Do I still have enough knowledge to be handling my own finances?

Let’s be honest, most business owners don’t have a ton of experience or education on managing accounting or financial duties. However, it’s usually how it starts in order for you to get up off the ground. With that said, as your business grows, the accounting usually becomes a bit more complex and there are more factors to think about (tax, growth strategy, raising money, international sales, etc.). It’s important to eventually move to an expert to get full support as your business starts to expand and grow.

Do I have time to handle the finances, and do I want to?

You are probably only doing this to get it done for reporting or tax purposes, not because you want to. You also would be best suited for other tasks in your business, such as managing the development team or the business development and customer relationships. Your goal is to grow and manage a successful business, and usually, finance is not a priority in this. You will start to know when you want to be doing more of the “cool” work and less of the tedious bookkeeping and reporting tasks.

Can I afford a finance team or CFO?

In the first year of business, money is always tight. It’s important to be mindful of where money is being spent, but at the same time be okay with investing in something that will provide a ton of long-term success and growth. In our experience, it’s common for businesses earning 100k per year or more to start outsourcing to a finance team to manage this for them. However, if you are still in that pre-revenue or early-stage revenue range, then we may have an alternative for you…

Finance 101 for Business Owners

Would you like to have more time doing what you love? Are you interested in seeing your business thrive and scale? It’s common for business owners to wear multiple hats at the beginning, but usually, one thing gets missed… finance!

We’ve started from the beginning too, and we’ve helped tons of businesses that are in the same position. We want to help you too! Here’s your chance to get ahead of your business so that you can spend more time driving growth while creating the life and business that you want and simply doing more of what you love.

Picture this…

● Cutting your bookkeeping and admin time in half!● Pulling LIVE reports from your accounting system that is ready to go on a daily, weekly, or monthly basis● Being able to show growth potential over the next 1-2 years with a positive CASH balance● Having actual cash in your business bank account!● Spending less time worrying about your financials, and more time finding ways to grow and scale your business

We would love to be able to do all this for you! However, if you are not ready for someone else to manage it, now is your chance to take full control and implement it on your own!

The post When Is It Time To Outsource Your Business’s Accounting? appeared first on VVREDDY & ASSOCIATES.

Keeping an eye on your cash flow ensures that you are staying on track with your monthly expenses, including those unplanned ones that seem to always pop up. It will also help you determine when you can start to grow your business, or if you need to adjust your strategy based on seasonal or fluctuating business.

What Makes Up Cash Flow?

There are different streams, or categories, that fall under cash flow; some of which are outgoing and others of which are incoming or are assets.

• Revenue – This is the money that you make for the goods or services that you sell. This is your bread and butter and why you do what you do.
• Costs – This will be your longest list and will include things such as staff, business expenses, building costs (rent, utilities, etc.) costs of materials for goods sold, etc.
• Assets – These are items that are neither incoming nor outgoing but that have value to your company, such as equipment, inventory, etc. Things that you will, or could, get money for in the future.

Bust out an Excel document and mark down all of the cash flow items that apply to your business. Do you make candles for a living? You need to think about the wax and wicks you use, any finished candles you keep in the studio to sell are assets. Do you have a photography studio downtown? Don’t forget to write down rent and each of your utilities as costs, plus all of your camera gear as assets. No matter which industry you’re in, when you sell something, that’s revenue.

Once you have a list of all of your cash flow items, it will be easier to track in your cash flow system.

How to Track Your Cash Flow

There are several different ways in which you can track your cash flow. These days it is recommended to use cloud-based accounting software, such as Xero so that you can access your financial information from anywhere, and you won’t have to worry about losing any of your data. You will also be able to automatically track revenue and expenses and generate reports.

Keeping digital receipts is another way to ensure that you’re accurately tracking your expenses, giving you a more accurate picture of your business’s current financial standing.

Once a month meet up with your accountant or Virtual CFO to ensure that you are on the right track and that everything is balancing the way it should be. This way, if something isn’t measuring up, you can catch it early, knowing you don’t have to go back further than 31 days.

Having a Virtual CFO is a great alternative to having a full-time company CFO. This way you get all the knowledge and expertise, with the savings of not having to pay for a full-time salary.

Common Cash Flow Issues

There are going to be times when you go to balance the cash flow and things just aren’t aligning. Some common cash flow issues are:

• Expenses are too high
• Income is too low
• Not making the most of your assets
• May have forgotten to enter something in
• May not have categorized something correctly

Once you get used to updating your cash flow regularly, you will probably see the number of occurrences for these issues diminish. That’s not to say that there won’t be mistakes or errors, but don’t panic. It could simply just be something was entered in incorrectly, and if not, talk to your Virtual CFO or accountant. The great thing about having everything online is that it is all traceable, up-to-date, and easy to identify opportunities for your business.

We hope that managing your start-up’s cash flow doesn’t seem so scary or overwhelming now. Knowing how important it is, and how much it can save you in the end, monitoring your cash flow is a simple way to invest in the health of your business. Remember, you’re never alone, there are plenty of online resources, plus you can always ask your accountant or Virtual CFO for assistance and advice!

The post Cash Flow 99: How to Manage Your Startup’s Cash Flow appeared first on VVREDDY & ASSOCIATES.

But budgets can feel tricky – if you’re still in the early stages, you may think it’s impossible to make an accurate budget. Or if you’ve been operating for years, tracking every nickel and dime can make your head spin! But regardless of where you’re at in your business journey, having a business budget allows you to be proactive, instead of reactive, for your important expenses.

Looking to start building your business budget? Here are our simple tips to help!

Start with Expenses
Starting with fixed expenses lets you know your break-even point and the primary bills that need to be covered. These are the easiest to find because they tend to be the same month over month (rent, internet, hosting, staffing costs, etc.). Then, determine variable expense (COGS, variable staffing, utilities, etc). You can include a variety of scenarios for this budget depending on your income for each month.

It’s also important to note down seasonal, annual, or one-time investments. If you decorate the office for the holidays, make sure you account for that expense in your December budget! If you require additional staff in the summer, make sure your staffing budget allows for that. If you have a large upcoming expense, such as new equipment or furniture, you can also begin setting aside money each month to fund the purchase, instead of having payments afterward.

List Your Revenue Streams
Depending on your business, you may have multiple streams of income. From multiple clients to different streams of your business, or even investment income, it’s important to account for all of the different sources of revenue your business has. If you’ve been operating for years, you can use historical data to determine what your average monthly income will be for each month. If you’re just getting started, you may want to mark down a minimum revenue needed to keep your business operating smoothly.

Most businesses have high seasons and slow seasons, so accounting for the increased revenue at different times of year is important, as it can impact your expenses as well (more sales could mean more supplies, longer hours, and additional support).

Plan for the Future
Are you thinking of growing your space, investing in new equipment, or breaking into a new market? After subtracting your expenses from your revenue, you can now start to look for opportunities to invest in your business and set yourself up on a path for growth.

If you have accrued revenue in your business, consider how that could best be spent on the business, or if additional investment is a way to go. If you see that there’s some wiggle room in your monthly budget, perhaps a new team member to help take your business to the next level, or investment in streamlining and automating your systems to scale would be a great way to use those extra funds!

Prepare For Any Scenario
When building a budget, it’s worthwhile to plan for any scenario. Ideally, you’d want to have a ‘break even’ budget – knowing which expenses you could cut or revenue streams you could rely on if you needed to simply break even each month. Then, you can make a ‘stretch’ budget – if you reach all your big goals, what would that look like for revenue, expenses, and investment in your business?

How To Track Your Budget
The easiest way to track your budget is through cloud-based accounting software that automatically tracks your expenses and revenue and tracks how much you have in each of your accounts for a 360-degree view of your business finances. We recommend using Xero for its simplicity, user-friendly design, and powerful features!

Meeting with your accounting or virtual CFO on a monthly or quarterly basis also helps you to stay on track, and get an expert perspective on your business’s finances, helping you make the most of your current position and setting yourself up for success in the future.

Looking to take your business to the next level? Reach out to the Virtual CFO and let us guide you in making the best financial choices for your business.

The post A CFO’s Guide to Building Your Small Business or Start-Up Budget appeared first on VVREDDY & ASSOCIATES.

Net income and EBITDA are two important KPIs that measure financial performance. It’s especially important for startups to understand the difference between the two, and to know when to use them to measure their financial success.

We know – there’s a lot of ‘alphabet soup’ to learn in the world of finance. Here are the basics you need to understand when it comes to net income and EBITDA.

EBITDA
EBITDA stands for ‘Earnings Before Interest, Taxes, Depreciation, and Amortization.’ It sounds like a handful, but it’s a pretty basic concept. In brass tacks, it’s a measure of the profitability of a company. In other words, it’s how much money a company brings in, before accounting for any of its expenses: depreciating assets, amortization, cost of revenue, overheads, and interest.

Think of it like when you were a kid with a lemonade stand. When you counted out your nickels at the end of the day, that was the only number you cared about, right? You didn’t think about how much your mom spent on the lemonade and cups, or how much time you had to spend in the hot sun. You were only counting your EBITDA.

Net Income
On the other hand, net income (or net earnings) is your company’s income after accounting for all those expenses EBITDA ignores. It’s all the money brought in, minus all the money that goes out, to the cost of goods, general and admin expenses, operating expenses, depreciation, interest, taxes, and the like.

Going back to our lemonade stand example, you’d care more about your net income if your mom actually made you pay her back for the lemonade, or if you have to split your earnings with the next-door neighbor who helped you out all day.

The Right KPI for Your Startup
Like with most KPIs, there are times when it makes sense to use either net income or EBITDA, and times when it doesn’t.

Remember that EBITDA measures the pure profitability of a company. For this reason, it can be an extremely helpful KPI for startups, which are often looking to maximize sales, and may also be more susceptible to uncontrollable factors, given their tight budgets. Understanding your EBITDA can be great to keep track of growth.

That said, EBITDA can also overstate cash flow, so it shouldn’t be the only KPI you track. That’s why net income, which ultimately calculates earnings per share is often a better KPI for more established companies.

The reality is that each company is unique, and navigating this ‘alphabet soup’ of finances is best done with the right guidance. In other words, CFOs are often in the best position to help you determine which KPIs are right for your startup – along with how to track them.

The post Understanding Net Income vs EBITDA for Your Business appeared first on VVREDDY & ASSOCIATES.