debits and credits. Need a simple double-entry bookkeeping system example? Glad you asked. Imagine a spreadsheet with two columns, one for expenses and one for credits. Each transaction is recorded twice, once in the expenses and once in the credits, hence the name “double-entry.” If the columns don’t balance, you can investigate why the error exists.

Let’s say you have a corporate credit card with a balance of $5,000 that you want to pay off. Your company’s cash account would be reduced by $5,000; this is a debit/expense. At the same time, you would subtract $5,000 from the current debt held by the company, which is considered a credit. The transaction is recorded once in subtraction and once in addition, balancing the line items.

When do accountants use double-entry bookkeeping? Medium to large businesses, and even some small businesses, require this method to keep an accurate balance sheet. This style of bookkeeping also keeps your general ledger clean — this is a book that categorizes your financial transactions by type. You can also use double-entry when you create a trial balance, which is a simple spreadsheet with credit/debit columns that covers a specific time period. This document is meant to detect accounting errors, and double-entry helps you find discrepancies.  

Double-entry operates from the fundamental accounting equation: Assets = Liabilities + Equity. Once you add what you own against what you owe, you can understand whether you are in a surplus or deficit.

Man reviews a balance sheet on his laptop

Untitled by Photo by Austin Distel on Unsplash

How is double-entry bookkeeping different than single-entry bookkeeping?

Single-entry bookkeeping only works for very small, very simple businesses. If you are bringing in cash with few expenses, such as with a sole proprietorship, this type of accounting may cover you. 

Single-entry methods are like keeping a chequing account. You only keep track of deductions or credits, creating a single entry for each transaction. Even if you had a credit/debit double-column spreadsheet, there would not be an entry in both columns for each transaction — with double-entry, there is. 

Should I use double-entry bookkeeping?

There are many advantages of a double-entry bookkeeping system. Here are some of the reasons we recommend switching to this type of accounting as a medium to large company:

  • A more complete view of finances. Creating two entries for each transaction makes it easier to see where exactly the money that is going out as a payable ended up. A simple single-entry cash system isn’t complex enough for most businesses. 
  • Finding errors is faster. Doubling down on entries also makes faster work of locating where a credit came in that was not properly debited, and vice versa. You will thank yourself later if you detect missing money.
  • There is total transparency. By expecting a double-entry system from your accounting staff or partners, you keep everyone clear on where the money is coming and going. 

Conclusion

Bookkeeping can be a complicated business, and even double-entry bookkeeping isn’t foolproof. While double-entry accounting adds transparency and increased accuracy to the process — you may still need some help by way of a bookkeeping service. 

Visory has a team of financial experts that can lend their expertise whenever you need help balancing the books or preparing a trial balance brief. We’re better than an in-house accountant for growing businesses because you get access to a whole team and you can check your records around the clock. If it’s time to upgrade from single-entry to double-entry bookkeeping techniques, it’s definitely time to give us a call or create an account online today.

Harnessing the Cloud: If cash is King, data is its Queen

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A recent study found nearly half of Australian businesses are looking to increase cloud infrastructure spending in 2020, and 59 per cent now have ‘cloud first’ policies when it comes to making new investments[1].

Cloud accounting allows your business, its administration employees and advisers to access its financial information live from online servers, anywhere at any time, which helps your business make better choices as it can use ‘real time’ information to assist its decision making.

The power of data lies in both its timeliness and its ability to be tailored to the individual business. Raw data by itself is difficult, if not impossible to utilise effectively. However, by using integrated systems such as optical recognition, live bank feeds, and industry specific software that is linked to the core application, your business can start to approach the detail and data integrity of larger organisations.

By increasing your business’ level of data accuracy, you’re not only better positioned to meet your day to day compliance needs accurately and efficiently, but you’re also setting up your business to take advantage of the data at its disposal by summarising and presenting the data in ways that are specific and useful to your business.

The key to making the most of the data available to you is to delve into the key drivers of your business and the industry it operates in. The lead indicators of a coffee shop will differ to the lead indicators of a freight business, so it’s critical to narrow in on the data points that really make a difference in your business.

Once decisions have been made about the core drivers of your business’s success, most cloud systems will allow you to tailor reports to focus on selected data points, either from the core platform or from a linked industry-specific application.

Undertaking an analysis of the key trends you have identified across these data points can then be developed into a set of visual management reports that allow you to have a finger on the pulse of your business on a day to day and week to week basis.

Identifying the key business drivers and the underlying data flow that reports on them is a great foundation for building a reporting pack that helps you as a business owner analyse current trends and make solid decisions about future direction, quickly and accurately.

To maximise the return on investment in your cloud data, diarise time each week, and each month to review the reports that your cloud system produces for you to assess your performance against current goals and re-set goals and actions for the next period.

Lastly, never forget the maxim, ‘rubbish in, rubbish out’. Good data quality should not be taken for granted in the world of data integration.

For assistance identifying your key business drivers and implementing cloud solutions, please get in touch with our team.

[1] Australian IAAS Market Soars Beyond $1.3BN