3 Keys to Turn Your Financial Budget into a Financial Forecast

We are coming to the end of the quarter.

So how did your Company do?

At New Economy, we hit our measurables of revenue of $614K, gross profit of 50%, and net profit of 12%. 

Also, we hit 80% of our rocks. These are the top priorities for us in the quarter.

What did you learn?

At New Economy, we learned a lot. 

financial forecast

We learned that we need to keep making financial investments in our team members through training and growth opportunities. 

We also learned we need to increase our financial investments in marketing to help let entrepreneurs know we are here to help them gain control of their finances to make smart decisions.

But what do we do with these learnings from a financial perspective?

At New Economy, we believe you can use this information to forecast for the next quarter.

For a bit of background on creating a budget, check out our blog posting Here.

Your financial budget is set for the and will not change. 

However, your financial forecast can change based on what you have learned.

In this article, you will learn about: 

  1. The difference between a financial budget and a financial forecast
  2. When and why to update your financial forecast 
  3. Top 3 Takeaways

Let’s dive in.

The Difference Between a Financial Budget and a Financial Forecast

Most Companies, including New Economy, perform their financial budgeting towards the end of the year. 

Being a December year-end, we typically begin the process in November and wrap up in the first week of January.

The financial budget is the goalpost – think football and field goalposts. You are aiming to kick the ball through the goalposts to score. Or from a financial point of view, achieve the budget which keeps you on the path to achieving your overall goals.

You are estimating things like the investments you need to make into the business that will get allocated to hiring, marketing, and operating expenses. 

Further, you are determining your revenue goals and the direct costs to support that revenue.

It is your best guess.

You are painting the financial road map month to month to help you achieve your annual financial goals.

It’s important to note that your budget should not change.

You don’t want to move the goalposts.

We call that cheating 🙂

However, there is another very helpful tool.

It is your financial forecast. 

Your financial forecast is identical to your budget. It is set up the same way, looks the same and even works the same.

The biggest difference is you can change your financial forecast. 

In fact, at New Economy, we are constantly changing our forecast. 

But we are also continuously lining up the financial forecast against the financial budget. 

The idea is the financial forecast is updated for what is happening in the business, and in our experience that is lots of change.

At the end of the day, we hold ourselves accountable to the financial budget that was set and use the financial forecast as the real-time road map to get to the intended destination.

It’s kind of like the direction app, Waze.

You enter your destination and ways will give you the directions to get to your destination. This is like your financial budget.

However, then an accident happens. 

Waze then recalibrates and provides an alternate route. There are changes but it will still get you to the original destination. This is like your financial projection.

So, we suggest you make sure you have a financial budget.

Then modify that budget by bringing it alive based on changes or real-time information and call that your financial forecast.

In the next section, we will talk about when and why to update your financial forecast.

When and Why to Update Your Financial Forecast

When to change your forecast 

By now you should know the difference between a financial budget and a forecast.

The next question is when do we update the financial forecast?

There is a wide range of answers to this question depending on:

  • The business
  • The visibility required
  • The investment of time that’s willing to be made 

We have some customers that re-forecast weekly. 

They have built a weekly process around this and have determined that weekly forecasting gives them real-time insights that they need to manage the business.

We have some customers that re-forecast monthly or even quarterly. 

They will access real-time changes but more so look at monthly budget versus actual information. When items are on and off track, they will trigger changes to the model.

At New Economy, we re-forecast weekly. 

We have created a simple process where all the department leaders provide any material changes. It takes us about 15 minutes per week to do this and we will discuss why we do it this way in a bit.

In any case, updating on a weekly, monthly, or quarterly basis you are on the right track. 

You need to turn your budget into a forecast applying what you have learned.

Why change your forecast 

One of our taglines is we help entrepreneurs gain control of their finances to make smart decisions to build and grow their businesses.

To make smart decisions you need timely and accurate financial information like a financial forecast.

The forecast gives you the most accurate picture of how your business is performing from a financial perspective at any point in time.

Having that timely and accurate financial information allows you to do the following:

  • Determine if you are on or off track to your budget
  • Identify areas of opportunity or improvement
  • Run decision-making scenarios that show the financial impact

The reason New Economy updates the forecast weekly is to have good data for our weekly Leadership Team meeting called our Level 10 meeting. 

As part of that weekly Level 10 Meeting, we review a weekly, monthly, and quarterly scorecard which has the financial data we’re measuring. 

And you guessed it, one of the sources of that data is our financial forecast.

One last thing to note on the financial forecast.

Once a month has closed, we drop the actuals into the forecast. Refer to more information on the financial close here.

For example, if we are through Q-1, the months of January, February, and March would have actual results in the financial forecast. The remaining nine months would be the projected results.  

And we continuously analyze the financial forecast against the original budget.

A financial budget and financial forecast are very powerful business tools. So don’t sleep on the importance of implementing them into your business.

3 Key Takeaways

At New Economy, we want to help you gain control of your finances to make smart decisions. Part of that is understanding your finances and how to drive business performance.

Here are 3 key takeaways.

  1. Make sure you have a budget in place. Don’t change the budget once you set it. And build the budget showing details such as monthly and by-line items.
  2. Make sure you transition your budget into a forecast. Your forecast can be updated weekly, monthly, or quarterly. It can be changed and should be compared back to the budget.
  3. Leverage these tools in your business. They are powerful tools to help you achieve your business goals.

There you have it 🙂

financial forecast

New Economy Team Members are Experts in Accounting for Entrepreneurs

If identifying ways to decrease your taxes is not in your skill set or you want to gain control of your finances to make smart decisions to build and grow your business, New Economy is an excellent partner

We’ll help you get your accounting and taxes done, and done right.

Schedule a time to meet with our Founder, Jeff, and discuss how we can add value to your situation.

5 Ways to Know You Need a New Accountant

Having the right accounting and finance team is important. 

Really important.

Why?

Contrary to popular belief, your accounting team is not just overhead.

You need timely and accurate financial information to make smart decisions to build and grow your business.

Accountant

At New Economy, we think about the right seats needed to support the accounting department for any business. Then we think about getting the right people in those seats.

Most small businesses need some form of an Accountant, Controller, or CFO. 

It really depends on the type of business, the stage the business is in, and the growth plans the business has for the future.

And each of these seats has a different skill set and value they bring. It goes from tactical to strategic in nature.

For more information on the differences between each seat check out our post on Do you know the difference between an Accountant, Controller and CFO.

But what are the signs that your accounting team is not working?

In this article, you will learn about: 

  1. The top reasons your accounting set up is no longer working
  2. 5 ways to tell it’s time to change accountants
  3. Top 3 Takeaways

Let’s dive in.

The Top Reasons Your Accounting is No Longer Working

There are several reasons why this can be the case but here are a few.

Reason #1 – Sorry, You really don’t have an accountant.

Very early on in the life of your business, you might have had Tony’s aunt doing the accounting. 

There is nothing wrong with Tony’s aunt. However, she is self-taught and doesn’t fully understand what she is doing. Sure, she can pay bills and is wicked cheap, but she’s just a family friend, not an accountant.

This is common and ok, but this will hold you back if you don’t make a move.

Reason #2 – The business outgrew your current accountant.

You have a vision of where you want to be. You are chasing down that vision and raising capital, hiring people, building processes, and executing your plan.

Your business is growing and evolving, and when that happens things can get complicated in the various departments, such as your accounting department.

But your current accountant is stuck in the old way of doing things. They don’t have a grown mindset and they are not open to technology and new ways of doing things. 

This results in delays and inefficiencies because the business is growing but your accountant is not growing with it.

This too will hold you back. 

Perhaps you have a good tactical person but need to layer on a more experienced person who focuses on strategy from an internal perspective.

Reason #3 – Your accountant is overhead and is doing too many administrative tasks.

Many internally placed accountants get very comfortable and are overpaid. 

Yup, I said it.

They have a high-level technical skill set and are compensated for it. 

But they are given tasks that don’t relate to this skill set. They start doing administrative work, they get pulled into a bit of human resources or even managing technology.

They get pulled in too many directions, are overpaid, and are no longer adding value. 

They become overhead as opposed to an investment that is helping you get closer to achieving your goals.

Reason #4 – You don’t need a full-time accountant.

Once you really dive into point #3, you may realize that you don’t need a full-time accountant. 

How can this be?

You have them focus on the functions that require their specialized skill set. Nothing more, nothing less.

For more information on this check out our blog post on hiring a part-time remote accountant.

Also, as part of not needing a full-time accountant, you can save money. You are not covering insurance, benefits, training, or even internal time to manage this person. We believe the cost of a part-time remote accountant can be a big savings with a better return on your investment.

For more information on this check out our blog post. “What will it cost to outsource my accounting?

Ok, so now you have some reasons as to why our accounting might not be working.

And it’s ok. 

You are not alone. Part of your job is to ensure the right people are in the right seats to help you achieve your plan.

In the next section, we will discuss some of the indicators that it’s time to start thinking about some changes on your accounting team.

 

5 Ways to Tell It’s Time to Think About a Change in Accountants

So we know why you might be having issues.

But how exactly do those issues manifest?

After years of experience, we have identified 5 key ways to tell it’s time to make a change.

Here they are in no particular order:

Reason #1 – You are not getting timely financial information.

If you are not getting the following reports within the following timeline a red flag should go up:

  • Cash Flow reporting – Weekly
  • KPI / Scorecard reporting – Weekly, Monthly, Annually
  • Financial statements – Within 20 days of month end
  • Budget vs Actual reporting – Within 20 days of month end
  • Forecasting – Updates within 20 days of month end

Having timely information is important. You want to make real-time decisions based on data that is current.

Reason #2 – You are not getting accurate financial information.

If you are not getting accurate financial information a red flag should go up. The information is the same as that listed above. 

But how do you know it’s accurate considering you’re not an accountant and an entrepreneur?

Here are some thoughts:

  • Use your gut, it got you this far
  • Share the information with a peer group and compare information
  • Ask a trusted advisor or mentor with a financial background to have a look

Timely and accurate information are the keys to making smart business decisions.

Reason #3 – You keep getting surprised and are not learning from the past.

No one likes surprises. 

So if you’re looking at your budget versus actual reporting and are surprised when something is off track, a red flag should go up. 

Or if you get to year-end and your monthly financials that have been reported on change, a red flag should go up.

Or if you are caught off guard by an unexpected tax bill, a red flag should go up.

Things change fast in business, but learning and applying is key. 

Remember the old saying “Fool me once shame on you but fool me twice shame on me”?

Reason #4 – You can’t see into the financial future.

Your historical statements are very important. 

As we stated, they need to be accurate and delivered on time.

But we also need windows out into the future from a financial perspective. So if you can’t see out into the future whether it be 13 weeks of cash flow into the future or 24 months of your profit and loss out into the future, a red flag should go up.

Reason #5 – You are frustrated and feel pain and confusion on the financial side of your business.

We have said it before, trust your gut. You have great intuition.

So if even hearing the word financials causes you to feel pain or frustration, a red flag should go up.

Or if your accountant is confused and can’t seem to give you straight answers, a red flag should go up.

So there you have it; 5 examples that can give you an indication it’s time to think about changing your accounting team.

3 Key Takeaways

At New Economy, we want to help you gain control of your finances to make smart decisions. Part of that is understanding your finances and how to drive business performance.

Here are 3 key takeaways.

  1. Make sure you have the right people in the right seats on your accounting team. Early on Tony’s aunt might have been a great fit. But since you have raised some capital, have 10+ employees, and are on your way to profitability it’s time to increase the firepower of your accounting team.
  2. Make sure you are not flying blind. You should have timely, accurate historical financial statements and visibility into the future financial condition of the business based on your forward-looking projections.
  3. Trust your gut and invest in your accounting and financial team. They are an investment that should help you to get closer to your goals by providing you with invaluable insight to make great business decisions.

There you have it 🙂

Accountant

New Economy Team Members are Experts in Accounting for Entrepreneurs

If identifying ways to decrease your taxes is not in your skill set or you want to gain control of your finances to make smart decisions to build and grow your business, New Economy is an excellent partner

We’ll help you get your accounting and taxes done, and done right.

Schedule a time to meet with our Founder, Jeff, and discuss how we can add value to your situation.

Creating a Compelling Company Vision Using EOS – Part 2

Creating a compelling vision for your Company is extremely important – and it does not have to be complicated or overwhelming.

At New Economy, we have leveraged 8 questions to help us wrap our arms around our overall vision and strategy.

In our first post, (see link here) we covered the first 4 questions:

  1. What are your core values?
  2. What is your core focus?
  3. What is your 10-year target?
  4. What is your marketing strategy?

We highly recommend reading the first post before continuing on. In that post, we share the answers that we came up with at New Economy to help you get started.

We believe in creating a clear vision and communicating it to everyone.

EOS Business

Full disclosure, we are a Company that runs on EOS, and we happen to be data experts. 

The system has helped us to grow the Company 3x since graduating from implementation. Even if you don’t run on EOS, this post will surely help you out. 

We know firsthand as some of the thoughts and frameworks have helped us get better.

In this article, you will learn about: 

  1. 4 remaining key questions to help you create a compelling vision
  2. 3 key takeaways

Let’s dive in.

Refresher: 8 Key Questions to Help You Clarify Your Vision

As a refresher, below are the 8 key questions to help you clarify your vision. New Economy, we have taken the time to answer these 8 questions. 

If you need some background on what exactly vision is, check out Jim Collins’s article published in the Harvard Business Review entitled Building your Company’s Vision. You can find it here

Much of this is inside work that no one can do for you. The questions we will present will help you along the way.

Here they are:

  1. What are your core values?
  2. What is your core focus?
  3. What is your 10-year target?
  4. What is your marketing strategy-?
  5. What is your 3-year picture?
  6. What is your 1-year plan?
  7. What are your top priorities over the next 90 days?
  8. What are your issues?

In this post, we will run through questions 5 – 8.

We will provide a bit of background and provide the answer we came up with at New Economy.

Question #5 – What is your 3 year picture?

Having answered the previous questions, you know who you are, what you are, where you are going, and what marketing strategy you will use to get there. Now it’s time to consider what the business will look like in 3 short years from now.

At New Economy, we love the 3-year picture. It allows us to get up to 30,000 feet and dream while at the same time bringing us back down to the ground floor and having detailed budgets for the next 3 years to support that vision.

Also, the decisions that you are making today should align with the direction you are illustrated in your 3-year picture. So the decisions are powerful and must be aligned with getting you to where you want to be.

Our 3-year picture at New Economy is illustrated as follows as of December 31, 2026:

EOS Business

Beyond our financial measurables, we believe that it looks like the following:

  • Culture of high satisfaction days
  • Culture of pay for performance  
  • Key partner to companies running on EOS
  • Best practices and processes to support SAAS, construction, service & e-commerce companies
  • Using speaking, writing, podcasts & video to advance the mission of New Economy
  • Marketing generating leads 
  • Wrap Around team caring for and loving our people
  • Career success plans for all team members
  • Customer success plan for all clients
  • All core processes are operationalized through Financial Cents
  • Increased efficiency through technology
  • Someone else running the LT team besides Jeff

As you can see, we have created an image of what New Economy will look like in three years. 

It is important to have this documented so that you can move into the 1-year plan and start making moves to get yourself closer to your 3-year plan.

Here are some tips for coming up with your 3-year plan:

  1. Schedule time with your leadership team to specifically discuss what it looks like
  2. Make sure everyone believes in the plan and wants it
  3. Encourage feedback and folks to speak up with concerns
  4. Memorialize the plan so you can measure your progress on an ongoing basis

Question #6 – What is your 1-year plan?

Giddy up.

We are now bringing the longer-range vision to the ground level and making it real. This plan is for those who love to get stuff done.

Here we must decide what has to get done this year. 

We believe less is more and have found that we overestimate what we can do in one year and underestimate what we can do in three years.

Our 1-year picture at New Economy is illustrated as follows as of December 31, 2024:

EOS Business

Beyond our financial measurables, we have created Company goals for the year:

  • All core processes run on Financial Cents
  • Customer success plans for 10 clients
  • Career success plans for all core team members
  • 3 experienced new hires

Now you have 1-year goals and a budget in place to support your 1-year plan. At New Economy, we take it a step further and break it down into the next quarter we are facing.

This brings us to our next question.

Question #7 – What are your top priorities over the next 90 days?

We refer to our top quarterly priorities as rocks. These are the most important things that must be accomplished over the next 90 days. 

It’s possible that these rocks connect into an annual goal, and by investing time in the quarter, you are moving closer to the annual goals.

We have created the following measurables for Q-1 of 2024:

  • Revenue is $531,000
  • Gross profit is 49% or $260,000
  • Net profit is 17% or $90,000

We have created our top priorities for Q-1 of 2024:

  • All Team Services running on Financial Cents
  • Make an offer to an experienced hire interested in supporting EOS companies 
  • Set up Time Tracking & Capacity Management in Financial Cents
  • All Operations & Customer Success processes running in Financial Cents
  • Schedule 9 zooms with EOS implementers or integrators
  • Sell $18K or MRR or $39K of total new revenue

We leverage the system of making our goals and rocks SMART. 

Meaning we want them to be:

  • Specific
  • Measurable
  • Attainable
  • Realistic 
  • Time Bound

For more information on SMART goals refer to this Harvard Business Review Article to get you started.

Ok, we are covering lots of ground. We are almost there, stay with us.

This brings us to our final question.

Question #8 – What are your issues?

This is a tough one at first.

But once you get comfortable with openness, honesty, and transparency you can address pretty much anything.

An issue is an obstacle that could prevent you from reaching your targets. The sooner you accept that you have issues, the better off you will be. You will always have them and your leadership team is responsible for solving them.

Currently, at New Economy, we have 30 issues on our issues list. Our leadership spends 60 minutes per week solving these problems which increases our probability of success.

Here are some tips for coming up with your issues list:

  1. Schedule time with your leadership team to specifically discuss issues
  2. Consider all the obstacles, concerns, and opportunities you face
  3. Take them one at a time. Focus on getting to the root cause of the issue
  4. The goal is to remove the issue by solving the problem. Make sure someone is assigned responsibility for any to-do’s relating to the issue
  5. Review your issues weekly

As mentioned, issues can be tough, but once you get into it, you realize that everyone has them. And the more you work at solving problems the better you become.

 

 

You now have a compelling vision with a 3-year, 1-year strategy supported by a marketing plan, and you are dealing with your issues on a regular basis.

But this is one last key piece.

You need to share this vision with your employees. The only way you can do this is to tell them. You must tell them over and over.  You want everyone’s energy going in the same direction towards the common vision, goals, and rocks you have created. 

When that happens, it will create an exponential force helping you to achieve your vision.

Here are some tips for sharing your vision:

  1. Share it during new employee onboarding
  2. Share it at your annual Company meeting
  3. Share it at your quarterly meetings. 

They say it takes folks 7 times before something sticks. So keep repeating yourself here, it’s worth it.

Summary

We have covered all 8 questions to help you create a compelling vision for your Company. We have found that focusing on these topics has helped us to create a  foundation to grow New Economy. 

And you can too.

3 Key Takeaways

This is some heavy and impactful stuff. It will help you to build a solid foundation to build and grow your business. We are living proof.

Here are 3 key takeaways.

  1. Spend some time on the 3-year plan. This should be fun and practical. It should drive the decisions you are making today and connect back to your longer-term vision. Early on, we lost sight of the 3-year plan which can create a rudderless ship. Now we have the 1-year plan lining up with our 3-year plan which helps us to ensure that we are on track.
  2. Run into your issues not away from them. The more open you are to solving your problems, the faster you will be able to chase down your vision. Be open, honest, and vulnerable. Encourage others to do the same.
  3. Constantly share your vision. You need to find ways to get your vision in front of your employees. They are critical to your success. They need to understand where you are taking them and the role that they will play in the vision. Connect those dots for them and you will have alignment that will move them and your business forward.

There you have it 🙂

We are living proof that this system works.

EOS Business

New Economy Team Members are Experts in Accounting for Entrepreneurs

If identifying ways to decrease your taxes is not in your skill set or you want to gain control of your finances to make smart decisions to build and grow your business, New Economy is an excellent partner

We’ll help you get your accounting and taxes done, and done right.

Schedule a time to meet with our Founder, Jeff, and discuss how we can add value to your situation.

EOS Business

How to Go Deeper with the EOS Data Component of Your Business

We run on EOS.

It has been game-changing for us. Our vision is clear, our team is aligned with the values and missions, and we are creating a culture that is open to new ideas and discusses challenging issues.

The result is we have been able to 3x the business.

In other words, we are the data component.

And as we all know the tools are simple. It’s going deeper into the tools where the insights and learning are applied.

Our mission is to help unleash the full potential of the growth-minded entrepreneur.

We want to help you gain control of your finances to make smart decisions to build and grow your Company. 

In this article, you will learn about: 

  1. Best practices for the current EOS Data tools
  2. A few additional data tools to support your EOS Company
  3. Ways to go deeper into the EOS data tools 
  4. 3 key takeaways

Let’s dive in.

EOS Business

Best Practices for the Current EOS Data Tools

The EOS data tools are your gauges. If set up and utilized properly, they are going to help you accurately and consistently measure the pulse of your business so you can take effective action when needed. You’ll no longer manage based on gut, emotion, ego, or impulse. 

You will have data. 

Understanding the landscape

Ok, as a quick refresher let’s discuss the EOS data component tools.

  • Scorecard – This is a handful of numbers, between 5-15,  that can tell you at a glance how the business is doing. These are reported weekly, monthly, quarterly, and annually.
  • Measurables – This is a number that is given to a single person to take ownership of.

There you have it. That data component of EOS is pretty simple. We have a few additional tools which we will discuss below.

But don’t be deceived. The power of the tools actually lies in the “working” and “evolution” of the tools themselves. For instance, at New Economy, it took us about a year to land on the right scorecard and we are continuing to evolve it. This provides better data to make decisions and gauge where the business is currently at and trending.

Best Practices

So, over the years we have created some best practices which have helped us to further unlock the 2 main EOS Data Component tools. 

Here they are:

  • Leverage technology. We started way back in the day using a Google sheet as it allowed for sharing and easy updating. We then moved on to leveraging the technology platform Ninety.io. It has been a game-changer.
  • Be persistent and relentless. When we started, the information entered was not correct. In fact, we learned we were measuring the wrong things. But we hung in there and continued to hold the line, it was worth it. So pick a team member, like your Integrator, to be persistent and relentless.
  • Measure “fluffy stuff”. We measure the more traditional stuff like cash in, gross profit, and so forth. But what about keeping a pulse on team members? We measure something called “High Satisfaction” days with our team. We also measure “Core Value Call Outs”. We set goals and intentions to foster and develop the culture we want.
  • Measure leading indicators. Measuring revenue is great but what drives revenue? We measure leads and new prospect zooms which lead to sales. So consider those things that will help you drive towards your desired outcome.
  • Reflect, Discern, and Simplify. The natural tendency is to measure more. We try to step back and really ensure we are measuring only the things that matter. We strive to continue to simplify.
  • Accountability. You need to go there. If something is off track, lean in and give the person taking ownership the opportunity to get to the root cause and fix the problem. This will only happen if leadership is strong and healthy and is willing to go there.

So, keep working on your scorecards and measurables. It should be like fine wine and get better over time.

 

Additional Data Tools

At New Economy, we have leveraged a few additional tools that fit into the data component. We believe these tools help to provide visibility, confidence in decision-making, and overall peace of mind as it relates to uncertainty.

These are tools that are around technology and processes that we leverage to help our clients gain control of their finances to make smart decisions.

Here it goes:

  • 13-week rolling cash flow forecast. Have you ever worried about cash? Well, imagine having a tool that is predicting the cash flows of your business to a degree of accuracy over the next 2.5 months. You would have peace of mind knowing where the cash gaps are coming from and can plan in advance on how to fill them.
  • Financial model. You are familiar with this tool. You know it as the 1-year, 3-year, and 10-year plan. We have taken that tool and built it into the monthly financial meeting cadence. Meaning, we review the one-year plan each month and review for budget versus actual. Why? So we can determine what is off track, fix it, and re-forecast for the remainder of the year. Think agile budgeting and forecasting that make your 1, 3, and 10-year plan stay alive and front and center.
  • Month End Close. Yes, this is a tool. Every business needs accurate financial statements to determine the financial performance of the business. The Month-end close is a tool that encompasses all of the reconciliations to ensure the numbers are correct. This is important because you should be making decisions based on true and accurate information.

For more information on these tools refer to our blog post here

At New Economy, we feel grateful to have the unique ability to help in the data component. We could not imagine running a business without having these tools in place. 

And we feel you don’t have to be a bookkeeper, accountant, or CFO to have financial insights. These financial insights will help you:

  • Increase your probability of success and achieving your goals
  • Get the most out of your business 
  • Reduce your stress level and provide peace of mind

You just need to have the right team and system in place to provide timely and accurate financial information to help you grow your business. 

Ways to Go Deeper on the EOS Data Tools

The beauty of the EOS tools is in their simplicity. They take complicated matters and help to provide a framework to make decisions.

But don’t be fooled. These tools have some depth to them and you need to stay close to them to receive the full benefit.

Since we like lists, here is a list of 10 things to consider when going deeper into the EOS Data tools:

  • Make sure you have the right level of experience for the team member running your data tools. If they are too inexperienced, they will not be effective at fully leveraging the tools.
  • Make sure you keep evolving the tools. Meaning, that the tools and their usage should improve over time. Don’t let them get stale or become complacent with them. Review them quarterly.
  • Leverage technology for the tools. You will become more efficient, be able to collaborate with others, and avoid version control issues.
  • Measure fluffy things. We have scorecard items that are so impactful but they are non-financial and culture-related. We measure things like high satisfaction days and core value callouts which help to create and nurture the culture we desire.
  • Don’t settle for less. Every business needs a cash flow projection, a budget, and ongoing projections that are updated monthly. These tools will give you tremendous insight into the business. Make sure you have these tools in place.
  • Get an outside perspective. Talk to other EOS companies. Seek the counsel of accountants and CFOs who are dedicated to adding value to the EOS community. Feel free to email me directly at [email protected].
  • Think vision and leading indicators. Think of where you want to be and consider the things that have to happen to get you there. If you want sales, measure leads, customer calls, and prospecting lunches as they will drive you toward your desired outcome.
  • Hold the line on accountability. Make sure the numbers are accurate and are being delivered timely. The idea is you can use this data to make smart decisions to build your business. And get to the root cause of off-track data issues.
  • Reflect on the data. Meaning are you learning and applying what you are learning to drive change in the business? Reflect, learn, and apply.
  • Everyone, I mean everyone, has a number. Consider each team member and ask yourself, do they have a number? If they don’t, they should. Connect these numbers into the vision which is connected to the financial plan. Many companies overlook this.

Data is your friend. The tools that provide data arm you with information to support your intuition and gut. It is an amazing combination of having great intuition and data to support it when making decisions.

There you have it. We hope this insight allows you to go deeper into the EOS data component to help you achieve your goals.  

Here are three key takeaways:

  1. Get the right person in the right seat. Make sure that you have an experienced EOS accountant on your Accountability chart to help you leverage your data to keep your pulse on the business.
  2. Leverage your data to make smart decisions. If you have questions or decisions to make, use your budget to understand the financial implications of those decisions. You now have tools to help corroborate your “gut” response to decisions.
  3. Leverage additional tools such as a budget, forecast, and cash flow projection. Every week, month, and quarter you will be gaining new insights into your business. You have the opportunity to apply that learning and make changes that will impact the performance of your business.

EOS Business

New Economy Team Members are Experts in Accounting for Entrepreneurs

If identifying ways to decrease your taxes is not in your skill set or you want to gain control of your finances to make smart decisions to build and grow your business, New Economy is an excellent partner

We’ll help you get your accounting and taxes done, and done right.

Schedule a time to meet with our Founder, Jeff, and discuss how we can add value to your situation.

Why Companies Running on EOS Need a Remote Accountant in their Accountability Chart

New Economy runs on EOS. 

We successfully graduated from a full implementation of EOS with a hired implementer back in 2020. The system has been instrumental in allowing us to build our team, systems and processes, and create company alignment around mission, vision, and values. It’s also helped us support our 3.5x revenue growth since implementation.

So clearly, we see the value in the EOS system. 

Further, we greatly appreciate the EOS community’s shared values which encompass an abundance and growth mindset, doing the right thing, giving before you get, and doing what you say.

We are grateful to be a part of the community and want to help others just as we have been helped.

We have unique abilities in the data component that can be leveraged to help EOS companies achieve their vision and goals.

We want to help you gain control of your finances to make smart decisions to build and grow your company. 

In this article, you will learn about: 

  1. Why to consider hiring a remote accountant and what to look for
  2. The proper seats and core functions to set you up for success
  3. The right tools and meeting rhythms
  4. 3 key takeaways

Let’s dive in.

What to Look for When Hiring a Remote Accountant and Why to Consider it as an Option

What to look for

New Economy is a fully remote Company. We have 15 team members in 15 different states. Further, we have 45 recurring customers that get us into another 5 states, totaling 20 states between employees and customers.

So we know firsthand that remote working works. We have leveraged the EOS tools and meeting rhythms which increase the probability of success. 

We focus on:

  1. Lots and of Leading, Managing, Accountability (LMA)
  2. Focused and consistent Level 10’s, monthly check in’s, 90-day check-ins, Quarterly and annual roll-outs
  3. Focused and consistent weekly, monthly and quarterly scorecards
  4. Documented process
  5. Technology to support the team and customers

Further, we outsource our marketing (awesome plug for Full Stadium 🙂) and legal (awesome plug for Howell Legal 🙂) to remote Companies. So not only are we a remote and outsourced service provider but we successfully leverage the service of others

So here is tip #1 –  Make sure the company has proven experience and examples of success when working in a remote environment. 

Many companies are trying to take advantage of remote working but they have not invested in the technology, process, or systems. They just are not equipped to provide awesome service (core value call out).

Another key component is alignment. Being an EOS company, we have a set of core values:

  • Deliver awesome customer service
  • Embrace learning and growth
  • Be passionate and own it
  • Build open and honest relationships
  • Continuous learning and growth

And we even look at our core values and seek to find alignment with our customers by asking questions during the early stages of the customer journey. Further, by leveraging our core values we have created the characteristics of our ideal customer:

  • Mission-driven, values-based, and growth-minded
  • Revenues and/or investor funding in excess of $2M 
  • 10+ Employees
  • Located anywhere in the US
  • Leverages technology and process
  • Wants an engaged accounting and finance partner to help them use data to grow

 

If this is you, let’s talk.

 

This leads to tip #2 – Make sure there is a degree of alignment around core values, working and communication styles. 

This takes a bit of hard work, but as an EOS company, we know it’s all about getting the right people in the right seats, and the right person just might be someone that is remote.

So now we have a sense of what to look for.

But why should I consider outsourcing to a remote company?

Why to consider outsourcing

Back in June we wrote a detailed blog posting giving 3 key reasons why you should consider outsourcing to a remote accountant. For your reading pleasure, we are including a link here.

But if you like summaries, here are the top 3 reasons why:

  1. You will likely save money as you probably don’t need a full-time hire. You won’t need to worry about space, technology, or benefits. Further, you will not be overpaying a technical person to do admin-type work. We stay in our lane and focus on what we are good at which aligns with the seats and core functions which we will talk about later.
  2. Considering outsourcing will require you to focus and evaluate your accountability chart, your people, your processes, and your technology. And this is a good thing for your business. It will require you to take a hard look at what is working, not working, and why. And one of the things about remote working and leveraging technology and process is effectiveness and efficiency because we have to.
  3. You will have a resident accounting expert on your team who does not need to be trained or managed. They work with different companies so have an inside look into many businesses and acquire best practices. They are focused and specialized in core functions that are specific to their skill set. 

So, by now you should have a sense of what to look for and why to consider outsourcing to a remote accountant.

Keep reading if you want to get a glimpse of seats and core functions in the accountability chart that will help you gain control of your finances to make smart decisions to build and grow your business.

The Proper Seats and Core Functions to Set You Up for Success

ou are probably familiar with the accountability chart if you run on EOS, and if not check out this quick video here. It acts like an organizational chart by really focusing on identifying the core functions of each role.

This is all about getting the right people in the right seats and focusing on accountability for the tasks they are responsible for. 

We figured the best way to explain the ideal chart for a growth-minded organization is to just show it.

We prefer to build this from the bottom up:

First up is your staff accountant. This team member is leveraging processes and technology to perform their core functions. They are the foundation of your accounting team. The old saying is garbage in, garbage out. The tactical inputs of this team member will be at the front end of the strategic outputs you are looking for. 

 

Staff/Senior Accountant

*AR and AP

*Payroll

*Bank & Credit Card recs

*Maintain QB

 

Next up is your Controller. This team member leads and manages the staff or senior accountant. Further, they work with creating processes and policies, and are focused on delivering timely and accurate financial information. 

 

Controller

*Lead, Manage, Accountability

*Month-end close

*Financial process

*Budgeting & cash flow

 

Next up is your CFO. This team member sits on your leadership team. They are focused on being the right hand to the CEO and supporting the overall strategy of the business. 

 

CFO

*Leadership

*Strategy

*Capital raising

*Risk

 

The above 3 seats are key for really every business, but it’s hard for a CFO to be effective if the foundational pieces are not in place. Remember, each role requires unique abilities and skills, so make sure you are setting everyone up for success. 

Here is what a health accountability chart for a growth-minded company should look like:

 

CFO

*Leadership

*Strategy

*Capital raising

*Risk

                    

Controller

*Lead, Manage, Accountability

*Month end close

*Financial process

*Budgeting & cash flow

                   

Staff/Senior Accountant

*AR and AP

*Payroll

*Bank & Credit Card recs

*Maintain QB

 

For more information on the difference between an accountant, controller and CFO, check out this blog posting here.

And here are a few pro tips:

Tip #1 – Start from the ground up. Get the tactical foundational stuff set up before bringing in a controller or CFO.

Tip #2 – Don’t over-hire. Meaning, your CFO or Controller should not be doing admin-type work. Actually, they should not be doing any work outside of the core functions listed above.

Tip #3 – The reality of it is outsourcing can save you money. Focus on the core functions which are based on specialized skills. Use Admin and operations people for all non-accountant and finance core functions.

If you are feeling pain in this area, let’s talk. We have this figured out for you so you can focus on building and growing your Company.

The Right Tools and Meeting Rhythms

Now let’s talk about tools and meeting rhythms.

The Tools

Being a fully remote company, we operate in a paperless environment with all web-based applications. There are hundreds of web-based platforms out there to meet your needs and we don’t have time to go over all of them here, but here are some essentials:

  • Quickbooks Online – Maintains all of your accounting and produces your financial statements
  • Bill.com – Provides bill payment solutions that automate and help with internal controls 
  • Expensify – Provides expense reimbursement solutions that automate and help with internal controls
  • Fathom – Provides month end dashboards and analysis like budget versus actual
  • Jirav – Provides budgeting and forecasting

And the list goes on. The key is to find a tool that is in the cloud and will add value to your life. The goal is to become more efficient as a result of the technology.

The Meeting Rhythms

Being remote, we live and die based on accountability. One of the ways we drive accountability is by having preset meeting rhythms. Much of this depends on the services our customers want but here is a glimpse into the preset rhythms we have in place:

Internal

  1. Weekly Team Level 10’s – Here we all get on the same page for what’s working, not working and solve problems
  2. Monthly Team member one on one – Make sure our team members are set up for success and help them with challenges and issues
  3. Quarterly Check-Ins – These are 90-day check-ins where we provide our team with feedback and actionable insights to help them grow.
  4. Monthly Culture Events – These are geared to help us grow in our relationships with each other. We are looking to build intentional connections and increase trust and credibility.

The above meetings impact our clients even though they are not a part of them. These meetings help to build our team up and provide clarity on timing, expectations, and deliverables. Most importantly they set the tone for our culture which is an internal thing that makes its way into everything we do.

Now onto our client-facing meeting rhythms:

External

  1. Weekly Check-ins – These are to drive alignment and build trust. They are quick meetings to “get on the same page”. Some happen in Slack and others in Zoom.
  2. Weekly Cash Flow – If we are doing bill pay or cash flow forecasting, we have a weekly cash flow meeting. This is to provide insights into cash flow on a rolling 13-week basis. (Read more about creating and following a cash flow model here).
  3. Monthly Finance Zoom – This is a fun meeting and core to our services. Here we present the financials with actionable insights. We are quickly spoon-feeding our customers relevant information from the financials to make smart decisions.
  4. Quarterly Tax Zoom – If we are providing tax consulting services, we connect quarterly to discuss tax opportunities and threats with the idea of providing peace of mind around taxes.
  5. Quarterly Budgeting Zoom – If we are providing budgeting or forecasting services we will meet quarterly to discuss what we have learned about the business and how to apply it moving forward.

Ok, that seems like a lot and there is more. Note, that we love to simplify and can combine and condense where it makes sense.

The key for us is to have preset meetings that drive engagement. This engagement allows us to provide key insights to help our customers grow their businesses. 

Here are three key takeaways:

You made it this far, now for the top 3 takeaways:

  1. Spend time reviewing your business needs as they relate to your accounting department. What’s working or not working? Get this all documented based on the above accountability chart. Once you have established the seats and functions you can then move on to getting the right people involved.
  2. Don’t overpay or underutilize team members. Meaning, your CFO should not be in QuickBooks doing basic accounting work. Further, your accountant should probably not be advising you on strategic business decisions. Build some depth on your team and outsourcing will provide a cost-effective way to make that happen.
  3. Culture. Culture. Culture. We love to focus on alignment. Make sure you take the time to align with a company that seems to have a shared value system. Ask them about their mission, vision, and values and look for areas that resonate with you.  Taking your time to get the right people in place will provide tremendous value in helping you achieve your goals and allow you to focus on what’s most important.

New Economy Team Members are Experts in Accounting for Entrepreneurs

If you run on EOS and building out processes with a focus on accountability is something your business is working towards, New Economy can help. We have the right tools and meeting rhythms to ensure your core functions are being taken care of. 

Again, it’s our goal to help you gain control of your finances to make smart decisions to build and grow your company.

So, Schedule a time to meet with our Founder, Jeff, and discuss how we can add value to your situation.

Creating a Small Business Budget

A small business budget is like a treasure map. Yup, you heard that correctly. Just think of Jack Sparrow in the Pirates of the Caribbean.

Many entrepreneurs and business owners can communicate where they want to be at some point down the road. For many, that is obtaining the treasure i.e. achieving goals and financial measurables. 

But they struggle with how they are going to get there.

That’s where creating a small business budget comes into play. Think of your small business budget as the map to provide the steps to obtaining your treasure.

At New Economy, we believe in one-year, three-year, and 5-year budgets, and as we are entering into the fall, now is the time to start thinking about your budget again. As much as we love the three-year plan, this article is focused on the one-year plan.

We want to help you gain control of your finances to make smart decisions to build and grow your Company. 

 

Small Business Budget

In this article, you will learn about: 

  1. How to get started on preparing your one-year small business year budget
  2. Best practices in creating your one-year small business budget
  3. Utilizing your one-year small business budget to obtain your treasure
  4. 3 key takeaways

Let’s dive in.

How to Start Preparing Your One-Year Small Business Budget.

You might be surprised, but some of the most important parts of creating a budget have nothing to do with numbers or spreadsheets. The first part of creating a budget requires stepping back and obtaining a deep understanding of the business.

Understanding the Business

At New Economy, before we prepare a one-year budget, we spend time getting to know the business. This requires meeting with key team members like the Visionary/CEO, Integrator/COO, Operations, and Sales team leaders in an effort to gather as much knowledge as possible about the business. 

We do this because we seek to understand. We want to be able to offer up best practices and strategies to help you get closer to achieving your goals. And without historical context, an understanding of the present moment, and the future vision it is difficult to predict.

Here are some of the things we seek to obtain and understand and what you should too if you are preparing your own budget:

  • Review existing business and financial information like historical financial statements, tax returns, and business plans.
  • Review and understand unit economics. For example, the cost of making your product or service.
  • Review pricing strategies.
  • Understand management’s vision, growth, and exit plan for the business.
  • Get a sense of the resources needed to achieve the vision. Think people, equipment, technology, and so forth.
  • Understand the finances and capital in place to support the business.
  • Understand the sales and marketing process and review all collateral.
  • Understand the issues and challenges the business is facing.
  • Get a sense of the overall market conditions and opportunities in the specific industry.
  • Review key documents like customer agreements, employee agreements, and bank documents.

It seems like a lot and it is, but it’s important. We typically have a few sessions to do these knowledge and data transfers.

By reviewing all of this information, we are able to obtain a baseline understanding of the business and the direction that management is looking to go. We use this as the foundation for building a one-year small business budget. So don’t rush through, take your time and seek to understand. Soon, you’ll have what you need to create the map that leads to your treasure.

Best Practices For Creating Your One-Year Small Business Budget

Okay, now we are ready to get started.

Tools and Technology

There are many forecasting tools out there, and we are big fans of leveraging technology. This allows for automation, reduction of errors, and possibly some time savings.

A few forecasting tools to check out are:

  • Jirav
  • Spotlight
  • Fathom

However, at New Economy, we tend to gravitate towards either Excel or Google Sheets. We find they allow us to customize the levers and unit economics and inputs specifically to your business. In other words, we have extreme flexibility when building out the budget.

There is no wrong answer here, but staying consistent with a single tool is the best route.

General Framework

At New Economy, we build our budgets much like your historical financial statements. So our budgets encompass three financial statements:

  • The Balance sheet
  • Profit and loss statement
  • Statement of cash flows

You’ll need this to produce budget versus actual information but more on that later.

When building out financial statements, we take a detailed approach and use the chart of accounts in your financial statements to build the budget. Yup, we do it line item by line item based on each account so we create variance reporting at month end.

Further, we build out the financial statements by month. So each financial statement will have monthly balances. The end product is a Balance Sheet, Profit and Loss statement, and statement of cash flows that mirrors your financial statement accounts and is produced by month.

Input Sheets

Next, we move into the input sheets. These sheets are the drivers, the levers that feed into the financial statements mentioned above. By setting up input sheets, you are able to run “what if” scenarios and change your assumptions which will ripple throughout your financial statements.

Here are some key examples of input sheets:

  • Staffing Sheet – This sheet represents the team you have and the new hires you will make. You can add new hires, increase compensation, add benefits, and even remove staff. The idea is to show what your team is going to look like over the next 12 months and how much it is going to cost the business. Again, this is done monthly and at a detailed level. 
  • Operating expense Sheet – This sheet represents the general expenses and overhead needed to support your business over the next twelve months. Think about expenses like rent, insurance, software costs, and marketing expenses. These are your fixed costs and the idea is to show how much it is going to cost the business. Again, this is done monthly at a detailed level.
  • Revenue and Cogs Sheet – This sheet represents your revenue and the direct costs to produce that revenue. We like to get very detailed on the revenue side. For instance, as you build this sheet out, think about the economic units. Meaning, can you build this sheet out showing # of units x price per unit to get to sales? This allows you to make different assumptions around growth. On the Cogs side, it is variable with revenue. We do build them from the bottom up and get a sense of the costs needed to produce one unit of revenue. But we also look at it from the top down and look at the overall gross profit margin as a gut check. Again, this is done monthly at a detailed level.

Financial Statements

This is where the magic all comes together. 

You should have a good understanding of the financials since the budgeted financials are just a forward looking picture of the actual financials you review at the end of each month.

In our framework section, we discussed the basic layout as follows:

  • Balance sheet by month
  • Profit and loss sheet by month
  • Cash Flow Statement by month

Your traditional financial statements that give you a sense of how your business is performing from a financial perspective on a month to month basis. And we have both the actual historical financial statements for each month as well as the future oriented budgeted financial statements out into the future.

Your Actual and Budgeted Balance sheet will show all of your assets, liabilities and equity.

Your Actual and Budgeted Profit and loss statement will show all of your revenue and expenses.

Your Actual and Budgeted Cash Flow statement will show you where your sources and uses of cash are coming from.

All of the financial statements in our budgets are linked up to the input sheets. So any changes you make in the input sheets ripple through the financial statements automatically.

We feel it is important to take a detailed approach to budgeting and have your budgeted financial statements mirror your historical actual financial statements which we discuss in the next section.

 

Utilizing Your One-Year Small Business Budget to Obtain Your Treasure

Now that you have a one year budget in place, let’s talk about the ways to use it.

  • Variance reporting  – Variance reporting is something that happens at month end. Once you close the books for a month and have your actual financial statements we review a variance report. This can be system generated from an accounting system like QBO. The value here is understanding which line items are on track or off track against the budget. Then you can assign a team member to look into why and help understand if any necessary changes are needed to get things back on track.
  • What if scenarios  – We often get asked questions like “can we afford to hire?” Or “if we do hire, what is the impact on profitability”? While most entrepreneurs have a pretty good gut answer we prefer to utilize the data. We would run the hire and salary through the staffing tab to see the impact on the profit and loss statement. Then we can answer the question accurately as to the financial impact of that decision. So you can use the budget to get a sense of the financial impact of any decision you are about to make in your business.
  • Reforecasting  – As the months march on we should be learning about the business. We are aiming for the results laid out in the original budget. However, much of the learning we are obtaining may result in some re forecasting. For instance, maybe we want to increase marketing spend above the budget amount because it is resulting in revenues above the budget amount. So you can use the budget to create a reforecast which is simply changing underlying assumptions in the input tabs based on the direction of the business. But be careful, you want to continue to hold yourself accountable to the original budget.

There you have it. We hope the  road map above gets you closer to your treasure.

Here are three key takeaways:

  1. First and foremost, every Company needs a budget. A budget will help you understand the resources needed to chase after your vision. Further,  budget will help you to determine on a month to month basis whether or not you are on track.
  2. Leverage your data to make smart decisions. If you have questions or decisions to make, use your budget to understand the financial implication of those decisions. You now have a tool to help corroborate your “gut” response to decisions.
  3. Turn your budget into a forecast. Every month, you will be gaining new insights into your business. You have the opportunity to apply that learning along with the financial impact by reforecasting your numbers. We suggest doing this on a monthly or quarterly basis. But keep your original budget intact as those are the goal posts for the year.

 

Small Business Budget

New Economy Team Members are Experts in Accounting for Entrepreneurs

If identifying ways to decrease your taxes is not in your skill set or you want to gain control of your finances to make smart decisions to build and grow your business, New Economy is an excellent partner

We’ll help you get your accounting and taxes done, and done right.

Schedule a time to meet with our Founder, Jeff, and discuss how we can add value to your situation.

3 Ways to Boost Your Confidence in Your Small Business

How Leveraging Financial Data and Your Accounting Team Can Help.

As a growth-stage entrepreneur, you’re constantly dealing with emotional highs and lows based on the various circumstances thrown your way that are not in your control. 

We feel your pain. 

And we have learned that this can impact the confidence you have in your small business. But what really is confidence?

Here are a few definitions. 

  • It is the feeling or belief that one can rely on someone or something.
  • Or defined another way, a feeling of self-assurance arising from one’s appreciation of one’s own abilities or qualities.
  • Or the state of feeling certain about the truth of something.

Which begs the question: Do you have confidence in your small business? And can you increase that confidence in your small business using financial data and leveraging your accounting team?

At New Economy, we believe so.

Why, you ask? 

It aligns with our efforts of helping you gain control of your finances to make smart decisions to build and grow your company. 

In this article, you will learn: 

  • What types of issues might be eroding your confidence in your small business
  • What you can do to overcome these issues 
  • Three key takeaways related to improving the confidence in your small business using data

Let’s dive in.

Small Business Confidence

What Issues May be Eroding Your Confidence in Your Small Business?

There are a few important things to discuss here. 

First off, there is no silver bullet and the game of business covers a lot of ground. Therefore, we will focus on issues on the financial side of your business, which is the space that we play in. But this approach can be applied to any department such as marketing or even operations.

So what could deteriorate your confidence in your small business as it relates to the financial side of your business?

Maybe it’s people, maybe it’s process, maybe it’s technology, or maybe it’s a combination of all three. 

Let’s Talk People

Start with the Right Seats

Before we dive in, let’s discuss the seats in your accountability chart. And here is a question–Do you have a sense of the right seats and core functions needed for your business based on your stage, growth trajectory, and goals?

We believe every entrepreneurial, growth-minded company needs 3 foundational seats, each with a different set of skills and unique abilities (for more, check out our blog on the difference between an Accountant, Controller, and CFO). Here they are:

  • Bookkeeper / Accountant – They focus on tactical things like payroll, bill payment, bank reconciliation, credit card reconciliations, and invoicing and collections. This team member may have 3-5 years of experience.
  • Controller – They focus more on the output which would be things like accurate financial statements, accounting processes, managing the Bookkeeper, and working directly with the CEO or CFO. This team member may have 10-15 years of experience.
  • CFO – They focus on the business. They are a strategy partner to the CEO and they oversee everything related to accounting and finance and will get involved in budgeting, forecasting, and helping to bring plans to life. This team member may have 20+ years of experience.

Now that we have the right seats in place, you need to find the right team members and this is where people come into the picture.

Then Find the Right People to Fill Those Seats

At New Economy, we ask ourselves a few questions about placing a team member in a seat such as the ones mentioned above.

First, are they aligned with our core values at New Economy? If not, they will not be a good fit for our company, and we don’t place them. If yes, we move on to the next question.

Do they get it, want it, and have the capacity to complete the functions needed for the seat? If not, they will not be a good fit for the seat and we move on. But maybe through training and development, we can get them there. And if yes, then we place them in the seat.

So, if you don’t have the right seats, or maybe you have the right seats but the wrong person in them, you will face challenges. Chances are:

  • You are frustrated
  • your team member is frustrated and feeling burned out
  • You are not getting financial information to make smart decisions to build and grow your business

So your confidence could be down to not having the right structure and seats in your accountability chart or not having the right people sitting in those seats.

Consider stopping doing your own bookkeeping or using Tom’s uncle’s cousin who really is a party planner! Take the time to get this right. 

If you get this right, you will have an accounting and finance department that is aligned with your vision and provides useful financial data, actionable insights, and business improvements all to help you build and grow your business. This is an investment in your business that will return extraordinary results.

Let’s Talk Process

The next issue that might be eroding your confidence in your small business is the lack of process. At New Economy we are consistently reviewing our core processes, documenting them, and training others to ensure they are followed by all.

By having documented processes in your accounting and finance department you are ensuring that team members are clear on how to do things and you are mitigating the chances for errors, inefficiencies, or even fraud. Yup, we said fraud which nobody thinks about until it’s too late.

But here is the real reason the documented process is important: It will ensure that over and over again you have a procedure in place to consistently produce a desired outcome in a timely and accurate manner. 

For example:

  • Processes will support the release of timely and accurate financial statements. A process around the month’s end will allow any controller to step in and provide you with financial data that you can rely on to make great business decisions.
  • Processes will ensure that bills are paid on time for goods and services that we have received (we have seen vendors getting paid for things they should not) and that payments are going out at the right amount per the actual purchase order and invoice.
  • Processes will ensure that your business is on track to meet its annual budget. At month’s end, the actual financials can be compared to the budget to show what is on and off track. From there, you can forecast the future based on what you are learning to see how you are lining up compared to the budget. 

We prefer to rely heavily on processes. The process runs the business and the people step in to run the process. This takes time and effort but it is worth addressing in all departments in your company.

So, if your accounting team is always late with providing information, missing key information, or off on the accuracy we can see why your confidence might be down. And it may be due to a lack of processes needed to support where the business is currently at today.

A few final thoughts:

Having a documented process may not be enough. We believe that team members need to be trained in processes. Further, the process needs to be followed by all. So, you need a process to ensure that processes are being followed – yikes! 

But in the end, the process will give you the confidence that you are receiving financial information that is both timely and accurate. And this will give you insights as to how your business is performing.

Let’s Talk Technology

Remember the old days when you used to get a set of financial statements printed on ledger paper?

We don’t! And if someone handed us a set of financial statements on ledger paper our confidence would certainly drop. We’d question, in a healthy way, if we could rely on the numbers.

See, we have built New Economy from the ground up by leveraging a technology stack that allows us to provide virtual accounting and finance services worldwide. It’s faster, more efficient, more cost-effective, easier to build processes, and easier to train team members on how to use technology tools.

However, many companies’ accounting and finance departments are still struggling to adopt new technologies that will increase efficiencies, reduce errors, and allow team members to spend more time analyzing information and providing actionable insights.

The point is: Consider what technology you might be able to use to change the game and build your confidence. 

Here are some examples:

The list goes on and on. 

But the main point is that the use of technology can speed the flow of information up and assist with increasing the accuracy. Further, processes can be wrapped around these technology tools, meaning technology has an impact on increasing your confidence in your small business.

 

What Can We Do to Overcome the Issues that are Decreasing Your Confidence in Your Small Business?

The very first thing we suggest you do is step away from the day-to-day of the business. Most growth-stage entrepreneurs have too much on their plate and it’s hard to reflect and think strategically when you are in the business.

So what do you do?

Take clarity breaks. A clarity break is a regularly scheduled appointment on your calendar with yourself. You define what regular is – a half-hour daily, two hours weekly, a half-day monthly. It’s up to you. The doing of it is what matters.

Note: We like to take these in physical spaces that motivate, inspire, and encourage us. For example, I like to take my clarity breaks in my 1986 VW camper van by the ocean. Some team members like to take them at Starbucks. But the point is, get away from your regular space.

OK, so I am in my van, now what?

We would encourage you to reflect on the above and ask the following questions:

  • Do I have the right accounting and finance seats on my accountability chart?
  • Are the functions for each seat clearly defined?
  • Do I have the right team member with the right skills sitting in the seat?
  • Do I have processes supporting each function in these seats?
  • Are the processes being followed by all? Are they evolving with the business?
  • Do I have the right technology to increase productivity?

Reflecting and answering these questions will increase your confidence in your accounting and finance team and provide you with the information you need to build and grow your business such as:

  • Ways to increase profits
  • Ways to mitigate risks
  • Ways to run smoother
  • Ways to improve business insights
  • And ultimately increase business confidence

We have subscribed to this approach to help build and grow New Economy. You can do this for literally any department in your business. 

But should you want to get there quickly, consider hiring a company like New Economy that has done the hard work for you 🙂

And once you have the confidence in the back end of your business, you are ready to go and ready to grow. You have the foundation built to support the needs of your customers while capturing market share.

3 Key Takeaways Related to Improving Confidence in Your Small Business Using Data and Leveraging Your Accounting Team

If you want to improve your confidence in your small business, consider leveraging your accounting and finance team and the data they provide.

Here are three key takeaways related to improving your small business confidence:

  1. Make sure you know the needs of your business and that you have clarified the roles. Further, make sure that you have the right person with the right skill set to meet those needs by being able to perform the core functions of the role.
  2. Lean into your process and technology. Make sure that you have a documented process followed by all. Further, make sure that you are using the best-in-class technology for efficiency purposes.
  3. Take time away from the day-to-day to reflect. Think about what’s working and not working, and what next people move you need to make. This time is valuable in that it will provide new ideas and actionable insights to chase down your goals.

Small Business Confidence

New Economy Team Members are Experts in Accounting for Entrepreneurs

If your Company’s accounting and finance team is not providing data to help build your confidence in your small business, let’s talk.

New Economy makes an excellent partner because we want you to gain control of your finances to make smart decisions to build and grow your business. 

We’ll help you get your accounting done, and done right.

Schedule a time to meet with our Founder, Jeff, and discuss how we can add value to your situation.

3 Ways to Cut Business Expenses

As a growth stage entrepreneur, you’re constantly thinking about ways to grow your Company. 

An important thing to consider as you grow is keeping expenses on track. We have learned that growth can suck cash and a big part of that is expense management. 

This begs the question: Do you have an expense management process in place that effectively cuts unnecessary business expenses?

At New Economy,  this is on our minds too.

Why, you ask? 

It aligns with our efforts of helping you gain control of your finances to make smart decisions to build and grow your company. 

In this article, you will learn: 

  • What an expense management process looks like
  • What types of questions to ask when identifying expenses to cut
  • How to actually cut or reduce expenses
  • 3 key takeaways related to cutting business expenses

Let’s dive in.

Cutting business expenses

What is an Expense Management Process?

There are a few important things to discuss here. 

First off, before we get into the process itself we’d like to quickly cover an important financial tool. 

Every business should have a detailed budget. The budget should be prepared monthly and be detailed by line item (Refer to our blog post on top 4 financial tools). In this case, our focus is on the expense line items. If you don’t have this in place, you should. 

Why? You are making important bets and decisions on where you need to invest your resources to achieve your goals. 

Ok, now we can move on to the process which can be achieved at a detailed operational level and at a higher financial level.

Let’s start with the detailed operational level. The benefit here is: 

  •  You are ensuring you are obtaining the proper tax deductions
  •  You are able to manage expenses
  •  You are going to get more insights to budget 
  •  You are minimizing fraud

Every business is different and there are employee expenses such as travel and meals and then business expenses such as inventory purchases and marketing expenses.

Here are a few keys for every business regardless of the type of expense:

  • Have a written policy that is followed by all
  • Keep everyone from employees to managers accountable to the process
  • Ensure the process has built into it proper documentation such as expense reports and purchase orders
  • Ensure the process has proper approval built into it. Meaning, make sure a manager is approving the employee expense report or purchase order

Moving on to the higher financial level. The benefit here is:

  • Having data to make timely decisions
  • Knowing what is on-track or off track
  • Identifying root causes of overspending
  • Fixing problems real-time

Here the process goes back to the budget we discussed. At month’s end, the actual amounts for all expense line items should be compared to the budgeted amounts. All line items should be analyzed to determine what we are learning. 

For instance, if a line item is over in a particular month, why is that? Maybe it’s a timing issue and we had to front-load expenses and no additional action is required. Or maybe, the marketing team has overspent and this needs to be brought to their attention to reduce expenses in a subsequent month to keep things on track.

The key here is to create both types of processes, put someone in charge of managing them, and use the information you are getting to cut business expenses to help you achieve your financial goals.

What Type of Questions Should We Ask When Looking to Cut Expenses?

We believe cutting expenses to achieve your financial goals is both an art and a science. You don’t want to simply cut an expense because it is over your budget. Maybe the expense that is over budget is helping you to achieve your business goals. In that case, why would you cut it?

This leads to our first question. We like to ask: “Does this expense get us closer to achieving our goals?”.

The question is to get you to really think about where you are allocating your capital and get you to prioritize. If the expense is mission critical, then we often advise to proceed with caution and perhaps find other expenses that are not as much of a priority.

Another important question to ask yourself is: “Why is this expense over and above the budget?”.

We have found that getting to the root cause often requires us to go deep. Meaning, we try to ask why at least 5 times to get to the bottom of it. Here is an example.

The marketing budget is over budget for the month by 25% or $15,000 but why:

  • Why 1x – Because the marketing team overspent
  • Why 2x – Because they needed additional support to achieve lead generation
  • Why 3x – Because they underestimated the resources needed
  • Why 4x – Because their original submitted budget was not scrutinized enough
  • Why 5X – Because the process for establishing budgets was not followed

As you can see, as you keep going deeper you get closer and closer to the real why. And by having the real answer you are able to make a smart decision. You can decide to re-forecast and increase the budget over the remainder of the year. Or you can decide to work with the marketing team on staying on budget and lower expectations on lead generation based on the resources deployed. 

Lastly, another favorite question is: “Who is accountable for this expense line item?”. 

We believe that whatever we measure and manage will improve and get better. And part of this is giving responsibility to team members to manage and own the number. 

So back to the example above, we would suggest that the marketing team leader is the person that should be taking ownership of approving the budget for the marketing team. This individual is now responsible for providing thoughts and actionable insights on getting the budget back on track. Never underestimate the power of “who” …..as in, who is responsible and accountable for this.

 

 

How Do We Actually Cut Expenses?

This is a delicate topic. But as your Company is growing, you may find that expenses naturally start to grow. Growth sucks cash in the form of expenses. But cutting expenses is one way to help you stay on track for achieving your business goals.

Here are some tips for cutting expenses:

  • Communicate your “revised vision” with the reduced expenses in the form of a re-forecast to your team. This paints a new picture of what we are aiming for on the expense side. And call out those specific line items and explain the why behind them. The point is, involve your team in this conversation.
  • Have open and honest communication with your vendors. You need your vendors just as much as your team and customers. They are helping to provide the goods and services needed to grow the business. So inform them by communicating timely and clearly so they can plan ahead.
  • Continue to hold managers accountable, ensuring they are driving the change needed to reduce expenses. This should be emphasized as a top priority that needs to follow through based upon an agreed timeline.
  • Keep banging the drum so that your expense management process is followed by all. Let everyone know they can play a role here to ensure the company succeeds.

So as you can see, there is no silver bullet. No doubt you can focus on certain line items but we encourage our companies to think before acting and not making quick decisions. We like to take a thoughtful approach and balance the tension between the short-term and long-term goals of the business.

Note, per the Small Business Administration one of the top reasons Companies don’t make it is they run out of cash. And the reason they run out of cash is they have more money going out in the form of expenses than money coming in in the form of revenue.

So this is a financial discipline worth investing in for your business.

So one last question, how is your expense management process and what needs to change?

3 Key Takeaways Related to Cutting Expenses 

If you want to build and grow your business, you need to make sure you are keeping an eye on expense management.

Here are three key takeaways related to reducing your expenses:

  1. Make sure you have done the hard work of building a detailed monthly budget. Review the budget versus actual by line item each month. Reflect on what you are learning. And determine what may need to change and re-forecast based on your learning.
  2. Lean into your process. Make sure that you have an expense management process in place that is followed by all. Assign one manager to oversee this to make sure that they are banging the drum on the expectations.
  3. Assign team members to be accountable for specific line items. Have them own the expenses and be prepared to offer up the “why”, suggestions for improvement, and take on the responsibility of the execution of any change needed.

Cutting business expenses

New Economy Team Members are Experts in Accounting for Entrepreneurs

If your Company is off track and expense management isn’t your thing, you struggle with building budgets that properly allocate funds, or you want to gain control of your finances to make smart decisions to build and grow your business, New Economy is an excellent partner

We’ll help you get your accounting done, and done right.

Schedule a time to meet with our Founder, Jeff, and discuss how we can add value to your situation.

What is the ROI for Digital Marketing?

As a growth stage entrepreneur, you’re constantly thinking about ways to grow your Company. Considering the world is more virtually connected than ever, with customers spending more and more time online, digital marketing is becoming a vital part of a robust business strategy. Which begs the question: what is the ROI for digital marketing?

At New Economy, it’s on our minds too.

Why, you ask? It aligns with our efforts of helping you gain control of your finances to make smart decisions to build and grow your Company. And to grow your business you are going to have to make favorable investments in marketing.

In this article, you will learn: 

  • What digital marketing is
  • What types of digital marketing channels you can invest in
  • Ways to calculate ROI for digital marketing strategies
  • 3 key takeaways related to investing in digital marketing and the ROI

Note, before getting into any digital marketing strategies it’s very important to understand who your target audience is and where they hang out.

Let’s dive in.

Digital Marketing & ROI

What is Digital Marketing?

Digital marketing is an umbrella term for all of your online marketing efforts. 

This can encompass the following:

  • Content marketing
  • Social media marketing
  • Pay-per-click advertising
  • Affiliate marketing
  • Native advertising
  • Mobile marketing 
  • Email marketing
  • Online PR
  • Inbound marketing
  • Sponsored content
  • Search engine optimization (SEO)

The best digital marketing strategies focus on specific audiences and support the overall business strategy. Today, consumers are relying on digital channels to discover, research, and purchase products and services. Therefore, investing in digital marketing and knowing the return on investment can be a good business decision.

A few interesting digital marketing statistics per Tomas Laurinavicius’s “Mind-blowing Digital Marketing ROI Statistics” are as follows:

  • The average return on investment (ROI) from email marketing stands at 4,200%
  • Individuals who use blogging as a marketing tool are 13 times more likely to get a positive ROI
  • 72% of marketers improve their engagement through content marketing
  • Companies generate an average of $2 in earnings for every $1 they spend on Google ads
  • 64% of internet users are more likely to purchase a product online after watching a video

Pretty interesting stats, right? 

There is no doubt that every company needs to have a marketing budget to help ensure that proper resources are allocated to meet the goals of the Company.

Here is a quick question for you to consider.

What digital marketing strategies are you currently investing in and how do you decide if you are investing enough?

On a monthly basis, New Economy is investing in email marketing, blogging, and content creation which is about 1% of our revenue. As we look forward to 2024 we are planning to increase that investment to 3-5% of our revenue. We still think this is a bit low and are continuing to reflect on whether or not this is enough to help us reach our goals.

Which Digital Marketing Channels Should You Invest In?

Unfortunately, there is no broad-based answer to this question.

As we mentioned earlier, you need a thorough understanding of your target audience. For instance:

  • Who are you trying to reach?
  • What is their communication style and preference?
  • What content do they enjoy most?
  • Which digital marketing channels do they use?

It is worth taking the time to answer the above questions as it will save you time and money in the long run.

At New Economy, we have learned a lot about our ideal customers and where they hang out. So we will speak to those digital marketing channels and why we are investing in them.

Content Marketing 

We believe content marketing is the foundation of our digital marketing strategies. Through content creation, we aim to capture attention and then nurture that interest with email marketing (which we describe below).

Our content marketing takes the form of blogs, videos, one-pagers, client case studies, and social media posts. The key is to create high-quality content that adds value to your targeted customer.

Click here for an example of the client case study. Here we identified issues and challenges that the client was facing and discussed how we were able to help them to go from a place of frustration and chaos around their financial situation to a place of confidence.

Email Marketing 

Even though we get tons and tons of emails, email marketing typically delivers one of the highest returns on investment (ROI). We are about to launch our weekly email marketing campaign with the idea of trying to educate our customers and prospects. Our intention is to build the relationship and establish trust and credibility. 

The end goal is to get our prospects to our website and ultimately generate a conversion via our “call to action button”. Here, we are taking a long-term approach by trying to capture attention and create interest over time.

Social Media Marketing

Here is a staggering statistic: 70% of Americans utilize social media. 

Therefore, this has become a powerful digital marketing tool for growth-stage entrepreneurs. Each social media channel caters to a different audience so it is important to know who your audience is and where they hang out. 

Our focus here is to build relationships with key people at targeted companies. We do this with an educational and informative content style and spend much of our time on LinkedIn, YouTube, and Facebook. 

As we seek to improve our digital marketing strategies, we base our decision on data and not assumptions. So how do we calculate the return on investment (ROI) for our digital marketing strategies?

Keep reading 🙂

 

How Do You Calculate the ROI for Digital Marketing Channels?

Let’s continue on with the digital marketing channels noted above to calculate the return on investment (ROI) using New Economy as a guide.

Content Marketing 

When a Company doesn’t have time or bandwidth to produce its own content, it might outsource its content creation. While staffing someone outside of your office will cost your company money, think of the extra hours your team will have for other productive projects if they don’t have to create content.

Example:

New Economy wants to publish 8 social media posts and 2 blog posts per month. In order to do this it will take some investment in labor and technology.

They use this formula to calculate their ROI:

Internal Cost

15 hours per month x $150 per hour =    $2,250

Technology Costs                              =    $500

Total Monthly Cost                            =    $2,750

External Cost

Marketing Firm Retainer                   =    $1,200

By outsourcing to an external marketing firm, we are realizing a gain. The outsourced firm is able to do this much more cost-effectively. However, the true benefit is the recapture of time under the Opportunity cost. By spending 15 fewer hours on marketing, we are able to spend time on direct sales which could result in a new client and add $36,000 to revenue.

In addition, we look at the ROI through a different lens. If we spend $14,400 ($1,200 x 12 mth) on outsourcing our marketing efforts and get 2 new clients, that’s an additional $72,000 in revenue. This results in a return of $57,600 or 407% return on investment; we will take that.

Email Marketing

Email marketing is a great way to nurture current leads. It provides value and establishes you as a thought leader. We currently spend about 2 hours per week or 8 hours per month on creating our email marketing campaigns.

Example:

New Economy wants to publish 4 email newsletters per month. In order to do this it will take some investment in labor and technology.

They use this formula to calculate their ROI:

Internal Cost

8 hours per month x $150 per hour   =    $1,200

Technology Costs                              =    $50

Total Monthly Cost                            =    $1,250

If we spend $15,000 ($1,250 x 12 mth) on outsourcing our marketing efforts that results in 2 new clients for an additional $72,000 in revenue which is a return of $57,000 or 380% return on investment; We will take that.

There is an old saying. It takes money to make money. 

We believe that digital marketing has a pretty big upside. There are ways to identify the right strategies and then determine if they are generating returns for your business.

So take a look at your profit and loss statement and review your marketing line items. What type of ROI are they generating for your business?

3 Key Takeaways Related to Digital Marketing and Calculating Your ROI

If you want to build and grow your business, you need to make sure you are properly budgeting for digital marketing. Further, you should continuously evolve the return on these investments (ROI).

Here are three key takeaways related to calculating your ROI on digital marketing:

  1. Make sure you have done the hard work of understanding who you are and who your customer is. If you have not done this work, you are wasting your time and money on digital marketing. For real.
  2. Expect a positive return on your investment. We believe it is reasonable to expect a positive ROI over the long term. After all, if they don’t generate a positive ROI, why would we do them? So get serious about your investments and calculate the returns on a quarterly basis.
  3. Realize that digital marketing investments do not operate on a stand-alone basis. This can make calculating the exact ROI for any specific investment difficult but it is worth pursuing. We strive for “reasonable and accurate enough” to make smart decisions based on data.

Digital Marketing & ROI

New Economy Team Members are Experts in Accounting for Entrepreneurs

If calculating returns on investments isn’t your thing, you struggle with building budgets that properly allocate funds, or you want to gain control of your finances to make smart decisions to build and grow your business, New Economy is an excellent partner

We’ll help you get your accounting done, and done right.

Schedule a time to meet with our Founder, Jeff, and discuss how we can add value to your situation.

Use Efficient Data to Reach Business Financial Goals

If you are a typical business owner, there’s a good chance you wake up at 2 am some mornings with an uneasy feeling – trying to crunch numbers in your head and get an accurate pulse of what’s going on in your business. But with out-of-date and tough-to-read data, things just aren’t adding up. 

So you take the pulse based on your gut. But deep down, you know this isn’t going to get your business where you want it to be. 

New Ecomony’s solution – formulate your data in a way that allows you to consistently and accurately take the pulse of your business so you can take effective action.

If this sounds good, read on.

business financial goals

Do You Have Business Goals? 

Goals are defined as a desired result that you, or a group of people, plan and commit to achieving. Does your business have them? If not, you should. 

Here are some of our best tips for setting goals for your business: 

Get Your Team Involved 

Your team is full of ideas and has an interest in the success of your business. Get them involved. Get their buy-in, and gather their thoughts and ideas. Lean into what they have to say and use it to help you build out your goals. 

Think Through Your Priorities

Think of your top 1-3 priorities in your business that need to be focused on to move it forward. This may take some deep thought and serious evaluation, but it will be worth it. 

Ask yourself:

  • Where is your business now? 
  • What are you trying to accomplish? 
  • Where are you trying to go? 

Your goals should help you accomplish your priorities. 

Create SMART Goals

Following the SMART goals framework helps you build good goals. 

Here’s what we mean:

  • S – Specific 
    • Make your goals specific and narrow.
  • M – Measurable
    • Define how you will measure your success towards reaching the goal.
  • A – Achievable 
    • You have to be able to accomplish your goal. Don’t set the bar too high. 
  • R – Relevant
    • Make sure your goals align with your priorities.
  • T – Time-based
    • Set a realistic end date for reaching your goals. 

Document Your Goals 

Once you’ve built out your goals, document them. 

Make them clear to your team. 

Hold yourself accountable. 

Having goals won’t do you any good if you are the only person who knows they exist. 

What Does Your Data Look Like? 

Financially speaking there are certain data components that can help to determine if you are on or off track. When you track the right data, you have the opportunity to make decisions to right the ship when things are off track.

Here’s what your data should look like: 

Every Business Should Have a 1, 3, and 5-Year Financial Plan

A strong financial plan will be broken into 1-year, 3-year, and 5-year segments. You’ll be able to refer back to your financial plan to bring the business you want to life. Think of it as a roadmap. 

You can break your financial plan down by month and measure it against actual financial results. This is the KEY. If something is off, you need to be able to gain an understanding as to why. 

Assign ownership to an individual to get to the root cause and offer up suggestions to get things back on track.

By following along with your plan, you can also narrow down what resources are needed as you go, like: 

  • Cash
  • Customers
  • Employees
  • Equipment 

As you build out your financial plan, use our top 4 financial tools to guide you. 

Use a Weekly Scorecard 

Every business should have a weekly scorecard. At New Economy, we believe a good Key Performance Indicator (KPI) in the form of a scorecard will help you manage data and provide you with a pulse of your business on a consistent basis. This will allow you to take prompt, effective action.

Here’s how you can create an effective scorecard

  • Identify and agree on the top 10 items to measure
  • Make someone accountable for each measure
  • Create goals for each measurable
  • Make the measurable time sensitive
  • Make someone accountable for getting the measurable and filling in the scorecard each week
  • Use it

Each Team Member Should be in Charge of a Measurable

Keeping track of your measurables is essential, but the task shouldn’t just fall on one person’s shoulders. Give everyone on your team a number to keep track of. Doing this: 

  • Cuts through murkiness between manager and direct reports
  • Create accountability
  • Provides clarity and commitment 
  • Produces results (this is a big one as we are trying to use data to drive towards our goals) 

For example, if you are a service-based company, you might measure revenue by employee, and each employee understands what is expected of them. If they achieve their measurable, which should be aligned with the business goals and overall measurables, then you have a high degree of alignment and can rest assured knowing team members rowing in the right direction.

business financial goals

Bring Your Data to Life, Achieve Your Goals

By having a Financial Model, Weekly Scorecard, and Individual Measurables, you are bringing to life the data road map which can be utilized to help you achieve your goals. 

A few final thoughts to remember before you put the plan into action:

  • Be open to learning. What is the data telling you?
  • Dig deep. Is something off track? Get to the root cause.
  • Apply what you have learned and get things back on track.

If you’re searching for a financial partner to help you use efficient data to reach your business goals, schedule a call with our Founder, Jeff! Our mission is to help entrepreneurs gain control of their finances so they can make smart decisions to build and grow their businesses, and we’d love to help you!

Startup Accounting: 5 Essential Processes for Success

As a growing startup, your business will eventually need to implement several key processes to continue achieving your business goals. 

These processes will improve efficiency and help you complete the actions or operations needed to achieve your desired result. 

Here at New Economy, we focus our processes on data. This gives us the best results and positions us for success. 

We have identified five essential processes that are handled by our team of accountants, controllers, and CFOs. This article will dive into these processes and explain how they work. 

Startup Accounting

1. Bill Pay Process

Knowing how much cash (when and to whom it’s going) is leaving your business is important. This is where a bill paying process comes into play. 

Here are some key steps for this process: 

  • Establish a weekly rhythm to focus on this process. We like to use a schedule or calendar. 
  • Ensure all documentation has been received such as invoices, shipping documents, and purchase orders. 
  • Produce an accounts payable aging to show which amounts are due, to whom, and when. 
  • Establish an approval process for payment ensuring that the goods or services have been actually received or provided. 
  • Leverage technology to store digital documents and automate the approval process using technology like bill.com.

The bill pay processes are typically performed by staff or a senior accountant. The information is then leveled up into cash flow forecasting.

2. Cash Flow Forecasting Process

Attaching itself to the tactical bill pay process is a more strategic process in order to gain future visibility. Understanding your cash flow gaps is crucial to managing your business and achieving your goals. 

Here are some key steps for this process: 

  • Layer on extra time to your weekly bill pay meeting rhythm to get more strategic.
  • Download New Economy’s simple free cash flow tool at https://neweconomycpa.com/free-cashflow-tool/.
  • Load in all expected money due over the next 13 weeks and all money going out over the next 13 weeks. Then, verify the figure to your AR and AP aging.
  • Analyze and review for cash flow gaps.
  • Determine the next steps to cover the gap such as accelerating AR collections, leveraging a short-term loan, or extending terms on your accounts payable.

The cash flow forecasting process is a beauty. This process has helped many entrepreneurs sleep at night as it provides the visibility and data they need to make good decisions. This process is usually owned by a more experienced team member, like a controller.

3. Month-End Closing Process

All businesses need timely and accurate financial statements. Obtaining them each month allows you to determine how your business performed. This is beneficial as it will give you a snapshot of the financial condition of your business.

Here are some key steps for this process: 

  • Set up an agreed-upon timeline to have the books closed. This is typically by the 15th of the month for the preceding month.
  • Prepare a month-end closing checklist. This includes things like complete bank reconciliations, credit card reconciliations, and ensuring revenue is properly recognized.
  • Complete the month end closing checklist to ensure that the accounting policies are followed. To ensure the books are accurate, accounting policies must be executed.
  • Book all adjusting entries that are necessary for accurate books.

The goal of the month-end closing process is to ensure that your numbers are accurate. This is important as you’ll need to leverage your month-end financials to build and grow your business. This process is usually owned by a more experienced team member, like a controller.

4. Budget vs Actual Process

Attaching to the month-end close process is the budget versus actual process. This process allows you to understand, line item by line item, how the business is performing against plan.

Here are some key steps to this process: 

  • Load your budget into your accounting system.
  • Produce a system-generated budget versus actual report.
  • Review variances and determine if the variance is a timing issue or a real business issue that needs to be addressed.
  • Share the variances with department heads or others that can be held accountable to influence change.

The goal of this process is to determine where the business is over or underperforming. This is great data to have as points you in the right direction and gives you the opportunity to ask yourself if things need to change. This process is usually owned by a more experienced team member, like a controller.

5. Financial Model Process 

Building and maintaining a three-statement financial model by month, over the next 12-18 months, is crucial. It provides a picture of what the business looks like in the future and what resources are needed to bring that vision alive.

Here are some key steps to this process: 

  • Gain an understanding of the overall business model and drivers.
  • Review relevant contracts and agreements that are pertinent to the business.
  • Build out a three-statement model being a balance sheet, income statement, and cash flow.
  • Adjust the model each month based on what you have learned about the business. 
  • Iterate, iterate, iterate as this is a living and breathing document.

The goal of this process is to provide you with a flexible picture, based on your assumptions, of the future financial condition of the business. Further, it will provide you with a road map of where the business is headed. This process is usually owned by a more experienced team member, like a CFO.

Startup Accounting

Build Out These Processes for Success

With due diligence and the help of these processes, your business will be well-positioned for success. 

If building out these processes sounds overwhelming or too time-consuming, reach out to New Economy. We help entrepreneurs gain control of their finances and make smart decisions.

Head over to our website for related blog postings and don’t forget to schedule a time to meet with our founder, Jeff. He’d love to learn more about your business and walk you through how New Economy can help it grow!

What Will it Cost me to Outsource my Accounting?

Outsourcing accounting is trending in the business world. 

Depending on the role you choose to outsource, entrepreneurs reap many benefits, like: 

  • Accurate and timely financial insight
  • Strategic support and guidance
  • More time to work on the business instead of in it
  • Cost savings

If you’re exploring this option for your business, one of your primary questions is most likely, what will it cost me to outsource my accounting? 

The following article will answer this question based on New Economy’s numbers so you can have a rough estimate of the total cost savings you’ll receive from outsourcing your accounting. 

Know What You Need

Before you begin to think about the cost of outsourcing your accounting, you need to be clear on the kind of service you need, whether it be an accountant, controller, or CFO. 

Each service has a different function, so you want to make sure you’re outsourcing based on your needs. 

An accountant is tactical in nature and takes care of the basic financial management that is required for compliance and business success. 

A controller is a bit more experienced and typically leads the accounting staff. They’ll have more insight into your business and have the ability to make operational improvements to your financial system. 

A CFO is a strategic partner and will work with the CEO to perfect the business model and ensure the business is meeting its financial goals. 

For more detail about each role, check out our article on the topic. It’ll help you select which service is the right fit for your business so you can properly outsource your accounting. 

Let’s Define the Cost Savings (Sorry for the data and detail, we are number crunchers!)

The cost of hiring a full-time employee can pile up, and this is before you even think about the time and salary. 

However, outsourcing your accounting to New Economy offers plenty of cost savings in a few key areas. 

Training Investments

IT and Technology

  • We cover all of the IT and technology investments which is roughly $5k per employee each year. 

Fringe Benefits

  • We cover all of the fringe benefits including payroll taxes, 401k match, and health insurance. To put this into perspective, this means we are investing between $15K-$20k per employee each year based on a $75k salary. 

Management Time

  • We cover all of the management time on each account which can be a bit more challenging to quantify. However, you are now valuing your own time. 

So as you can see, New Economy covers anywhere between $25k-$35k in costs that, when you outsource your accounting, you do not have to assume. And keep in mind, these numbers don’t include salary. 

Before we Jump into Salary, Consider the Time that You Need

When you take into account the costs above and include a salary of $75k per year, you’re now shelling out anywhere between $100k-$110K for a full-time employee. However, this begs the question, do you really need a full-time employee? 

We are learning that many internal accounting hires are pulled into operations or admin work. When this happens, they are being overpaid and under-challenged. And you run the risk of losing them.

To avoid this, you need to understand the true time needs in accounting. This will reduce your investment in this area. 

For example, a full-time controller could cost between $80K-$125K, but if you only need a 50% schedule, your cost will reduce dramatically. 

Now onto Salary, Keeping in Mind we are Focused on Growing Small Businesses and Startups

Let’s take a look at the typical salaries for hiring full-time: 

  • A new accountant can cost anywhere from $55K-$65K
  • An experienced accountant can cost anywhere from $65K-$80K
  • A Controller can cost anywhere from $80K-$125K
  • A CFO can cost anywhere from $125-$200K

In our experience, most growing small businesses and startups don’t need full-time accounting help. 

So the true cost savings of outsourcing your accounting while still obtaining top-tier talent would be: 

  • $25K-$35K on technology, training, and benefits
  • 20%-30% of the salary by leveraging the team member in their unique ability and removing all admin and operational type work

Interested in Outsourcing Your Accounting to New Economy? 

At New Economy, we believe outsourcing is a great way to help you gain control of your finances to make smart decisions to build and grow your company. 

Our team comes from a great culture where they are nurtured and developed and we are proud of the awesome service they deliver. 

Based on the above, you can see that there can be significant cost savings in outsourcing your accounting.

If you are interested in learning more about our service, reach out to us today!