In private equity, growth is not just a goal but a necessity. The ability to scale efficiently can mean the difference between success and stagnation. However, with challenges such as managing diverse portfolios, complex financial transactions, and evolving regulatory requirements, scaling and growth is not a simple feat. Outsourced accounting can work to solve these problems.

In this blog, we will discuss how outsourced accounting services can play a key role in driving smarter scaling solutions and contribute to the growth of private equity firms.

Don’t Let Accounting Challenges Stall Your Firm’s Growth

During times of rapid growth, your PE firm will encounter increasingly complex accounting situations. When your team is consumed with accounting, they can’t focus on growth.

The question is, when is the right time to change your processes?

There’s no litmus test for deciding when to outsource. However, there are some clear indicators you should look for. Consider outsourcing accounting if any of the following conditions apply to your firm:

Visibility is Poor

You need a high level of financial visibility to make investment decisions for your investors. By the same token, you need a clear view of your PE firm’s financial health and performance if you hope to grow.

When your processes are inefficient, financial visibility will plummet. You’ll often find yourself working with data that’s weeks or even months old. Outdated data can often lead to missed opportunities.

 

Poor visibility is also a barrier to your long-term growth.

You must slow down your decision-making processes until you access relevant financial data. And you’re more likely to make missteps that negatively impact cash flow and threaten continuity. For these reasons, you need up-to-the-minute insights into your firm’s financial health.

Accounting Processes Consume Too Much Time

Accounting processes should only take up a tiny fraction of your work week. When these processes overshadow core duties, you need to make a change.

To determine whether it’s time to outsource, simply monitor how many hours you spend on accounting during a given week. If you’re unhappy with your findings, revamp your strategy.

Your Team Is Overloaded with Work

When your team and other firm leaders are stretched too thin, you have a few options.

The obvious answer involves hiring more people. However, this effort may undermine your firm’s long-term growth if you are not in a position to incur added expenses to recruit, hire, and train an employee.

The other approach involves redistributing the workload. For instance, analyze how many hours your team spends on accounting and other back-office functions each week. Imagine how much more productive they would be if all of these tasks were off their to-do lists.

You can lighten the load on your staff by using private equity accounting services. Reducing their workload will also help them get more done each week.

Let’s take a look at how exactly outsourced accounting can address these challenges and propel private equity firms’ growth.

How Outsourced Accounting Supports Private Equity Firm Growth

Outsourcing accounting is the top choice for many PE firms aiming to concentrate more on private equity deals than dealing with complex accounting tasks.

Specialized Expertise and Industry Knowledge

Outsourced accounting firms bring a wealth of specialized expertise and industry knowledge to the table. With professionals who are well-versed in the intricacies of private equity accounting, including complex fund structures, valuation methodologies, and regulatory compliance, these firms provide invaluable insights and guidance. By tapping into this expertise, private equity firms can navigate challenges more effectively and make informed decisions that support scalable growth.

Flexible Resource Allocation

One of the significant advantages of outsourced accounting is its flexibility in resource allocation. Private equity firms often experience fluctuations in their accounting needs due to deal flow variability, fundraising cycles, and portfolio growth. Outsourced providers offer the flexibility to scale services up or down as needed, ensuring that resources are allocated efficiently and cost-effectively. Whether it’s managing a sudden influx of transactions or adjusting to seasonal demands, outsourced accounting firms can adapt quickly to support the scaling efforts of private equity firms.

Advanced Technology and Automation

Outsourced accounting firms leverage advanced technology and automation tools to streamline financial processes and enhance efficiency. 

 

This not only reduces the burden on internal teams but also minimizes the risk of errors and accelerates turnaround times. By embracing technology-driven solutions, private equity firms can optimize their operations and achieve greater scalability.

Scalable Infrastructure and Support

Outsourced accounting firms offer scalable infrastructure and support to accommodate the evolving needs of private equity firms. Whether it’s handling complex fund accounting, managing multi-currency transactions, or ensuring compliance with international standards, these providers have the resources and capabilities to scale operations seamlessly. With dedicated teams of accounting professionals and robust infrastructure in place, outsourced providers can support the growth trajectory of private equity firms without compromising on quality or efficiency.

Compliance and Risk Management

Compliance and risk management are paramount concerns for private equity firms operating in a highly regulated environment. Outsourced accounting firms specialize in navigating complex regulatory landscapes and ensuring adherence to regulatory requirements. By staying abreast of regulatory changes, implementing robust internal controls, and conducting regular audits, these providers help mitigate compliance risks and safeguard the interests of stakeholders. With outsourced accounting support, private equity firms can maintain compliance standards while focusing on strategic growth initiatives.

Elevated Reporting and Financial Insight

Outsourced accounting firms not only handle day-to-day financial tasks but also provide elevated reporting and financial insight to private equity firms. With access to advanced reporting tools and analytics, these firms can generate customized reports tailored to the specific needs of private equity investors and stakeholders. Whether it’s detailed performance metrics, fund performance analysis, or portfolio valuation reports, outsourced accounting firms deliver actionable insights that enable private equity firms to make data-driven decisions. By leveraging these comprehensive reporting capabilities, private equity firms can gain a deeper understanding of their financial health, identify growth opportunities, and communicate effectively with investors.

Private equity firms manage multiple holdings, each with unique financial processes. Accurate, relevant, and timely reports that give insight into the companies’ performance are essential to understanding the health and growth of those portfolio companies.

Unlock Your Growth Potential with Signature Analytics

While overseeing the finances of your portfolio companies is essential for attracting new investors and maintaining profitability, private equity firms also require day-to-day accounting expertise and operational management for their own entities.

With Signature Analytics, you get strategy, implementation, flexibility, and reliability, enabling you to manage your PE group through substantial influxes and slower periods without disruption.

Ready to streamline your private equity firm’s financial management for sustained success? Contact us today to learn more about our tailored outsourced accounting solutions or schedule a consultation with our experts.

Read on to discover why more private equity firms are opting to outsource their accounting tasks.

Jason Kruger, President & Founder of Signature Analytics, joined the Nonstop Nonprofit podcast to discuss how properly-fitted accounting contributes to the success of your impact, where to start and pitfalls to avoid, and signals that’ll tell you it’s time to professionalize your finance functions.

Building a Solid Financial Foundation for Nonprofits

Money, budgets, funding, and accounting are all critical elements that contribute to the success of nonprofit programs and their overall impact. But when you’re a smaller nonprofit or just starting out, do you really need a CFO?

Jason Kruger brings a wealth of experience and insight into the financial needs of nonprofits. His novel approach allows nonprofits to build an accounting team and processes tailored to their specific needs, rather than overextending their resources prematurely. 

Let’s dive into our discussion to get clarity on how properly-fitted accounting contributes to the success of your impact, where to start, pitfalls to avoid, and signals that indicate it’s time to professionalize your finance functions.

Importance of Financial Management in Nonprofits

Effective financial management is the backbone of any successful nonprofit organization. Properly managing money, budgets, funding, and accounting ensures that resources are used efficiently, obligations are met, and the organization remains compliant with various regulatory requirements. Smaller nonprofits often face the challenge of determining whether they need a Chief Financial Officer (CFO) or if there are more suitable, scalable solutions available.

Tailored Solutions for Nonprofit Financial Management

At Signature Analytics, we understand that every nonprofit is unique, with its own set of challenges and needs. Our approach is to provide customized accounting solutions that fit the specific requirements of your organization. Rather than adopting a one-size-fits-all model, we help nonprofits build their accounting teams and processes from the ground up, ensuring they have the right tools and expertise at each stage of their development.

Jason Kruger explains, “A lot of organizations have a bookkeeper or someone handling their accounting, focusing on tasks like paying bills, invoicing donors, managing cash flow, and filing annual 990s or tax returns. However, as these organizations grow, they realize the increasing importance of having good financials for decision-making and communicating with outside parties such as the board, banks, or donors.”

Key Financial Considerations for Nonprofits

1. Audit Requirements:

Understanding and complying with audit requirements is critical for maintaining credibility and trust with donors, stakeholders, and regulatory bodies. Regular audits ensure that financial statements are accurate and transparent.

2. Transparency:

Transparency in financial practices is not just a regulatory requirement but a cornerstone of building trust. Donors and stakeholders are more likely to support organizations that are open and honest about their financial health and use of funds.

3. Timeliness:

Timely completion of financial tasks prevents bottlenecks and ensures smooth operations. Delays in financial reporting or budgeting can lead to missed opportunities and erode stakeholder confidence.

Professionalizing Your Finance Functions

As your nonprofit grows, so do its financial complexities. Recognizing the right time to professionalize your finance functions is crucial. Some signals that it might be time to enhance your financial management capabilities include:

  • Increased funding and donations
  • Expansion of programs and services
  • Greater regulatory and reporting requirements
  • Need for detailed financial analysis and strategic planning

Jason highlights, “As organizations grow, they start to realize that the importance of having good financials becomes more critical. Decisions based on accurate financial data are essential for communicating with the board, applying for grants, and building donor confidence.”

The Role of Budgeting

Budgeting is foundational for nonprofit operations. A well-developed budget allows organizations to plan and allocate resources effectively. It involves detailed analysis of both expenses and revenue, engaging program leaders and fundraising teams to understand donor dynamics and grant processes.

Jason emphasizes the importance of breaking down the budget into different areas for analysis. Real-time information is crucial for program heads to make timely decisions. For example, Signature Analytics provides real-time data to clients, which can be sent automatically on a weekly or even daily basis, offering visibility and control over financial performance.

The Ideal Financial Team

For midsize nonprofits, a healthy financial team might include a mix of internal and outsourced resources. This team would typically encompass roles such as:

  • Bookkeepers for day-to-day transactions
  • Accountants for financial reporting and compliance
  • Controllers for oversight and financial strategy
  • CFOs for high-level strategic planning and financial leadership

Jason explains, “Most nonprofits don’t need a full-time CFO or controller, but they do need financial leadership. Our role is to provide that expertise on a fractional basis, bringing top talent to the nonprofit sector in a cost-effective way.”

The CFO Misconception

Nonprofit boards often push for the hiring of a CFO, assuming that this single step will ensure financial stability and sophistication. However, Kruger points out that this approach can backfire in two significant ways:

Misaligned Expectations: Organizations may hire someone with the CFO title but without the necessary experience and sophistication. This individual ends up performing lower-level accounting tasks, such as managing the books or speaking to the board about historical numbers, rather than providing strategic financial oversight.

Misallocation of Skills: Conversely, hiring a high-powered CFO and expecting them to handle basic tasks like bank reconciliations and book closings is an inefficient use of their expertise.

Building from the Ground Up

Kruger advocates for a different approach: building the finance team from the ground up. Here’s how:

Start at the Lowest Level: Initially, hire someone to handle data entry and transactional work. This ensures that the fundamental tasks are covered.

Add Oversight: As the organization grows, introduce roles that provide oversight to these lower-level tasks. This can include a controller or an accounting manager.

Gradually Increase Sophistication: Eventually, the organization will reach a point where hiring a CFO is appropriate. At this stage, the CFO can focus on strategic financial planning rather than day-to-day accounting.

This hierarchical approach ensures that the organization’s financial operations are scalable and capable of providing accurate, relevant, and timely information.

The Importance of Strong Financial Reporting

How important is strong accounting and financial reporting to donors? Accurate financial reporting builds credibility and security for donors, ensuring that their contributions are being managed responsibly. If an organization is significantly behind on audits or financial reporting, it raises red flags and can deter potential donors.

Overcoming Cost Concerns

Many nonprofits are concerned about the cost of hiring an external firm like Signature Analytics. Kruger acknowledges this but notes that organizations often reach out after experiencing significant pain points, such as falling behind on audits or financial reporting. Educating the board and potential clients on the long-term benefits of a structured finance function is essential.

Common Pitfalls and Proactive Solutions

Kruger identifies common pitfalls that nonprofits face as they grow:

Over-reliance on a Single Individual: As organizations grow, relying on one person for all accounting tasks can lead to problems if that person’s skills are outgrown or they leave the organization.

Lack of Documentation: Without documented standard operating procedures, organizations struggle when key personnel leave.

Technology Challenges: Outdated or poorly integrated technology systems can hinder financial reporting and management.

To avoid these issues, nonprofits should ensure they have adequate documentation, integrate their systems effectively, and provide necessary oversight and support at all levels of the finance function.

Final Notes

Building a strong financial foundation is vital for nonprofits to achieve their goals. By customizing accounting solutions, recognizing signals for professionalization, and embracing budgeting practices, organizations can adapt and grow while maintaining transparency and trust. Overcoming common challenges such as over-reliance on individuals and outdated technology is essential for long-term success. With proactive financial management, nonprofits can navigate complexities and ensure sustainability in fulfilling their missions.

How Signature Analytics Can Help Your Nonprofit

Signature Analytics’ nonprofit accounting services help you make financial decisions based on the highest quality accounting practices, while our day-to-day outsourced accounting teams implement the highest quality donor and government accounting standards.

For additional assistance with cash flow management, developing detailed nonprofit budgets, and audit support, contact Signature Analytics today.

Nonprofit organizations play a crucial role in addressing societal issues and serving communities. While their primary goal isn’t profit maximization, managing finances effectively is essential for their sustainability and impact. One significant aspect of nonprofit financial management is understanding the difference between restricted and unrestricted funds and their impact on cash flow.

Read on to learn how these funds influence a nonprofit’s financial health.

What are Restricted and Unrestricted Funds?

Restricted funds are donations or grants designated by the donor for a specific purpose or program. These funds come with restrictions on how they can be used, often outlined by the donor or grantor. In contrast, unrestricted funds are contributions that don’t come with specific restrictions. Nonprofits have more flexibility in using unrestricted funds to cover operational expenses, salaries, or other needs as they see fit.

“So you’re actually required, with generally accepted accounting principles to split out now and show your net assets, restricted versus unrestricted, and also required by the donor or by that contractor grant to make sure that whatever monies you’re spending are in compliance with the exact purpose that they gave you the funding for.”

The Impact on Cash Flow:

 

Restricted Funds

Limited Flexibility: While restricted funds are earmarked for specific purposes, they can’t be freely allocated to cover other expenses. This restriction can create challenges in managing cash flow, especially if the organization relies heavily on restricted donations.

Timing Issues: Sometimes, nonprofits receive restricted funds in advance for projects or programs scheduled for the future. Managing cash flow becomes crucial to ensure these funds are available when needed, without compromising other ongoing operations.
Reporting Requirements: Nonprofits often have reporting obligations to donors or grantors regarding the use of restricted funds. Meeting these requirements adds another layer of administrative burden but is crucial for maintaining donor trust and compliance.

Unrestricted Funds

Operational Stability: Unrestricted funds provide essential support for day-to-day operations, offering flexibility to cover immediate needs such as rent, utilities, and salaries. They act as a financial cushion during lean times or unexpected expenses.

Strategic Allocation: Nonprofits can strategically allocate unrestricted funds to areas where they are most needed, whether it’s investing in new programs, expanding existing ones, or building organizational capacity.

Sustainability: A healthy balance of unrestricted funds contributes to the long-term sustainability of a nonprofit. It reduces reliance on external funding sources and grants, making the organization more resilient to fluctuations in donor preferences or economic conditions.

Strategies for Managing Restricted and Unrestricted Funds:

Budgeting and Forecasting: Develop detailed budgets and cash flow forecasts that distinguish between restricted and unrestricted funds. This helps in planning for upcoming expenses and ensuring adequate liquidity for both types of funds.

Diversifying Revenue Streams: Reduce dependence on restricted funds by diversifying revenue sources. Explore opportunities for earned income, membership fees, or fundraising events to supplement donations and grants.

Negotiating Flexibility: When entering into grant agreements or accepting donations, negotiate for flexibility whenever possible. Seek to minimize overly restrictive conditions that could impede cash flow management or limit the organization’s ability to adapt to changing needs.

Transparent Communication: Keep donors and stakeholders informed about the organization’s financial situation, including how restricted funds are being utilized. Transparent communication fosters trust and encourages ongoing support.

How Signature Analytics Can Help Your Nonprofit

Signature Analytics’ nonprofit accounting services help you make financial decisions based on the highest quality accounting practices, while our day-to-day outsourced accounting teams implement the highest quality donor and government accounting standards.

For additional assistance with cash flow management, developing detailed nonprofit budgets, and audit support, contact Signature Analytics today.

Audit challenges often signal deeper issues within a nonprofit’s financial management system. Organizations typically rely on internal accounting teams, which may consist of individuals who have grown within the organization. While these team members are invaluable, the complexity of audit processes necessitates a higher level of financial sophistication and oversight.

Here’s a closer look at how accurate reporting supports audit processes and fosters financial integrity within nonprofits:

Building Confidence Through Financial Oversight

The audit process is not merely a yearly compliance exercise; it’s a vital mechanism for ensuring the ongoing accuracy of an organization’s financial records. A successful audit confirms the effectiveness of the nonprofit’s financial practices, including regular reconciliations and adherence to robust accounting procedures.

“Behind each number in your financial statements should be a foundation of confidence, built through rigorous review and reconciliation, ensuring the financial health and integrity of your organization.”

The Role of Monthly Close Procedures

For stakeholders, from CEOs to board members, having confidence in financial statements is paramount. This confidence is built on comprehensive monthly close procedures that ensure the accuracy and reliability of financial data. These procedures are essential for producing timely, relevant financial statements that stakeholders can trust.

Beyond Bank Reconciliations: A Holistic View of Financial Health

A thorough financial audit examines more than just cash balances; it assesses the organization’s entire financial position. This includes investments, fixed assets, and other critical financial indicators, ensuring a comprehensive understanding of the nonprofit’s financial health.

Final Notes

An effective audit process is foundational to a nonprofit’s financial integrity. By emphasizing rigorous financial oversight and monthly close procedures, organizations can ensure their financial statements accurately reflect their fiscal health, fostering trust among all stakeholders.

How Signature Analytics Can Help Your Nonprofit

Signature Analytics’ nonprofit accounting services help you make financial decisions based on the highest quality accounting practices, while our day-to-day outsourced accounting teams implement the highest quality donor and government accounting standards.

For additional assistance with cash flow management, developing detailed nonprofit budgets, and audit support, contact Signature Analytics today.

Small and mid-sized construction companies often grapple with a distinct array of challenges, particularly in the realm of financial management. Limited resources, time constraints, and a lack of specialized financial expertise can pose significant obstacles to achieving clarity and making informed decisions.

Fortunately, there’s a solution: Signature Analytics. As a trusted partner, Signature Analytics specializes in providing accurate, relevant, and timely financial insights precisely tailored to the needs of small and mid-sized construction firms. By leveraging their expertise and cutting-edge tools, they effectively fill these gaps and help businesses navigate their financial challenges with confidence.

Jason Kruger, the visionary founder of Signature Analytics, shed light on how their innovative solutions are transforming the landscape of financial management for small construction businesses in a compelling discussion on the Beyond the Belt podcast, hosted by Michael Whalen.

Tune in here or read on to learn more about how Signature Analytics provides timely, accurate financial insights to drive small and mis-sized businesses towards success.

What Exactly Does Signature Analytics Do?

Signature Analytics provides small construction companies with comprehensive financial services aimed at delivering accurate, relevant, and timely insights. By leveraging experienced professionals, they offer customized reports and strategic advice, empowering businesses to make informed decisions. Their commitment to accuracy, relevance, and timeliness (A.R.T.) ensures clients receive the clarity needed to navigate financial complexities effectively.

What Gaps Does Signature Analytics Fill?

Small construction companies often lack dedicated financial leadership, leading to inadequate accounting practices and cash flow issues. Signature Analytics steps in to fill this void by offering expert guidance and support. They help clients gain a deeper understanding of their financial landscape, particularly in areas like Work in Progress (WIP) management, enabling better forecasting and strategic decision-making.

Enhancing Financial Visibility: The Impact of Outsourced Accounting in the Construction Industry

In the bustling world of the construction industry, maintaining a firm grip on financial dynamics is pivotal for sustained success. Yet, for small construction businesses, managing complex accounting processes internally can present formidable challenges. Enter outsourced accounting services, offering not just support but a strategic partnership focused on streamlining financial management and ensuring business resilience. 

Let’s explore how outsourced accounting with Signature Analytics fosters essential visibility, driving success and sustaining operations in the construction sector.

Comprehensive Financial Analysis

Outsourced accounting firms like Signature Analytics offer comprehensive financial analysis services tailored specifically to the needs of construction businesses. By leveraging advanced tools and expertise, these firms delve deep into the financial data, providing valuable insights into cash flow, revenue trends, and profitability. This detailed analysis enables construction businesses to gain a clear picture of their financial standing and identify areas for improvement.

Real-Time Reporting

 One of the key benefits of outsourcing accounting functions is access to real-time financial reporting. Outsourced accounting firms ensure that construction businesses have timely access to accurate financial reports, including income statements, balance sheets, and cash flow statements. This real-time reporting allows businesses to monitor their financial performance closely and respond quickly to any emerging issues or opportunities.

Strategic Financial Planning

 Armed with comprehensive financial analysis and real-time reporting, construction businesses can engage in strategic financial planning with confidence. Outsourced accounting firms work closely with businesses to develop tailored financial strategies aligned with their long-term goals and objectives. Whether it’s optimizing cash flow, managing expenses, or planning for growth, these firms provide the expertise and guidance needed to make sound financial decisions.

Risk Management

Construction projects inherently involve risks, both financial and operational. Outsourced accounting firms help construction businesses identify and mitigate these risks through proactive risk management strategies. By conducting thorough risk assessments and implementing appropriate controls, these firms help safeguard the financial health and stability of construction businesses, ensuring they can navigate challenges effectively and seize opportunities with confidence.

Scalability and Flexibility

Outsourced accounting services offer construction businesses scalability and flexibility to adapt to changing needs and circumstances. Whether it’s scaling operations to accommodate growth or adjusting financial strategies in response to market fluctuations, outsourced accounting firms provide the resources and expertise needed to support businesses every step of the way.

Maximizing Profitability: How Outsourced Accounting Enhances Understanding in Construction Companies

In construction, profitability is the cornerstone of success, and achieving it requires a deep understanding of financial metrics, cash flow dynamics, and work in progress (WIP) management. This is where outsourced accounting services, like those offered by Signature Analytics, play a pivotal role. 

Visibility into Financial Metrics

 Outsourced accounting firms provide construction companies with a clear view of their financial metrics, including key performance indicators (KPIs) such as revenue, expenses, profit margins, and project profitability. By leveraging advanced reporting tools and expertise, these firms ensure that construction businesses have real-time access to actionable financial insights, enabling them to identify areas of strength and opportunities for improvement.

Effective WIP Management

Work in progress (WIP) is a critical component of profitability in the construction industry, yet managing it effectively can be challenging. Outsourced accounting partners assist construction companies in optimizing WIP management by tracking project costs, estimating completion timelines, and assessing project profitability. This proactive approach enables businesses to identify potential cost overruns or delays early on and take corrective action to preserve profitability.

Cash Flow Optimization

Cash flow is the lifeblood of any construction business, and maintaining a healthy cash flow is essential for sustained profitability. Outsourced accounting firms work closely with construction companies to develop cash flow forecasts, monitor cash inflows and outflows, and identify opportunities to optimize cash flow. By ensuring that cash is managed effectively, these firms help construction businesses minimize financial risks and seize opportunities for growth.

Accessible Financial Information

Monthly financial information and statements are valuable tools for understanding profitability and making informed decisions. Outsourced accounting services ensure that construction companies receive accurate, timely, and understandable financial reports that they can review and act upon. This accessibility to financial information empowers construction business owners and stakeholders to make proactive decisions that drive profitability and long-term success.

Interested in learning more? Check out our Guide to Managing Fluctuating Profitability Year Over Year in Construction.

About Signature Analytics

Signature Analytics is a leading outsourced accounting firm providing comprehensive financial services to businesses of all sizes. With a focus on Accurate, Relevant, and Timely (ART) financial reporting Signature Analytics empowers clients to make informed decisions and achieve their financial goals. With over 16 years of industry experience and a global team of 75 professionals, the firm is dedicated to delivering excellence in accounting solutions.

Let us become your trusted partner in accounting, allowing you to focus on what you do best. Reach out to our team today to discover how Signature Analytics can support the success of your construction business.

In California, nonprofit organizations with as little as $2 million in revenue are mandated to undergo financial statement audits. This relatively low threshold presents a significant challenge for many nonprofits, highlighting a gap between the stringent audit requirements and the available internal financial management capacities of these organizations.

The Digital Audit Dilemma: Case Study

“Effective financial management and digital readiness are not just about compliance; they’re about ensuring your nonprofit can respond with agility and confidence when audit time comes.”

Transitioning to digital audits means moving away from traditional paper-based record-keeping systems to more modern, electronic methods. For many nonprofits, this shift can be challenging, especially if they haven’t adequately prepared for it.

Imagine a nonprofit organization that has been managing its financial records using paper documents for years. When it’s time for their audit, they realize they need to digitize these records to comply with the audit process. However, this transition isn’t as straightforward as they had hoped.

The nonprofit faces various obstacles during this digital transformation. They encounter difficulties in scanning and organizing their paper documents into digital formats. As a result, the audit process gets delayed, causing frustration and added stress for the organization.

Moreover, as they delve into the digital realm, they uncover inefficiencies in their document management system. They realize that their existing processes are not optimized for digital audits, leading to errors, confusion, and ultimately, a less effective audit process.

In essence, this case study illustrates the challenges nonprofits may encounter when transitioning to digital audits. It underscores the importance of being prepared for such changes and emphasizes that effective financial management and digital readiness are essential for nonprofits to navigate audits successfully.

Proactive Financial Management: Key to Audit Success

The cornerstone of a successful audit lies in robust and proactive financial management. Organizations that maintain diligent monthly financial closing and reconciliation practices find themselves better equipped to address the auditors’ requests efficiently. This preparedness can significantly reduce the audit’s impact on the organization’s operations.

Establishing Strong Financial Systems

A comprehensive approach to audit preparation goes beyond basic record-keeping. It requires a deep understanding of financial reconciliation and the ability to produce detailed, accurate financial schedules. Educating the accounting team on these practices is vital to building confidence in the organization’s financial statements.

Embracing Technological Solutions

To navigate the complexities of modern audits, nonprofits must leverage technology. This not only facilitates meeting the digital expectations of auditors but also enhances the organization’s overall financial management processes, making them more streamlined and efficient.

For nonprofits, particularly in California, navigating the audit process with a proactive and technologically adept financial strategy is crucial. By fortifying their financial systems and processes, nonprofits can ensure that they not only comply with audit requirements but also reinforce their financial integrity and operational effectiveness.

How Signature Analytics Can Help Your Nonprofit

Signature Analytics’ nonprofit accounting services help you make financial decisions based on the highest quality accounting practices, while our day-to-day outsourced accounting teams implement the highest quality donor and government accounting standards.

For additional assistance with cash flow management, developing detailed nonprofit budgets, and audit support, contact Signature Analytics today.

 

In the nonprofit sector, managing fluctuating revenue streams is a persistent challenge that demands strategic foresight and adaptability. Recent events, particularly the “generosity crisis” emerging in the wake of the Covid-19 pandemic, have underscored the critical importance of effective revenue management for organizations committed to serving their communities.

Understanding the Generosity Crisis Post-Covid

During the height of the pandemic, nonprofits experienced an unprecedented surge in donations, enabling them to expand their operations and meet heightened service demands. However, as the world gradually emerges from the crisis, the funding landscape has shifted significantly. 

Many organizations now find themselves facing a decline in funding, leading to larger budgets, reduced revenue, and an unwavering commitment to addressing community needs.

The Budgeting Challenge in Times of Reduced Revenue

With the persistent high demand for services, nonprofits face the tough decision of aligning their operational capabilities with the available funding. Budgeting becomes a critical tool, especially when a significant portion of expenses is tied to staffing. Organizations must carefully evaluate their service offerings against their financial reality to ensure sustainability.

“Ensuring long-term sustainability in the face of fluctuating funding requires strategic leadership, robust budgeting, and proactive cash flow management, enabling nonprofits to continue their critical work in the community.”

Collaboration as a Strategy for Efficiency

In response to these challenges, some nonprofits are turning to collaborations with other service providers. This approach allows for a more efficient allocation of resources and enhances the ability to meet community needs, showcasing adaptability in a shifting funding landscape.

Successful Navigation Through Strategic Leadership

Key to navigating the generosity crisis is the engagement of an organization’s executive team and board. Successful nonprofits have demonstrated the importance of maintaining adequate reserves, embracing robust budgeting processes, and ensuring proactive cash flow management. These practices are foundational for long-term sustainability and effective response to community needs.

The Importance of Cash Flow Forecasting

Cash flow forecasting emerges as a crucial practice, enabling organizations to plan beyond the immediate budget constraints. This foresight allows for the strategic allocation of resources, ensuring that nonprofits can continue their vital work without depleting their reserves unnecessarily.

The post-Covid generosity crisis poses significant challenges for nonprofits. Through strategic budgeting, collaboration, and proactive financial management, organizations can navigate these turbulent times, continuing to deliver essential services to their communities.

How Signature Analytics Can Help Your Nonprofit

Signature Analytics’ nonprofit accounting services help you make financial decisions based on the highest quality accounting practices, while our day-to-day outsourced accounting teams implement the highest quality donor and government accounting standards.

For additional assistance with cash flow management, developing detailed nonprofit budgets, and audit support, contact Signature Analytics today.

Signature Analytics, a leading outsourced accounting firm, proudly announces the appointment of Alex Karlsen to spearhead business development initiatives within the private equity sector. With a wealth of experience in the middle market and a strong background in buy-side operations, Karlsen’s expertise will significantly enhance Signature Analytics’ outreach efforts to private equity groups, their value creation teams, and portfolio company leaders.

Profile photo of Alex Karlsen

Before joining Signature Analytics, Alex served as Vice President of Private Equity Business Development for CAPTARGET, a prominent buy-side firm specializing in the middle market.  CAPTARGET gave him invaluable insights into the intricacies, opportunities, and challenges of outsourcing operations within PE.

Celebrating its 16th year of operation, Signature Analytics has established itself as a trusted partner for businesses seeking comprehensive accounting solutions. With a global presence and a team of 70 dedicated professionals, SA is committed to providing flexible accounting solutions that support clients’ strategic growth and development.

“We are excited to leverage Alex’s relationships in the PE sector which will drive value for portfolio companies and create higher ROI for the fund. His proven track record and deep understanding of the private equity landscape will be instrumental in expanding our reach and delivering exceptional value to our clients. “

Signature Analytics, a leading outsourced accounting firm, proudly announces the appointment of Alex Karlsen to spearhead business development initiatives within the private equity sector. With a wealth of experience in the middle market and a strong background in buy-side operations, Karlsen’s expertise will significantly enhance Signature Analytics’ outreach efforts to private equity groups, their value creation teams, and portfolio company leaders.

Meet Alex Karlsen at the upcoming ACG DealMax event in Las Vegas this April. 

About Signature Analytics

Signature Analytics is a leading outsourced accounting firm providing comprehensive financial services to businesses of all sizes. With a focus on Accurate, Relevant, and Timely (ART) financial reporting Signature Analytics empowers clients to make informed decisions and achieve their financial goals. With over 16 years of industry experience and a global team of 75 professionals, the firm is dedicated to delivering excellence in accounting solutions.

Signature Analytics, a well known outsourced accounting company with a strong presence throughout California, is delighted to welcome Ian Lino as the driving force behind business development initiatives in the Southern California region. With a rich background in cultivating business connections and driving progress, Lino’s experience promises to elevate Signature Analytics’ engagement throughout the SoCal region.

Profile photo of Ian Lino, MBA

Prior to joining Signature Analytics, Mr. Lino was the Business Development lead at Automates, a national Outsourced IT & Managed Service provider for businesses. During his time there, he gained valuable insights into the intricacies of outsourcing operations and building relationships within the San Diego region.

“We are excited to leverage Ian’s expertise in the San Diego region and look forward to all he brings to Signature Analytics. Ian’s proven track record and profound understanding of the local market is sure to play a pivotal role in expanding our reach and delivering exceptional value to our clients.”

 -Tony Sands, President of Business Development at Signature Analytics

With over 70+ employees and 16 years in operation, Signature Analytics focuses on flexible, scalable accounting teams that grow with your business, elevated financial reporting that drives actionable insights, and streamlined technology solutions.  Signature Analytics is the smart choice for outsourced accounting and CFO-level business advisory services. With their tailored approach and proven track record, they’ve earned recognition as one of Inc. 5000’s fastest-growing companies and Best Places to Work.

We invite you to connect with  Ian Lino on LinkedIn and at upcoming events throughout Southern California, particularly in San Diego. His presence promises a fresh outlook, fostering networking opportunities and paving the way for collaborative ventures.

Navigating technological challenges is a common hurdle for many nonprofits. To address these issues effectively, it’s crucial to adopt a tailored approach that aligns with the unique requirements of each organization.

 

Let’s explore a real-life example that demonstrates how a targeted assessment and customized technology strategy can significantly enhance operational efficiency within a nonprofit.

Case Study: Transitioning from QuickBooks Enterprise to Online

Consider a nonprofit using QuickBooks Enterprise, which lacks the functionality to allocate budgets by specific projects or grants. This limitation forces the organization to rely on cumbersome Excel spreadsheets, introducing inefficiencies and a higher potential for error. Transitioning to QuickBooks Online, which allows for granular budget tracking by grant, exemplifies a strategic shift to more suitable technology, enhancing accuracy and efficiency in financial management.

“Choosing the right technology for a nonprofit goes beyond software features; it’s about aligning with the organization’s mission, ensuring all departments’ needs are met, and preparing for future growth.”

The Importance of a Comprehensive Assessment

A thorough assessment within the initial 30 days of engagement is crucial to understand how technology is utilized and the quality of reporting it generates. This evaluation informs the recommendation for a more fitting system, like QuickBooks Online or other sophisticated solutions such as NetSuite or Sage Intacct, which offer enhanced capabilities for budgeting by grant.

Involving All Stakeholders in the Decision-Making Process

Choosing the right technology extends beyond the finance department. Engaging various organizational departments, such as programs and development, ensures that the selected system meets the diverse needs across the organization, facilitating reports that aid in donor communication or program success analysis.

The RFP Process: Ensuring the Right Fit

A rigorous Request for Proposal (RFP) process is recommended to delineate the organization’s specific needs across different functional areas. By inviting multiple systems to demonstrate their capabilities, nonprofits can ascertain that the chosen solution aligns with their operational requirements and is scalable for future growth.

Selecting the right technological tools is pivotal for nonprofits to streamline their processes and enhance their operational effectiveness. By conducting thorough assessments and involving all stakeholders in a detailed selection process, nonprofits can ensure they invest in technology that not only meets their current needs but also supports their future growth.

How Signature Analytics Can Help Your Nonprofit

Signature Analytics’ nonprofit accounting services help you make financial decisions based on the highest quality accounting practices, while our day-to-day outsourced accounting teams implement the highest quality donor and government accounting standards.

For additional assistance with cash flow management, developing detailed nonprofit budgets, and audit support, contact Signature Analytics today.

In the nonprofit sector, especially during times of the generosity crisis, the role of technology and systems integration cannot be underestimated. As organizations navigate the complexities of increased donor engagement and expanding operational scopes, the necessity for cohesive technological solutions becomes paramount.

 

The Challenge of Disparate Systems

Many nonprofits face the hurdle of disjointed technological frameworks, where essential systems operate in silos, hindering efficiency and data coherence. This fragmentation often leads to the cumbersome task of manual data reconciliation, detracting from the core mission-focused activities.

“Embracing advanced technology and system integration in nonprofits isn’t just an operational upgrade; it’s a strategic move towards greater mission fulfillment and efficiency.”

Case Study: A Journey to Technological Cohesion

Let’s delve into a real-world scenario where a nonprofit grappled with such challenges. Initially plagued by uncommunicative systems, this organization struggled with data management inefficiencies, particularly in managing an expanded donor base during the COVID era.

The Role of CRM and ERP Systems

A robust Customer Relationship Management (CRM) system, integrated with an Enterprise Resource Planning (ERP) system, is crucial for streamlining operations. Such integration not only simplifies accounting and donor management but also eliminates the labor-intensive processes traditionally associated with disparate systems.

Moving Beyond Excel

While Excel has been a staple in organizational data management, its limitations become apparent with scaling. Our case study organization found that reliance on Excel for complex data operations was a bottleneck, signaling the need for more advanced, integrated solutions.

The Impact of Proper Training and Implementation

The transition to more sophisticated systems is not just about the technology itself but also about ensuring that staff are adequately trained. Without proper understanding and utilization, even the most advanced systems can revert users to their “old faithful” Excel spreadsheets, undermining the benefits of technological upgrades.

The journey from technological fragmentation to integration exemplifies a crucial pivot point for nonprofits. By embracing interconnected systems and ensuring comprehensive user training, organizations can significantly enhance their operational efficiency, allowing them to focus more on their mission-critical objectives.

How Signature Analytics Can Help Your Nonprofit

Signature Analytics’ nonprofit accounting services help you make financial decisions based on the highest quality accounting practices, while our day-to-day outsourced accounting teams implement the highest quality donor and government accounting standards.

For additional assistance with cash flow management, developing detailed nonprofit budgets, and audit support, contact Signature Analytics today.

Nonprofits often face unique challenges in managing their finances, particularly when it comes to budgeting and reserve planning. As our expert Laura points out, a common pitfall for many organizations is the simplistic allocation of annual budgets, spreading funding evenly across 12 months. This approach, however, can strain cash reserves, as operational expenses such as payroll occur regularly, regardless of funding fluctuations.

 

The Importance of Cash Flow Forecasting

Effective budgeting extends beyond just balancing numbers. It’s about anticipating cash flow dynamics over the fiscal year. Laura recommends a 12-month cash roll-forward approach, which provides a clearer picture of the organization’s financial trajectory, highlighting potential periods of financial stress where dipping into reserves might be necessary.

“Embracing a forward-thinking financial strategy in nonprofits is not merely about survival; it’s about maximizing every dollar’s impact towards the mission’s longevity and effectiveness.”

Adopting a For-Profit Mindset for Fiscal Management

Our discussion underscores the value of borrowing financial strategies from the for-profit sector. Managing a nonprofit shouldn’t always equate to aiming for a zero net budget. Such a strategy limits flexibility and hampers long-term planning. A more nuanced approach involves preparing multiple budget scenarios to accommodate various operational contingencies.

Leveraging Technology for Financial Planning

Looking ahead, the integration of technology in financial planning offers promising avenues for enhancing scenario planning and decision-making. Advanced tools can facilitate detailed analyses, from assessing the impact of cost-of-living adjustments to exploring different funding strategies, ensuring that nonprofits can adapt to changing financial landscapes.

Embracing a forward-thinking financial strategy is not just about sustaining an organization; it’s about ensuring that every dollar contributes to the mission’s longevity and impact. As we navigate the complexities of nonprofit management, it’s clear that a robust approach to budgeting and reserves is not just prudent—it’s essential.

Thinking about outsourced accounting? You’re in good company. Over half of all middle-market private equity firms already partner with outsourced accounting providers.

Outsourced accounting for private equity firms and their portfolio companies streamlines processes, reduces the risk of fraud, and improves investor relationships while saving costs by getting rid of unnecessary tasks. Let us show you how:

How Outsourced Accounting Elevates and Standardizes Reporting for Private Equity

Private equity firms manage multiple holdings, each with unique financial processes. Consolidating and standardizing the reports that come out of those companies is essential to understanding the health and growth of those portfolio companies.

Enhancing Financial Reporting Accuracy

Working with a team of experts means your accounting tasks are performed at the highest standards reducing errors and the need for corrections and repetitive manual tasks. This significantly reduces mistakes and enhances the reliability and integrity of financial reports.

Identifying Inefficiencies and Recommending Solutions

When we perform our initial assessment, one of the first areas of attention is identifying and recommending solutions for inefficiencies. Manual processes, systems that don’t talk and outdated SOPs hide potential revenue leaks, and fraud vulnerabilities. Our expertise and scalable team size provides you with strategic recommendations for better processes to improve operational efficiency.

Timely Reports

Month-end closes delivered 3 months later do nothing to help manage real-time crises or impending cash flow issues. With dedicated outsourced accounting professionals managing your portfolio’s accounting tasks, you can make informed decisions based on up-to-date financial information.

Compliance Assurance and Regulatory Adherence

Audits, compliance reporting, board requirements, bank requirements all rely on accurate financials. By partnering with us, your PE group can have all the necessary reports and schedules at the click of a button ready to answer any questions about any of your holdings (or, for that matter, your own firm). Enhanced speed and transparency builds trust with lenders, investors and potential acquisitions alike.

Outsourced Accounting Reduces Fraud Risk in Private Equity Portfolio Companies

With multiple holdings in a wide range of regulatory environments PE groups are uniquely positioned to leverage outsourced accounting expertise and standardized processes.

With so many teams operating, oversight can prove challenging and time-consuming, wasting valuable time and human capital resources overseeing far-flung teams. With a team from Signature Analytics, your portfolio of companies has third-party oversight, reducing the risk of fraud, from inside or outside the organization.

Improving Banking and Lending Relationships for Private Equity Groups and their Portfolio Companies

Debt management is as important as revenue management for PE’s managing multiple portfolio companies, especially in fluctuating interest rate environments. And mishandling banking relationships can have serious consequences.

We ensure timely and accurate reporting to lenders, enabling them to provide necessary support and maintain strong relationships with their commercial clients. With regular reviews of financial processes, month end closes that include all required schedules and reports, you have all the data needed to adhere to loan regulations and reporting requirements.

Increased Investor Transparency and Confidence

Knowing that there are standardized accounting procedures in place across the entire portfolio of companies gives investors more confidence when deciding which PE group to invest with.

Streamlined Accounting Processes

Implementing a single source of truth and a comprehensive, streamlined accounting process across your portfolio reduces redundancies and unnecessary expenditures.

Focused Fund Administration

Free fund administrators from reporting and day-to-day accounting tasks, allowing them to concentrate on managing the fund. This ensures that the health of your portfolio companies is prioritized while maintaining efficient operations.

Maximized Transparency for Growth

High growth rates require consistent, repeatable processes and low overhead costs. With Signature Analytics, your portfolio companies are managed to ensure maximum transparency and clarity in reporting.

Actionable Insights

Understand the health of your companies, identify operational inefficiencies, and pinpoint revenue growth opportunities with comprehensive reporting and analysis provided by Signature Analytics.

Manage Your Own Private Equity Group’s Accounting and Finance Department

While overseeing the finances of your portfolio companies is essential for attracting new investors and maintaining profitability, private equity firms also require day-to-day accounting expertise and operational management for their own entities.

With Signature Analytics, you get strategy, implementation, flexibility, and reliability, enabling you to manage your PE group through substantial influxes and slower periods without disruption.

Ready to streamline your private equity firm’s financial management for sustained success? Contact us today to learn more about our tailored outsourced accounting solutions or schedule a consultation with our experts.

Budgeting is a fundamental process for any nonprofit, crucial for guiding the organization’s financial strategy and operational planning. However, the approach to budgeting can vary significantly among organizations, with best practices often evolving from a blend of experience and strategic insight.

 

Let’s delve deeper into why accurate and actionable budgeting is crucial for nonprofit organizations:

Collaborative Budgeting: A Best Practice

“A well-crafted budget is not just a financial document; it’s a strategic tool that reflects the collective insights and goals of the entire organization, guiding its path forward.”

A key best practice in nonprofit budgeting is fostering a collaborative process. Engaging various departments, such as programs, development, and operations, in the budgeting process ensures a comprehensive and informed approach. This “bottoms up” strategy allows for a more accurate and strategic financial plan, incorporating insights from those directly involved in the organization’s core activities.

The Pitfalls of Isolated Budgeting

When the finance department operates in isolation, there’s a risk of basing the budget on incorrect assumptions or outdated data. This siloed approach can lead to discrepancies between the budget and actual financial performance, causing strategic misalignments and operational inefficiencies.

Strategic Objectives and Budget Formulation

Effective budgeting aligns with the organization’s strategic objectives, drawing from the goals and plans of different functional areas. This ensures that the budget is not just a series of numbers but a reflection of the organization’s forward-looking strategy and mission-driven activities.

The Impact of Accurate Budgeting

An accurate budget serves as a roadmap for the organization, guiding decision-making and resource allocation. It ensures that the nonprofit can adapt to changing circumstances while staying aligned with its strategic goals, ultimately enhancing its impact and sustainability.

Adopting a collaborative and strategic approach to budgeting is essential for nonprofits aiming to navigate the complexities of financial management while maximizing their impact on the community.

How Signature Analytics Can Help Your Nonprofit

Signature Analytics’ nonprofit accounting services help you make financial decisions based on the highest quality accounting practices, while our day-to-day outsourced accounting teams implement the highest quality donor and government accounting standards.

For additional assistance with cash flow management, developing detailed nonprofit budgets, and audit support, contact Signature Analytics today.

Nonprofits operate under a unique set of financial and regulatory pressures, particularly when it comes to audits and compliance. In regions like California, for instance, nonprofits with over $2 million in revenue are mandated to undergo financial statement audits. 

This requirement, while essential for transparency and accountability, introduces a layer of complexity, especially for smaller organizations that may lack the necessary financial expertise.

 

In this blog, we will discuss the challenges of financial reporting, the importance of infrastructure investment for nonprofits, and strategies for navigating compliance requirements effectively.

The Challenges of Financial Reporting

Compliance is not just a checkbox; it’s an ongoing process that demands detailed attention to financial activities, donor restrictions, and grant requirements. The task is daunting for nonprofits, which often operate with limited staff and resources. The scarcity of accounting talent in the financial market further complicates the matter, making compliance a significant hurdle for many organizations.

“An effective nonprofit operates on a solid administrative foundation, enabling it to fulfill its mission sustainably and maximize its impact on the community.”

Infrastructure Investment: Balancing Programs and Administration

Investment in administrative infrastructure is crucial yet often overlooked in the nonprofit world. While donors and regulatory bodies expect a substantial portion of expenses to be channeled toward programmatic activities, the importance of a robust administrative foundation cannot be understated. Without adequate support structures, such as efficient accounting and finance systems, nonprofits risk undermining their program effectiveness and long-term sustainability.

The Path Forward

For nonprofits facing these challenges, the solution lies in striking a balance between program spending and infrastructure investment. An effective strategy encompasses not only compliance with audit requirements but also a commitment to building a solid administrative foundation, enabling organizations to fulfill their missions more effectively and sustainably.

How Signature Analytics Can Help Your Nonprofit

Signature Analytics’ nonprofit accounting services help you make financial decisions based on the highest quality accounting practices, while our day-to-day outsourced accounting teams implement the highest quality donor and government accounting standards.

For additional assistance with cash flow management, developing detailed nonprofit budgets, and audit support, contact Signature Analytics today.

In the wake of the COVID-19 pandemic, the nonprofit sector has encountered what Signature Analytics’ founder, Jason Kruger, and consulting CFO, Laura Bertagnolli, term the “generosity crisis.” This phenomenon describes the challenging scenario where nonprofits, having scaled up operations due to an influx of donations during the pandemic, now face reduced funding while the community’s needs remain high or even greater than before.

 

The Challenge at Hand

During the pandemic, many nonprofit organizations saw a significant increase in contributions, allowing them to expand services and impact. However, as the immediate crisis subsided, so did the surge in donations, leaving these organizations with expanded capacities but diminished resources. This disparity has forced many nonprofits to reassess their budgets, often relying on reserves to balance their finances.

Strategic Responses to the Crisis

One critical area of focus is budget management, especially given that staffing typically accounts for around 60% of a nonprofit’s budget. Organizations must scrutinize their service offerings against their operational capacity, a task that is as challenging as it is necessary.

“Nonprofits must examine whether they can sustain their current level of infrastructure in the face of reduced funding”

Successful nonprofits have navigated these turbulent waters by fostering strong executive teams and board engagement. Effective boards actively oversee reserve levels, ensuring the organization maintains a sustainable financial cushion. Additionally, a robust budgeting process that adopts a bottoms-up approach, coupled with diligent cash flow forecasting, is essential for organizations to avoid dipping into reserves for operational expenses.

Collaboration as a Path Forward

Another strategy that has emerged is collaboration. By partnering with other service providers, nonprofits can extend their reach and efficacy without overextending financially. This approach not only optimizes resources but also maximizes the impact on the community.

The generosity crisis presents a complex set of challenges for the nonprofit sector. However, with strategic financial management, active board involvement, and a willingness to collaborate, organizations can navigate these difficulties and continue to serve their communities effectively.

For nonprofits, the role of Chief Financial Officers (CFOs) has become increasingly critical. However, a concerning trend has emerged – a significant shortage of financially-savvy professionals willing to pursue careers within the nonprofit sector. 

This shortage poses a substantial challenge for nonprofits striving to navigate complex financial environments while fulfilling their missions effectively. In this blog, we will discuss factors contributing to the talent shortage and how outsourced accounting can fill the gap for nonprofit organizations. 

Identifying the Root Causes: Factors Contributing to the Talent Shortage

 

Last fall, the University of California’s Berkeley campus took a proactive step to address this pain point by launching an initiative aimed at tackling the shortage of financially-savvy professionals within the nonprofit sector. Nora Silver, founder and faculty director of the Center for Social Sector Leadership at Berkeley, along with colleagues and students, conducted interviews with 70 chief financial officers working at nonprofits. 

 

The consensus was clear – there is a dire need for finance expertise within the nonprofit world.  In February 2023 alone, nearly 7,000 finance positions were available across the U.S. at nonprofits and foundations with budgets exceeding $10 million. This scarcity of talent is not limited to senior roles; many organizations struggle to fill junior finance positions as well.

 

Why are nonprofit organizations struggling to fill these positions? The staffing crisis facing the nonprofit sector is exacerbated by several factors. 

 

Nonprofits typically offer lower pay levels than their for-profit counterparts, making them less attractive to prospective candidates. Additionally, there is a pervasive lack of awareness about the opportunities available within nonprofit finance careers. As a result, the pool of financial talent attracted to the sector remains relatively small. It’s also exacerbated by the wave of openings created by retiring baby boomers, many of whom have had long tenures in these roles.

 

Salary Concerns: A Barrier to Attracting Talent

Nonprofit CFO compensation packages often fall short of those offered by their for-profit counterparts. While base salaries may be comparable, for-profit organizations have the advantage of offering performance-based bonuses or equity, such as company stock. This discrepancy in compensation poses a significant challenge for nonprofits, particularly small and midsize organizations with limited budgetary constraints.

Omri Even-Tov, an assistant professor of accounting at Berkeley, acknowledges the trade-offs involved in nonprofit finance careers. While the financial rewards may not match those of Wall Street, nonprofits offer strong benefits packages and better work-life balance. Moreover, working in the nonprofit sector allows individuals to make a tangible difference in society, contributing to meaningful causes and driving positive social change.

 

Lack of Awareness: A Barrier to Entry

Despite the rewarding nature of nonprofit finance careers, there remains a pervasive lack of awareness about the opportunities available within the sector. Ken Jones, Chief Operating Officer at the John D. and Catherine T. MacArthur Foundation, attributes this lack of awareness to a failure of grant makers to engage with college campuses effectively. Many individuals simply do not realize the potential for impactful careers within nonprofit finance.

Jayson Wang, a class of 2024 MBA candidate at the Haas School, emphasizes the importance of bridging this awareness gap. Drawing from his own experiences transitioning from economics to finance roles within the nonprofit sector, Wang underscores the need for greater exposure to nonprofit finance careers in educational settings.

 

Addressing the Talent Gap

As the demand for top financial talent continues to outstrip supply, it is imperative for nonprofits to take proactive steps to attract and retain skilled professionals. Programs like the Impact CFO initiative at Berkeley aim to expose students to the diverse career paths available within nonprofit finance, helping to cultivate the next generation of financial leaders.

Moreover, organizations can leverage partnerships with executive recruitment firms like Isaacson, Miller, and educational institutions like the Haas School to identify and nurture talent pipelines. By investing in awareness-building efforts and offering competitive compensation packages, nonprofits can position themselves as attractive destinations for finance professionals seeking to make a meaningful impact.

How Fractional and Outsourced Accounting Models Can Step into Fill the Gap for Nonprofits

 

Amidst the talent shortage crisis, fractional and outsourced accounting models have emerged as invaluable solutions for nonprofits grappling with their accounting needs. These models present opportunities for nonprofits to access experienced accounting professionals and specialized expertise without the necessity for full-time hires.

At Signature Analytics, we recognize the distinct challenges nonprofits face and offer tailored solutions to effectively address their accounting needs. Our approach is collaborative, working hand in hand with existing teams to ensure seamless integration and deliver high-value outcomes. With our outsourced accounting teams, nonprofits can rest assured that the highest quality accounting standards are implemented, empowering them to make informed financial decisions and achieve their mission-driven goals.

 

Navigating Challenges with Fractional and Outsourced Accounting

 

Sophisticated Reporting Demands: Nonprofit Boards of Directors (BODs) often demand sophisticated reporting, placing additional pressure on already stretched accounting teams. Outsourced accounting models provide access to professionals capable of meeting these demands while alleviating the burden on internal staff.

 

Resource Limitations: Many nonprofit accounting teams struggle with limited staff and resources, hindering their ability to fulfill their responsibilities effectively. Fractional and outsourced accounting services offer a cost-effective solution, ensuring that every dollar counts toward furthering the organization’s mission.

 

Overcoming Talent Shortages: With an aging population of CPA holders and a decline in accounting students, finding skilled accounting professionals has become increasingly challenging. Outsourced accounting providers like Signature Analytics offer access to a pool of experienced talent, mitigating the impact of talent shortages on nonprofits.

 

Elevating Nonprofit Capabilities: Elevated nonprofits require best-in-class reporting, flexible support, and technology implementation to thrive. Outsourced accounting services are equipped to provide the necessary expertise and resources to meet these demands effectively.

 

Professional Service Disparities: Nonprofits often find themselves at a disadvantage when it comes to accessing professional services. Outsourced accounting models level the playing field, ensuring that nonprofits receive the same quality of support as their for-profit counterparts.

 

Learning from Past Challenges: Learning from past challenges, such as struggles faced by organizations like LA 84 and Diversity in Health DHTI with outsourced teams, allows nonprofits to make informed decisions when selecting accounting partners.

 

Addressing Governance Needs: Boards with finance committees require specialized financial expertise. Nonprofits can incentivize board engagement by offering reduced fees for the organization, ensuring alignment with the nonprofit’s mission and financial goals.

 

Signature Analytics’ nonprofit accounting services help you make financial decisions based on the highest quality accounting practices, while our day-to-day outsourced accounting teams implement the highest quality donor and government accounting standards.

For additional assistance with cash flow management, developing detailed nonprofit budgets, and audit support, contact Signature Analytics today.

 

Internal controls are a series of policies and procedures that a business owner puts in place for the following purposes:

  • Protecting assets: internal controls protect assets from accidental loss or loss from fraud.
  • Maintaining reliability: internal controls make sure that management has accurate, timely, and complete information.
  • Ensuring compliance: internal controls keep accounts in compliance with the many federal, state, and local laws and regulations affecting the operations of a company.
  • Promoting efficient operations: internal controls create an environment where managers and staff can maximize efficiency and effectiveness.
  • Accomplishing objectives: internal controls provide a mechanism for management to monitor the achievement of operational goals and objectives.

The responsibility for maintaining internal controls falls on administrative management. Members of the management team are responsible for communicating to staff their duties and expectations within an internal control environment. They are also accountable for ensuring that other areas of the internal control framework are dealt with consistently.

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Framework for Internal Accounting Controls

To be effective, the framework for internal accounting controls should have a system that includes:

  • A controlled environment/li>
  • Risk assessment
  • Monitoring and reviewing
  • Information and communication
  • Control activities

The Three Main Internal Controls

There are three main types of internal controls, these are:

Detective Internal Controls

This type of control is designed to highlight any problems within a company’s accounting process. Detective internal controls are commonly used for things such as fraud prevention, quality control, and legal compliance. Examples of detective controls include an inventory count, internal audits, and surprise cash counts. Detective internal controls protect a company’s assets by finding errors when they occur so that business owners can minimize their impact on the company.

Preventive Internal Controls

This type of control is a proactive control designed to prevent errors and irregularities from occurring. Preventive internal controls are usually performed on a regular basis. Some examples of preventive controls are:

  • Separation of duties: splitting tasks for bookkeeping, deposits, reporting, and auditing, so there’s less chance of employee fraud.
  • Controlling access: this feature prevents team members from logging into certain parts of the accounting system unless they have a password.
  • Double-entry accounting: a system that adds extra reliability so that books are always balanced.

Preventive internal controls are put in place to help with clerical accuracy, backing up data, and preventing employee fraud. These internal controls help to avoid any problems or irregularities so that the business processes can run smoothly.

Corrective Internal Controls

Corrective internal controls are put in place to correct any errors that were found by the detective, internal controls. This type of internal control usually begins by detecting undesirable outcomes and keeping the spotlight on the problem until management can solve it. If an error occurs, then it is essential that an employee follow procedures that have been put into place to correct the mistake. Examples of corrective internal accounting controls include physical audits (such as hand counting money) and physically tracking assets to reveal well-hidden discrepancies. Implementing a quality improvement team can be a great way to address ongoing problems and to correct processes.

Other Forms of Internal Controls

There are other forms of internal accounting controls, these include:

Standardized Documentation

When accounting documents such as inventory receipts, invoices, internal materials requests, and travel expense reports are standardized, this can help to maintain consistency in the company’s records. Standardized document formats also make it easier to review past records when a discrepancy has been found in the system.

Trial Balances

This internal control entails using a double-entry accounting system. Doing so increases reliability and keeps the book balanced. Errors may still throw a double-entry system off balance. If employees calculate daily or weekly trial balances, this will help maintain analysis of the state of the system so that discrepancies can be discovered early.

Periodic Reconciliations

Occasional accounting reconciliations mean that account balances in the company system can be matched up with balances in independent accounts such as credit customers, suppliers, and banks. Any differences between these accounts will highlight errors.

Approval Authority

This internal control requires members of the management team to authorize specific transactions. Approval authority adds a further layer of responsibility to accounting procedures because it proves that any transactions have been analyzed and approved by the appropriate managers.

Ways to Improve Internal Accounting Controls

There are things you can do to strengthen your internal accounting controls. Here are a few suggestions:

Allocate Separate Accounting Responsibilities

Instead of relying on one employee or bookkeeper to handle all the accounting duties, segregate the processes to different members of your team. For example, processing receipts and payments can be separated. Other activities that can be separated include signing checks, approving invoices, and reconciling accounts. Allowing a single person to handle all these accounting processes increases the risk of errors or fraud.

Increase Oversight

Even though you have internal controls, they will not be effective enough without oversight. If you don’t have time to do it yourself, you should allocate a trusted member of your personnel to review statements, account reconciliations, and payment registers periodically. Look out for unapproved expenses or raises, non-existent employees, and unapproved hours. Make it a priority to review your company’s financial data so that you can stay abreast of trends and changes in your financial reports.

Restrict Employee Access to Financial Systems

Typically, business accounting software allows users to edit previous transactions. This unmonitored permission opens up the potential for employees to hide fraud or theft. As a business owner, you should restrict employee access to the company’s financial system to reduce the risk of employees changing and deleting entries. You can also review any transaction changes in the system to reveal any irregular activity.

Have a Third-Party Overlook Financial Statements

You can increase the safety of your assets by having a third party review your company’s accounts. Any employees who are involved with internal accounting and aware of your third-party review will be deterred from fraudulent practices. An independent reviewer will also be able to identify errors and inconsistencies.

Perform a Self-evaluation of Your Internal Controls

Performing a self-evaluation can help you to highlight any areas that come up short before problems arise and give you the opportunity to use more effective controls. The easiest process to perform a self-evaluation is by conducting a trace of a particular transaction throughout company records and procedures. The trace will give you a deeper understanding of your internal controls in action, particularly those controls which are in place to detect or prevent fraud. You will also be able to see if your internal controls have been designed effectively and are operating as intended.

Effective internal controls for your accounting and finance should be an integral part of your business plan. Internal controls significantly reduce the risk of loss of assets and increase the reliability and accuracy of all your accounting and finance operations. Additionally, controls ensure that your company’s accounting system is in accordance with applicable laws and regulations.

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We Can Help

You can contact us if you need help establishing internal controls for your accounting and finance department to protect your business assets adequately. Signature Analytics is an outsourced accounting firm providing ongoing accounting support and financial analysis to small and mid-size businesses. Our team of highly experienced accountants will act as your entire accounting department (CFO to staff accountant), or complement your internal staff, to provide the ongoing accounting and finance support necessary to effectively run your company, analyze operations, and guide business decisions.

 

Earlier this year, a company approached us after identifying some unusual checking activity while their bookkeeper was out of town for a week at training. They asked us to come in to look at all of the activity and determine if their accounting records were accurate. One of our accounting managers went to their office the following day to review the books (while the bookkeeper was still away at training) and identified that the bookkeeper had been colluding with a vendor to issue fraudulent payments and splitting the proceeds.

Needless to say, the company fired the bookkeeper for theft. The company requested that our accountants take over the role until they could find a replacement and we have continued to provide ongoing internal control accounting support to the company, including oversight for the new bookkeeper.

As a business owner, often your main focus is on the operations of the business. We have worked with several business owners who did not make financial information a priority, instead of focusing only on revenue. We work with other business owners who also recognize the importance financial statements play in understanding the state of the operations of their assets; however, with the best of intentions, they delegated the accounting work to an available employee (such as an office manager or admin), or to a bookkeeper with little to no accounting background, while providing no oversight at all.

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How to Protect Your Business From Employee Fraud

Employee fraud is more common than you may think, with small organizations (those with fewer than 100 employees) being the most common victims of organizational fraud. As a business owner, you have to take the necessary steps to ensure you’re protected.

Here are 5 ways to improve internal controls and oversight within your organization to help protect your business from employee fraud:

1. Segregate Accounting Duties

Small businesses usually depend on one employee or a bookkeeper to ensure the process in all aspects of the accounting process, including authorization, execution, custody, and posting of transactions. Ideally, the processing of cash receipts and payments will be separated, with segregation of duties with different people approving invoices, preparing checks, signing checks, and reconciling the bank accounts. Allowing one individual to handle cash or checks received, the deposits, and the posting of payments in the system increases the risk of fraud. These processes should be segregated among different individuals. If this is not feasible for your organization, it is advisable to rotate individuals performing the above tasks periodically.

Additionally, you could use an AP risk and control matrix to help your company assess and minimize inherent risks resulting from faulty accounting data and residual risks, which can remain even with good controls. AP automation providers, like Sampli, can help companies prepare AP risk and control matrices by keeping detailed and easily accessible accounting data, which gives business owners and CEOs a complete picture of what they’re up against.

You could also consider the use of an online payment service that can be accessed anywhere and provide you with increased account control over the payment process. Bills and payments can be authorized conveniently prior to any cash disbursement. If your situation still warrants physical check policies, consider signing them yourself or authorizing an additional signer. Ensure objectives that the signer is separate from the person issuing the checks and that the signer matches the checks to invoices prior to mailing. Finally, be sure to store blank checks in a safe place restricting access to avoid risk.

2. Restrict Access to Financial Systems

The most common accounting software used by businesses gives its users the ability to edit and delete previous transactions which could lead to easy concealment of theft. Business owners should retain ADMIN rights (if possible) to the company’s accounting system and consider restricting user access to only areas necessary for their functions. This will help reduce the chances of an individual creating false entries and covering up their tracks. A review of voided and deleted transactions will show any adjustments or deletions and can be instrumental in exposing irregularities in procedures.

If approval rights are granted to an employee or bookkeeper in your online payment service, a review of credit memos should be performed to ensure the validity of issued credits and deter the creation of false credit memos to cover any intercepted cash.

3. Increase Oversight

Internal controls without oversight are not good enough. You, or a trusted resource, should diligently review bank statements, check or payment registers, and bank reconciliations regularly. Review payroll statements for phantom employees and unapproved raises, hours, or even expenses. Impress upon the employee the need to keep supporting documents and you should periodically review some transactions and supporting documents for validity and accuracy.

Most importantly, business owners need to follow policies and procedures to make it a priority to review financial reports and understand the trend and changes in the business’s financial data. There should be a focus on understanding month over month or quarterly fluctuations as well as variances between budget and actuals.

4. Have Financial Statements Reviewed by a Third Party

To support bookkeepers and other in-house accounting efforts, business owners should consider utilizing their CPA to periodically review the financial statements. An individual who knows that the work performed will subsequently be reviewed is more likely to be deterred from committing fraud. An outside accountant can be instrumental in identifying inaccuracies and inconsistencies in the financial records as well as helping business owners better understand the procedures of their financial data.

Free Download: Discover how outsourced accounting can provide more visibility into your business

5. Require Employees to Take Vacation

In the client example mentioned earlier, the company identified the unusual checking activity while their bookkeeper was out of town for training. Embezzlement and other types of fraud require a constant paper trail cover-up in order to go undetected in accounting records. Therefore, business owners should insist that employees who perform the company’s accounting/bookkeeping duties take a vacation every year and designate a backup person to cover their responsibilities during that leave. Ideally, the vacation should be at least a week-long and occur over a month-end when the books are being closed.

Read more: Employee Fraud is More Common in Small Businesses – Are you Protected?

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We Can Help

Signature Analytics provides small and mid-sized businesses with the resources of a full accounting team on an outsourced basis, so our clients achieve effective segregation of accounting duties without having to hire additional full-time accounting staff. We ensure that all of our clients have preventative controls in place and provide an appropriate level of oversight and challenge for the company’s financial books and records.

To learn more about how Signature Analytics can help ensure your business is protected from employee fraud, contact us for a free consultation.

 


 

In 1971, Coca-Cola launched a campaign to unite the world by sharing a coke. GAAP, in the broadest sense, is similar but rather than joining the world through carbonated sugar water, the purpose of the Financial Accounting Standards Board (FASB) has been to establish and implement the uniformity of accounting principles worldwide.

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What is GAAP?

While 100 percent consistency has yet to be achieved worldwide, GAAP (generally accepted accounting principles), or simply accounting standards, are the framework for the rules and standards that dictate how financial statements are prepared.

GAAP addresses four concepts of financial accounting:

1. Revenue Recognition
Revenue Recognition is the accounting principle defining what earned revenue is, when to recognize or account for that revenue, and how much of it is measurable.

2. Measurement
Measurement is the accounting principle stating that assets and liabilities are recorded at the market value (actual cost) of the item on the date of acquisition. In short, only record transactions concerning real money. Factors that can indirectly impact the financial results of a business’s revenue (e.g., highly skilled employee equaling a predicted increase in sales), expenses, assets, or liabilities cannot be recorded.

3. Expense (aka The Matching Principle)
The expense recognition (also called the matching principle) addresses when to recognize expenses. Since this concept is considered one of the essential principles of GAAP, we discuss it further below.

4. Full Disclosure
Full disclosure principle states that all financial statements must present all the information needed for an individual to make an informed, economic decision. Required disclosures can come in many forms such as (but not limited to) financial statements, earnings reports, press releases, or footnotes.

The Matching Principle

We promised there’d be more. One of the essential GAAP principles in accounting is the matching principle (or expense recognition). The concept states that expenses are to be recognized in the same accounting period as related revenues.

Matching is critical because it creates consistency in the financial statement, which can be skewed if expenses are recognized either in earlier or later months. The matching principle ties the revenue recognition and expense principles together.

GAAP incorporates a general guideline known as the prudence concept which states that a company should be conservative when recording its profits while undervaluing when recording expenses and losses. Under this concept of accounting, the final accounts of a business must show caution (prudence) where income and expenses are impacted.

To understand the prudence concept a bit more, read here.

Why We Need GAAP

Commonly referred to as the language of business, the primary purpose of accounting is to communicate the financial results of the business to the owners or other individuals involved.

The purpose of GAAP is to ensure that financial statements of U.S businesses (and perhaps worldwide one day) are consistent and comparable. Why does this matter? Globalization has created international companies. GAAP is making it possible for people across the world to interpret the accounting data used by other countries to make informed financial decisions.

For instance, an American investor is interested in investing in a business in Japan. If the investor is unable to interpret the business’s financial statements, how do they know the financial health of a business and whether or not it’s worth investing?

Without uniformity of accounting principles, investors are unable to interpret an international company’s accounting information.

Enforcement of GAAP

Does anyone enforce GAAP? Accounting principles are determined by private sectors which means they are not mandated and have no authoritative requirement, but are instead generally accepted (i.e., Generally Accepted Accounting Principles – GAAP). However, because most accountants were taught these accounting principles in formal education, most companies follow GAAP as though they are the law.

What Accounting Method is Accepted Under GAAP?

GAAP affects what is disclosed in financial statements. Therefore, going back to the financial accounting concept of recognition (which indicates items are recorded on the financial statement), GAAP focuses on accrual accounting rather than cash accounting.

GAAP and Accrual Accounting

The annual financial report (which contains elements such as income statement, balance sheet, and statement of cash flows) is prepared by applying GAAP. The accrual basis of accounting reflects a better association of revenues and expenses with the appropriate accounting period, which is why it’s preferred over cash accounting.

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U.S. GAAP and IFRS

While U.S. based companies are required to abide by GAAP, IFRS (International Financial Reporting Standards) is the accounting method used throughout most of the world.

The primary difference between IFRS and GAAP is IFRS accounting is based on principle while GAAP is based on rules. IFRS guidelines provide far less detail than GAAP; however, it may more accurately represent the economics of business transactions. If your company is involved in any international business, it’s important to understand the differences between GAAP and IFRS.

The process of managing financial reports is not easy for most small and mid-size business owners – especially when it’s necessary to it accurately on a consistent basis. If you need assistance in managing financial statements to ensure they adhere GAAP, contact us today.

Though the Chief Financial Officer (CFO) and the financial controller work closely together, they have significantly different roles within a company. The biggest distinctions can best be described by breaking down the operations and responsibilities of each role. In this article, we’ll look at the three key differences between these positions. We’ll address their scope, daily responsibilities, and hierarchy to help give you a better understanding of how CFOs and controllers impact your company.

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Scope of Roles

CFO: The Strategizer

The CFO is the finance leader and chief financial strategist of a company. CFOs play a significant role in laying out the direction for a company’s future and advising stakeholders on important business decisions. Chief Financial Officers identify business risks by looking at financial data and make appropriate decisions to mitigate those risks, among their many leadership functions.

The CFO and CEO collaborate to make a case, based on the CEO’s vision and the CFO’s data, to get company-wide buy-in for changes in direction and new ideas. It is the CFO’s strategic leadership that steers the company in the right financial direction while holding departments that are tangential to the accounting and finance department accountable for the implementation and execution of the new direction.

Controller: The Tactician

The controller carries out the implementation and day-to-day management of the operations of the accounting department. The work that they do can be referred to as controller services. The controller’s oversight and account management enable the CFO to meet the company’s strategic goals. A good financial controller will develop efficient and effective strategies to increase profit margins, increase employee productivity, and find cost savings through cash management.

A controller is one of the most influential people within your company’s accounting and finance department. They can benefit your company by providing a balance of financial expertise and accounting services management that bridges the communication between C-suite and day to day functionality of the accounting department.

Read More: Benefits of a Part-Time CFO.

Daily Responsibilities: Management vs. Forecasting

Although both CFO and controller roles oversee the financial aspects of the company, they have very different day-to-day responsibilities. Here’s a look at the difference between the two:

What are the Daily Responsibilities of a Controller?

A financial controller has four tiers of accountability, each with its own set of responsibilities. These include:

Management

  • Implementing and maintaining accounting procedures, processes, and policies
  • Supervising all accounting department operations
  • Overseeing control of accounting within subsidiary companies
  • Ensuring the integrity of all accounting functions
  • Providing job training and mentoring to the accounting department

Transactions

  • Maintaining an up-to-date data storage system
  • Ensuring accounts payable and receivable are on time
  • Ensuring payroll is on time
  • Supervising bank reconciliations
  • Keeping an updated chart of accounts

Reporting

  • Preparing relevant and timely financial reports
  • Preparing the company’s annual budget and annual report
  • Suggesting ways to improve company performance
  • Generating and reporting financial operating metrics
  • Reporting budget variances to management
  • Generating analysis for financial management decisions

Compliance

  • Monitoring debts and compliance
  • Providing information to external auditors
  • Providing financial information for tax filing
  • Facilitation of tax information to your CPA
  • Providing financial information to company executives
  • Assisting the finance team with financial decisions
  • Helping the accounting team with cash flow management

What are the Daily Responsibilities of a Chief Financial Officer (CFO)?

A CFO is less directly involved in the accounting department’s day-to-day accounting operations compared to the controller. The tiers of accountability that a CFO has are:

Economic Strategy and Forecasting

  • Reviewing and comparing the company’s past and present financial situation to improve financial strategy
  • Generating forecasts for the company’s financial future
  • Reporting on where the company is most financially efficient and where improvements can be made
  • Predicting future scenarios and analyzing the best direction for the company’s success

Treasury Responsibilities

  • Deciding the best ways for the company to invest money
  • Overseeing the company’s capital structure
  • Determining the best options regarding debt and equity
  • Analyzing issues related to the company’s capital structure

Read More: What Should Small and Mid-size Businesses Expect From Their CFO?

Hierarchy: Director vs. Executive

The accounting department may be missing critical opportunities if there is no one in the role of controller. Not only that, but the CFO may be working overtime to get all the information they need to make accurate decisions. Likewise, without a CFO, the larger fiscal picture may be neglected, and the company may not have an accurate forecast of future finances.

The CFO is traditionally ranked just below the CEO in terms of hierarchy. The controller reports to the CFO, sometimes alongside the treasurer and tax manager. 

Below the controller can be roles such as the accounting manager, financial planning manager, accounts receivable manager, and accounts payable manager.

Read More: Signs Your Company Needs to Hire a CFO

Does Your Company Need a Controller or a CFO?

If you’re struggling to decide whether your company needs a controller, a CFO, or both, here are some things to consider:

Controller

You may consider hiring a controller if:

  • Your business is expanding: If you are scaling your growing business and your company is becoming more complex as you add lines of businesses or open new locations, a controller can make recommendations to help you use your capital wisely and save money wherever possible. 
  • You need to supplement your accountant: there is a significant difference between an accountant and a controller. A controller can supervise your accounting team and streamline your financial processes. 
  • Your CFO is overwhelmed:  A controller can take a load off your CFO by focusing on the day-to-day supervision of the accounting team. They can provide the CFO with the necessary information to help them make accurate financial forecasts that support future strategic decisions for the business.

A controller can also help companies grow in several ways, including:

  • Taking Accountability for Your Company Finances: Your controller will take full responsibility and accountability for your company’s financial systems and should have a thorough understanding of your business expenses from your financial statements.
  • Finding areas where you could be saving on costs: Controllers find ways to improve profitability and budgeting, helping all departments align on ways to decrease expenses and improve product margins through cash flow management.
  • Creating value as a business partner: A controller can manage vendor relationships to ensure the best terms and contracts. A good controller will push back on spending decisions and offer advice on ways to cut costs and use capital wisely, often opening up funds for more proactive initiatives for the business’ ultimate growth. 
  • Managing your company data: Your controller will supervise the company’s accounting processes and make sure it’s carried out accurately, efficiently, and securely. Good controllers stay up to date on current accounting and finance technology and best practices to keep your business on the cutting edge. 

CFO

You may want to consider hiring a CFO if:

  • You’re in a transition stage, such as going through a merger, acquisition, or relocation: It’s never easy going through a big change. A good CFO will keep your finances on track and provide high-level insight and executive leadership as your company transitions. 
  • You need financial forecasts for your company: All the financial data you keep track of is being wasted if you can’t use it proactively. A CFO can turn your historical data into projections so you can make insightful data-driven business decisions for the future. 
  • You’re overwhelmed: You have enough on your plate running the company every day, and the added burden of guiding your finance department can quickly take over all of your time if you don’t have the right support. A CFO will lighten your financial workload so you can focus on more important decisions. 

A CFO can help your business grow in several ways, including:

  • Negotiate better deals: A CFO can help your company score better rates with vendors, secure credit lines and loans from banks, and negotiate with clients to give your business a financial advantage.
  • Manage financial growth: A CFO will track all financial metrics across the board at your company and work hand in hand with each department to optimize financial growth. 
  • Manage risk: You can only manage so much risk yourself. An experienced CFO will enforce the right financial controls and keep a vigilant eye on financial data to avoid any errors. 
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Outsourced vs In-House Controller: Which is Right for Your Business?

Outsourced controllers are likely less of a financial commitment than hiring in-house: In-house controller hires are longer processes with interviews, background checks, and likely recruiter fees involved as well as long contracts, benefits, and incentives. Both are experienced controllers that will report financial results for your accounting department. 

Outsourced controllers are already trained in processes that save time. Far less training time is needed when you use outsourced controller services. Additionally, the level of accounting expertise you have access to with outsourced teams of finance and accounting professionals is more sophisticated in their controller services than the expertise of one individual who gets hired in-house full-time. 

An outsourced controller will have experience in a wider range of industries providing innovative solutions to old problems. In-house controllers may not see the forest for the tree, missing opportunities to cut costs or amend business practices that may not be optimal. 

Vacations and time off will not leave your company high and dry when you rely on internal controls. With an outsourced financial controller on your team, you will have access to expertise in accounting and bookkeeping when you need it. The deeper bench that outsourcing offers is one of the major benefits of outsourcing finance and accounting functions. 

Contact Signature Analytics today to find out how we can help you optimize your company’s financial future.

On a recent episode of the Construction Champions podcast, our very own Jason Kruger, Founder of Signature Analytics, shares his expertise on financial management in the construction industry.

Tune into the episode here or read on to gain exclusive insights and practical tips on achieving financial success in construction.

In this insightful conversation, we dive deep into the crucial role of financial management in the construction sector. Jason, with over 20 years of accounting and business advisory experience, brings a wealth of knowledge to the table. Let’s explore some of the key highlights from our discussion:

The Traits of a Construction Champion 

Ever wondered what it really takes to succeed financially in the construction industry? Let’s dig into some key factors that can make a difference:

Education: Having a solid understanding of construction techniques is crucial, but it doesn’t stop there. Financial literacy is equally important. Knowing how to manage budgets, understand contracts, and navigate financial documents can set you apart from the competition.

Efficient Operations: Streamlining operations can lead to cost savings and improved profitability. From optimizing scheduling to minimizing waste, finding ways to operate more efficiently can have a significant impact on your bottom line.

Accurate Cost Estimation: Accurately estimating costs for projects is essential for profitability. This requires a keen understanding of materials, labor costs, and overhead expenses. Overestimating or underestimating costs can lead to financial losses.

Strategic Planning: Developing a comprehensive business plan that outlines your financial goals and strategies for achieving them is key. This includes setting realistic revenue targets, identifying potential risks, and planning for growth.

Transforming the Construction Industry: Overcoming Challenges and Scaling for Success 

The construction industry is constantly evolving, presenting both challenges and opportunities for those looking to scale their businesses for success. Let’s explore some of the key challenges and strategies for overcoming them:

Cash Flow Management: Managing cash flow can be particularly challenging for growing construction businesses. Balancing the timing of payments from clients with the need to pay suppliers and subcontractors requires careful planning and financial discipline.

Scalability Issues: As construction firms expand their operations, they may encounter scalability issues related to workforce management, project coordination, and resource allocation. Finding efficient ways to scale operations without sacrificing quality is essential.

Competition: The construction industry is highly competitive, with numerous firms vying for contracts. Standing out from the competition and winning lucrative projects can be a significant challenge, especially for smaller firms.

Strategies for Success:

Proactive Financial Planning: Implementing proactive financial planning strategies is essential for overcoming cash flow challenges and ensuring financial stability. This includes accurately forecasting cash flows, setting aside reserves for emergencies, and establishing lines of credit to bridge gaps in funding.

Investing in Technology: Embracing technology can help construction firms improve efficiency, productivity, and project management. Investing in tools such as project management software, Building Information Modeling (BIM), and drones can streamline operations and enhance collaboration.

Building Strategic Partnerships: Collaborating with strategic partners, such as subcontractors, suppliers, and financial institutions, can provide construction firms with access to resources and expertise that facilitate growth. Building strong relationships with key stakeholders can also lead to new business opportunities.

Focus on Quality and Reputation: Maintaining a reputation for delivering high-quality workmanship and exceptional customer service is crucial for success in the construction industry. Building a strong brand reputation can differentiate your firm from competitors and attract repeat business and referrals.

In conclusion, while scaling a construction business presents its fair share of challenges, overcoming these obstacles is possible with the right strategies in place. 

Proactive Financial Strategies for Success in the Construction Industry 

In the fast-paced and intricate world of construction, proactive financial management is not just beneficial—it’s essential for success. Let’s delve into some proactive financial strategies that can help construction businesses navigate challenges and thrive in the industry:

Leveraging Data-Driven Insights

Utilize data analytics tools to gather insights into project costs, resource allocation, and profitability. Analyzing historical data can help identify trends and patterns, enabling more accurate forecasting and budgeting for future projects.

Implement project management software that integrates financial data, allowing for real-time tracking of expenses, invoicing, and cash flow. This visibility into financial metrics empowers decision-making and helps prevent cost overruns.

Staying Ahead of Market Trends

Monitor industry trends and economic indicators to anticipate changes in market conditions. Keep abreast of developments in material costs, labor availability, and regulatory changes that may impact project costs and timelines.

Stay connected with industry networks and participate in professional associations to gain insights into emerging trends and best practices. Networking with peers and industry experts can provide valuable knowledge and perspectives on market dynamics.

Adapting to Changing Market Conditions

Develop contingency plans to mitigate risks associated with fluctuating market conditions, such as interest rate fluctuations or shifts in demand. Having alternative financing options and flexible contract terms can help cushion the impact of market volatility.

Foster agility within your organization to respond quickly to market changes. This may involve adjusting project schedules, reallocating resources, or renegotiating contracts to maintain profitability in challenging market environments.

Investing in Technology and Innovation

Embrace technology solutions that streamline financial processes and enhance decision-making capabilities. Implementing cloud-based accounting systems, digital invoicing platforms, and automated reporting tools can improve efficiency and accuracy in financial management.

Explore innovative construction methods and sustainable practices that offer cost savings and competitive advantages. Investing in eco-friendly materials, energy-efficient systems, and modular construction techniques can reduce costs and enhance project outcomes.

2024 Financial Trends in the Construction Industry: What You Need to Know 

Looking ahead to 2024, it’s essential for construction industry professionals to be aware of emerging financial trends that are shaping the landscape. Here’s what you need to know:

Technological Advancements:

Technology continues to revolutionize the construction industry, with innovations such as Building Information Modeling (BIM), drones, and augmented reality (AR) transforming project management and execution.

Embracing digital tools and solutions can enhance efficiency, accuracy, and collaboration throughout the construction process, from design and planning to execution and maintenance.

Evolving Regulatory Requirements:

Regulatory requirements in the construction industry are constantly evolving, with changes in building codes, safety standards, and environmental regulations impacting project costs and timelines.

Staying informed about regulatory updates and ensuring compliance with applicable laws and regulations is essential for avoiding penalties and minimizing project risks.

Sustainability and Green Building Practices:

Sustainable construction practices are gaining momentum, driven by increasing environmental awareness and regulatory incentives for green building initiatives.

Incorporating sustainable materials, energy-efficient systems, and environmentally friendly construction methods can not only reduce environmental impact but also lead to cost savings and improved project outcomes.

Supply Chain Disruptions:

The construction industry is susceptible to supply chain disruptions, such as material shortages, transportation delays, and labor shortages, which can impact project schedules and costs.

Proactively managing supply chain risks, diversifying suppliers, and implementing contingency plans can help mitigate the impact of disruptions and ensure project continuity.

Digital Transformation and Remote Work:

The COVID-19 pandemic has accelerated the adoption of digital technologies and remote work practices in the construction industry.

Virtual collaboration tools, remote project management platforms, and digital communication channels have become essential for maintaining productivity and communication amidst remote work environments.

In conclusion, staying informed and adaptable to emerging financial trends is crucial for navigating the complexities of the construction industry in 2024 and beyond.

Learn More About How Signature Analytics Can Benefit Your Construction Business

Outsourcing your accounting team to Signature Analytics saves money, time, and hassle. Our team can provide expertise on day one, eliminating the costs tied to hiring and training an in-house accounting team.  We know the industry and the software available and can ensure your systems are working at maximum efficiency saving you precious time. And outsourcing provides a flexible solution that can scale up with you as you grow or reduce in challenging times reducing the stress of workforce planning in your accounting team.

With Signature Analytics, you get experienced construction accounting expertise that grows with you.

Knowing the building blocks for effective managerial and financial accounting is critical for any company’s financial health. Following and implementing good accounting methods will help you make informed decisions and provide your business with financial stability and growth.

In this article, we will look at the six best accounting practices your business should follow.

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1. Clear Financial Planning

A company’s financial status being successful starts with a clear and well-thought-out plan. While there are many ways to develop a financial plan, we prefer Financial Scenario Planning and Strategic Budgeting

Financial Scenario Planning is a proactive planning tool that can prepare your business for any scenario. To start financial scenario planning, brainstorm all occurrences that could impact business expenses and financial positioning. 

Then create a base, best, and worst-case scenario for each occurrence:

  • Base case: Use data from the previous year to predict the most likely scenario for your occurrence.
  • Best case: Imagine a situation where your occurrence exceeds projections (adding new customers, making a big acquisition). It’s important when using this scenario to be realistic with your projection.
  • Worst case: What’s the worst situation that could arise in your business in the coming year? Create an action plan for this scenario. 

Brainstorming and building out potential scenarios that might impact your business’ finances help you make more informed decisions, give investors an in-depth preview of returns and risks, and minimize losses.

Strategic budgeting is the process of developing a budget that is based on your strategic business plan. 

Start by creating a strategic business plan that includes future corporate milestones, what tasks must be done to reach them, and Key Performance Indicators (KPIs). Then use your budget to gauge if the finances of your business are on track. 

Download our e-guide below to help you create a strategic budget.

2. Set up Fraud Alerts

Unfortunately, the most common victims of fraud are small businesses. 

Preventing fraud in your company starts with putting fraud practices in place such as segregating accounting duties, adding outsourced oversight, enforcing time off and vacation policies for all employees, and reviewing statements monthly. 

Setting up internal fraud alerts and protocols provides an extra layer of security on top of your existing practices. Fraud alerts require lenders and creditors to take extra steps to verify your identity before extending or creating lines of credit. Simply send a signed letter on your company letterhead to the commercial relations department of one of the three national credit bureaus (Equifax, Experian, TransUnion) to set the fraud alert protocol in motion. 

3. Utilize Automated Software For Certain Accounting Services

Not using automated accounting software is likely costing you time and money. 

Finances aren’t always as simple as understanding accounts payable and accounts receivable, and even the best accounting professionals can make mistakes. Accounting software automates tasks, reduces accounting errors, helps with cash flow tracking, and makes your business accounting faster and more efficient. The right software also keeps everything in one place, backed up, and easy to find.

From invoicing to payroll, automated accounting services make sense with the right implementation and oversight. Easily available automated accounting services can eliminate the risk of double payment, incorrect payroll entries, or late payments while reducing your workload. Good accounting software has the right integrations to create a network of technology and communication that supports accounting and operational business functions.

4. Master The Three Financial Statements

There are three financial statements that every small business owner needs to understand: income statements, balance sheets, and cash flow statements. With an understanding of these, business owners can more readily implement best business practices based on clear financial data. 

Income statements measure your business’ profitability during a specified accounting period. They give you a clear look at all your revenue and expenses to determine net profit or loss. 

Balance sheets show the financial health of your business. A balance sheet reports what your business owes (liabilities) and adds that to how much capital has been invested (equity) to determine your assets. The assets should always be equal to the sum of your equity and liabilities. 

Cash flow statements focus on the overall money coming into the business compared to the money going out. While income statements are all about showing profit during a certain period, cash flow statements are a clear way to compare cash inflow vs cash outflow. 

5. Backup All of Your Records and Financial Reporting

Backing up your records is an essential practice for the safety of your business and following legal requirements. Fortunately, having the right technology in place automates a lot of the backup process for you. 

For all software, user error is the weakest link, so ensuring your fraud protection protocols involve strong password protection is the first step to take. Additionally, it is important to make sure that your technology is itself secure. That requires that you or someone in your IT department researches the security and safety of any new technology before choosing a place to store your financial information.

6. Hire Experts

If you haven’t read the book Who Not How,, this is an exercise in implementing the principles of that book. To get expertise, you can either build it or hire it. Hiring expertise is faster and often more efficient. If you need expert knowledge and insights in your accounting department immediately, the best solution is to outsource the expertise you need

By bringing in a team of experts, you can easily automate manual accounting processes so your existing accounting team has more capacity and time to work on important and ongoing issues. 

An outsourced team of finance and accounting experts can evaluate your accounting team’s skills, accounting structure, current technology, and data cleanup protocols and offer insight on how to run a more profitable and efficient business.

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Importance of Effective Accounting Best Practices

The value of following good practices for effective accounting can’t be stressed enough.

Implementing effective accounting practices provides the necessary information for you and your company to make informed business decisions. It also creates a clear and objective evaluation of your company’s performance, so you know exactly how and when to make improvements. 

About Signature Analytics 

Signature Analytics is the smart choice for business owners. With the support of our outsourced accounting and CFO Business Advisory services, your business can make smarter decisions based on accurate data.

We customize the right solution for your business to get you the Accurate, Relevant, and Timely (ART) financials you need to run your business successfully. Contact our team of experts for expert accounting and financial analysis.

The CFO’s role within an organization depends on several factors. These components may include the expectations coming from the CEO and board of directors, and may also vary depending on the industry, corporate strategy, and the goals of the business. A company’s size can also have a significant influence on the CFO’s role.

Below, the Signature Analytics team has outlined some general responsibilities that every business should expect from their CFO.

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The Importance of Forward-Looking Financial Analysis

The foundation of any company’s accounting and finance function is to produce timely and accurate financial information for the business. The CFO oversees these accounting and finance functions, but their true value comes from the ability to provide forward-looking financial analysis. This analysis should be focused on driving additional profitability and value to the company.

Read More: Outsourced CFO Services – Benefits of a Part-Time CFO

Whether you have a full-time, part-time, or outsourced CFO, below are some examples of the forward-looking financial analysis you should expect from the CFO role:

1. Cash Management & Forecasting

Can you predict when your business will have a surplus of cash that needs to be managed or when you will have a shortage of money that requires financing?

Cash flow problems can kill businesses that might otherwise survive. Your CFO should be monitoring cash flow and analyzing cash flow projections regularly to ensure your business does not run out of cash.

2. Budgeting & Expense Control

Does your business have a budget? Do you receive an analysis comparing prior year actual, current year actual, and current-year forecast on a regular basis?

Your CFO should own the budgeting process by incorporating input from each department for the most accurate and complete projections. They should also be monitoring budgeted versus actual results on a quarterly or monthly basis and reforecasting accordingly.

Read More: How CFOs Add Value To Your Business

3. Compensation Plan Development

Is the compensation of your employees aligned with the goals of the company?

The CFO of a company should help to structure employee compensation plans that incentivize efficiency and align with the financial goals of the company.

eGuide: What Business Should Expect From Their Accounting Department

4. KPI Development & Analysis

Are you maximizing margins? Are profits analyzed by revenue stream? Are employees being utilized appropriately to maximize profitability?

KPIs (Key Performance Indicators) are different for every business. They should act as the company’s compass, and the CFO serves as the navigator.

It is the responsibility of the CFO to work with those in operations to help develop KPIs applicable to the company and support the analysis of those KPIs regularly. The CFO should be using the data from the KPIs to assess business performance in real-time. Making changes that directly improve KPIs can help build the future value of the company.

Read More: What Are Key Performance Indicators and Why Are They Important?

5. Board & Investor Communications

Are you providing valuable financial information to your Board of Directors so they can review the trends of the company’s operations and assist in making appropriate decisions? Is the information presented professionally?

Your CFO should be preparing presentations for your board members that effectively communicate the company’s financial information in an organized manner. The information should illustrate trends to visualize projections so the data can help drive business decisions.

6. Securing Financing & Raising Capital

Do you review your banking relationships regularly? Are you confident you have access to financing on the best possible terms for your business? What are the capital needs of the company now and in the future? What is the best way to meet those needs?

Your CFO should play a key role in identifying and securing investment and financing. They should identify capital requirements before approaching financial institutions and investors to ensure you raise the appropriate amount of capital required to support your growth plans.

A successful CFO should also prepare presentations of the company’s financial information, allowing potential investors or lenders to understand the data and the companies performance.

7. Tax Planning

How often are communications occurring with the company’s tax advisor to maximize all tax-related strategies?

Your CFO should maintain consistent communication with tax preparers to minimize your company’s potential tax liability.

8. Ongoing Analysis & Review

All of these responsibilities should be considered ongoing processes that are revisited on a regular pre-determined schedule and modified based on the most recent financial information available.

Furthermore, all of the results should be measurable to track the success of the performed analysis.

eGuide: What Business Should Expect From Their Accounting Department

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A Solution That’s Right For You

If your CFO is providing forward-thinking analysis, they are providing infinite value to your company.

Each of the outlined goals above can help maximize profitability and value for the business, and, if managed appropriately and adequately, companies with the correct financial infrastructure can witness significant operational improvements and growth. Having this kind of efficiency will allow you to think about your business in new ways and likely uncover new possibilities for what’s next.

If your business requires any (or all) of the forward-looking financial analysis mentioned above, but you’re not in a position to hire a full-time CFO or may have a team that just needs additional support, the team of experts at Signature Analytics can help.

Our highly experienced accountants can act as your entire accounting department (CFO to staff accountant). If that solution isn’t the right fit, our team can complement your internal accounting staff, to provide the ongoing accounting support, training, and forward-looking financial analysis necessary to effectively run your company, analyze operations, and guide business decisions.

Have questions about our process? Contact us today for a free consultation.

 


 

Do you know your numbers?

In the dynamic world of Software as a Service (SaaS), understanding the financial pulse of a company is crucial for sustained growth and success.

 In a recent episode of “SaaS Scaled,” Jason Kruger, a seasoned finance professional, sheds light on the critical interplay between finance and SaaS operations.

The Genesis of Signature Analytics

Kruger’s journey began in public accounting, where he observed a consistent pattern: businesses treating finance as a necessary but undervalued component. With Signature Analytics, founded in 2008, Kruger aimed to change this narrative by offering top-tier financial expertise on a fractional basis. The company’s mission is to provide the visibility and metrics that empower SaaS businesses to make strategic decisions and reach their growth potential.

Why “Analytics” and Not “Accounting”?

Signature Analytics was consciously named to emphasize the value of data analysis over mere accounting. Kruger believes in enabling businesses to make informed decisions through actionable metrics and real-time dashboards, which are particularly pivotal in the SaaS industry, known for its focus on metrics like churn rates and monthly recurring revenue.

Identifying the Ideal Client

Kruger and his team excel in collaborating with forward-thinking business owners who are determined to scale and grow. They support these visionaries by enhancing financial processes and providing the necessary leadership to ensure scalability, manage risk, and guide companies through various stages of their lifecycle.

Common Pitfalls and Strategic Planning

Many SaaS founders, according to Kruger, treat accounting and financial metrics as an afterthought, leading to potential cash flow issues. Signature Analytics emphasizes the importance of forward planning and cash management to avoid being caught off-guard by rapid growth or the need for additional investment.

The Entrepreneurial Mindset and Financial Leadership

The balance between optimism and pragmatism is delicate yet essential. Kruger stresses the importance of maintaining an entrepreneurial mindset while also implementing a structured, risk-assessed approach to financial decision-making.

On Taking the Leap

Reflecting on his own journey, Kruger acknowledges the leap of faith required to start a business. He underlines the importance of planning but also recognizes the entrepreneurial spirit needed to take calculated risks.

Recommended Reads for Aspiring Business Owners

To wrap up the conversation, Kruger recommends “Rich Dad Poor Dad” by Robert Kiyosaki for understanding the value of strategic partnerships and “Traction” by Gino Wickman for creating a structured framework to scale and manage a business effectively.

Crafting an annual budget is one of the most important financial aspects of a business, but often gets overlooked.

Business budget planning is an essential task that is frequently neglected at small and mid-size companies. So why is it so important? Well, mostly because it is a process that prepares your company to answer critical questions about what the next 12 months will look like:

  • What are you projecting sales to be next year?
  • Are you expecting margins to improve next year?
  • Do you plan to hire additional employees?
  • Will you have any significant capital expenditures soon?

These questions (and many others) are typical of investors, financial institutions, potential strategic partners, and financial buyers. Every business, regardless of size, should have the answers to these questions to be able to plan the annual operating budget accordingly.

 

Start the Conversation

 

Having a chief financial officer, or CFO, as part of your company’s C-Suite executive team can be an asset in this process.

A CFO will have access to and be up to date on the most recent financial data pertaining to the company. These resources can help the company craft its budget, as well as short and long-term financial goals. Strategic budgeting is a skill that any good CFO will have in their arsenal. It’s just a matter of working as a team to bring all the relevant information together to plan for the future.

Read more: What CEOs Need From Their CFO

If you are overwhelmed by company budgeting planning, don’t have a CFO, or don’t know where to begin, below are some tips to help you get started:

 

1. Consult All Departments

The annual budgeting process should not be completed behind closed doors by one member of the accounting or finance team. Instead, all the departments within the company should be part of the conversation and provide feedback, insights, and expectations for the following fiscal year.

Who should contribute to the conversation? Be sure to loop in:

  • The sales team: they can assist with realistic revenue assessments
  • The manufacturing or service team: they can advise on costs of delivery and any large purchases required to update machinery
  • The research and development team: they can discuss expected expenses as well as the timing on any new products anticipated
  • Any other departments who can add value to the conversation

It is encouraged to incorporate feedback from each department as the results are much more likely to be accurate. Therefore, project completions are possible for the upcoming fiscal year. Too often, companies that do complete the annual budget planning process estimate an overall percentage increase over the prior year’s actual income – this is something that should be avoided.

 

2. Estimate Revenues

Expected sales have a significant influence on costs, including employee headcount, but it can be very challenging to make projections accurately. Here are some ways to come up with the best estimate:

  • Consider the recent monthly growth rate experienced by the company and decide if it can be continued.
  • Review industry guides and other expert publications that focus on your industry.
  • Review financial information from a number of your competitors, if available.
  • Communicate with your current customers to better understand their expected needs of your product or service.
  • Discuss the expected sales with your sales department and set expectations to help determine compensation for this team.

 

3. Determine Expenses

Once the expected revenue figures are estimated, the focus can shift towards expenses. Here are some considerations:

  • Some costs relate directly to revenue, whether they be inventory or employee services. Typically, the gross margin of a business does not fluctuate substantially unless new products are developed, inventory prices change, or inefficiencies are identified within the manufacturing process. Use this time to challenge your employees to identify cost savings related to the delivery of products or services.
  • Other expenses are fixed costs such as rent, insurance, equipment leases, and certain other services purchased. These expenses may be easier to estimate; however, you should consider reviewing the policies in place, especially around insurance. Use this time to determine if better insurance rates are available or if different coverages would be more advantageous.
  • Employee compensation should always be established to be in line with revenues and related growth in the coming year. Many companies believe that all employees require annual raises, but if the results show a contraction in the business, then it may not be reasonable. Consider tying aspects of compensation to the growth of the company. With today’s inflationary trends, make sure you include cost of living wage increases for your employees in your budget and projections as well.
  • Along with compensation, estimating employee headcount is a critical aspect of the budgeting process. It is important to identify when you will need to hire, how long that hiring process takes, and what experience level would optimize the operations.

 

4. Identify Capital Expenditures

Often not considered in the budgeting process are those large or expensive purchases which are vital to the continued success of the business. These may include new computers, systems, machinery, vehicles, furniture, etc. It is essential to keep in mind that each new employee hired will likely require a certain amount of capital expenditure.

Investments in equipment or processes that are directly related to your product or service should also be considered. Will you need to purchase any new materials next year? Is there old equipment that needs to be updated? Avoiding investment in equipment can impact your output, quality, or delivery timing, which can directly impact your revenues.

 

5. Calculate Cash Flow

While putting together a projected income statement can feel great, it is just as important to calculate the expected cash flow of the business.

Your company may pay bills faster than customers pay theirs. You may need to purchase inventory well in advance of sales if acquisition time is significant. In cases such as these, a cash flow statement should be created using the income statement as well as AR/AP turnover rates and other metrics from the balance sheet.

Read more: These Are the Four Financial Statements You Need to Grow Your Business

 

6. Be Conservative

While it may seem advantageous to show investors that the company will significantly grow, it’s a possibility that results may disappoint. Even worse, business decisions may have been made using such projections (aka best guess scenarios). When in doubt, it is a good idea to be more conservative and leave some room in the projections in case of emergency, unforeseeable large expenses, or a drop in revenue and sales.

 

7. Start Early

Businesses should begin the annual budgeting process three to four months before the start of their fiscal year to allow sufficient time to craft a detailed estimate before the year ends. However, the annual business budget should be monitored and updated on an ongoing basis. For this reason, it’s never too late to get started.

 

8. Monitor, Evaluate & Reforecast

Once you complete the budgeting process, the biggest mistake you could make is to file it away only to pull it out again at the end of the following year.

A budget should be monitored monthly, or sometimes weekly for smaller companies. Budgets should be edited if circumstances change, like bringing in more fruitful accounts or losing critical customers.

If you have a CFO on your team, they can help facilitate a strategic forecasting process that extends beyond the annual budget and encompasses more of a three-year plan. This can help push your company to think about future business decisions and goals.

Furthermore, budgets should always be compared to actual results to understand why there are differences. Doing this will help monitor spending money throughout the year and help management make important decisions in relation to the business. Put these tips into action and learn how to prepare an annual budget with our in-depth guide.

 

Talk to An Expert

 

We Can Help

Signature Analytics will help guide your company through the annual budgeting process. We will work with your management team to create a budget for your business and monitor that budget throughout the year.

This would include analyzing the budgeted versus actual results quarterly and helping forecast accordingly. We can also perform industry and economy reviews to assist with the forecasting process and provide benchmarking data.

If you want assistance creating (or improving) an annual budget for your business, contact us today for a free consultation.

 

For construction businesses, dealing with profitability that fluctuates year over year is part of the industry landscape. How you respond to these economic variances can significantly impact your tax burden, cash flow, and operational efficiency.

Cash Flow Management in Economic Downturns

During tougher economic times, Brandon Manning and Zak Krauss emphasize the importance of cash flow management. It’s not just about keeping projects funded; it’s about ensuring that the company can still operate smoothly—covering overhead and keeping the workforce paid. Manning advises that during these periods, maintaining a tight ship is critical to weathering the storm.

Cash Flow Management is Robust Economic Times

Conversely, in more prosperous times, opportunities arise to invest back into the business. Manning and Krauss suggest using the surplus to upgrade equipment, taking advantage of tax incentives like Section 179 deductions, which can lead to immediate and long-term benefits. By owning more efficient equipment, you’re not just saving on rental costs; you’re also preparing your company to operate more cost-effectively in the future.

Adopting the right strategy for the right time is key. When the market is down, it’s about survival and lean operation. When business is booming, it’s about strategic growth and tax-smart reinvesting. Understanding this cycle and planning accordingly is what helps construction firms stay robust, ensuring they’re not just surviving but thriving, no matter the economic climate.

Understanding and managing labor costs is pivotal for winning bids and ensuring project profitability. Zak Krauss and Brandon Manning discuss the importance of labor cost analysis in construction estimating and how it can be the difference between a profitable project and a financial loss.

Labor Costs and Bids – A Dynamic Relationship

Labor costs form a crucial part of construction bids. As Manning explains, estimating labor costs accurately is vital—not just to stay competitive but also to avoid underbidding and suffering losses. This process includes not only calculating the direct costs but also considering potential overruns. “What if he really needs 150 hours?” Manning asks, highlighting the need for a buffer in estimates that accounts for the unexpected.

Krauss emphasizes the different implications of labor costs for general contractors versus subcontractors. For general contractors, it’s about planning and projecting the workforce needed. Subcontractors must delve deeper into the specifics—analyzing how much work a crew can accomplish daily and the cost implications. This detailed tracking ensures that bids are competitive and that they align closely with the crew’s actual performance capabilities.

Both stress the necessity of ongoing analysis and refinement of labor cost estimates. By routinely reviewing project outcomes, companies can fine-tune their estimates for future bids. It’s about collecting data on crew performance, dissecting the hours spent on specific tasks, and using this information to bid more intelligently.

In the video, “Using Labor Costs to Make Better Estimates,” Krauss and Manning share insights into leveraging labor cost data to make more informed bidding decisions. They reveal that the key to successful bidding lies in understanding your crew’s capabilities and costs and ensuring this knowledge informs every estimate. The goal is to bid within a competitive range while safeguarding profitability.

For construction businesses looking to sharpen their bidding strategies and financial foresight, Krauss and Manning’s expertise is invaluable. Reach out to them for guidance on how to incorporate labor costs into your bidding process effectively and use this data to secure profitable projects consistently.

Welcome to the latest installment of our business podcast, where we explore the intersection of passion, data, and entrepreneurial success. In today’s episode, we had the pleasure of speaking with Jason Kruger, a financial maestro and the CEO of Signature Analytics.

From Sports to Business: The Game-Changing Role of Data

Jason’s journey is not just about numbers; it’s about moments that define success. As a University of Arizona alumnus, he recalls the glory of witnessing his alma mater’s national basketball title win. This same spirit of triumph is what he brings to the business world through data analytics.

In an era where sports have embraced data analytics to measure every move, Jason points out that businesses are not far behind. The key, he stresses, is not just the accumulation of data but harnessing the right data to make informed decisions.

The Foundation of Success: Accurate and Actionable Information

For businesses, especially growing ones, Jason emphasizes the importance of having a solid foundation. “Garbage in, garbage out,” he remarks, underscoring the necessity for clean, accurate data. This foundation allows business owners to delve deeper into their operations, examining product lines and margins with precision to guide sales and marketing efforts effectively.

Moreover, Jason discusses the critical nature of forecasting, particularly cash flow. A 13-week cash flow forecast is a tool that he insists on for his clients, providing the visibility and confidence needed to make sound decisions and ensuring that a company’s growth doesn’t outpace its cash reserves.

The Balance of Leadership and Data

But data is not the sole focus. Jason shares his personal journey of growing Signature Analytics and the learning curve that came with it. He became well-versed in areas beyond his accounting expertise, such as sales, marketing, and human resources. This holistic approach to business growth is something he champions for all entrepreneurs.

Leadership, Jason argues, is about more than just the financials. It’s about building a culture of communication, vision, and support. His company measures employee retention rates, indicative of the culture they’ve fostered, and these human-centric metrics are just as crucial as any financial KPI.

Preparing for the Unexpected: The Role of Financial Leadership

A recurring theme in Jason’s narrative is the lack of financial leadership in many growing businesses. Entrepreneurs often overlook the necessity of sophisticated financial guidance, leading to a disconnect between their perceived success and the reality of their cash flow.

Jason advocates for businesses to always be prepared, with their end game in sight. Whether the goal is to sell or scale up, having robust financial processes and credible financial statements ready is paramount. This preparation ensures that when opportunities arise, businesses are not left scrambling but are instead ready to maximize their potential.

Final Thoughts: Embracing Financial Expertise

As we wrapped up our conversation with Jason, his passion for helping businesses was evident. His parting advice to our listeners: Embrace financial expertise, whether internally or through partners like Signature Analytics. Doing so will not only prepare you for growth but will ensure you’re ready for whatever the market throws your way.

For more insights and assistance in financial leadership, reach out to Jason at Signature Analytics, and stay prepared to take your business to the next level.

Understanding the complexities of private and public construction jobs is crucial for contractors, as Zak Krauss and Brandon Manning explain in their insightful discussion. Public projects, in particular, bring a unique set of challenges and financial considerations, chiefly due to prevailing wage regulations and union interactions.

Prevailing Wage

Prevailing wages significantly impact the bidding and financial planning of public jobs. “You need to understand the prevailing wages for different roles to ensure profitability,” says Krauss. These wages, often set by unions or by law for public projects, can inflate labor costs considerably. Therefore, accurate cost forecasting during the bidding process is essential to absorb these additional expenses without compromising profit margins.

Subcontractor Compliance

For subcontractors, the meticulous tracking of labor costs and compliance with prevailing wage laws is non-negotiable. Manning emphasizes the importance of timely reporting: “If you’re not reporting on time, you’re not getting paid.” This can lead to a cascade of financial setbacks, from delayed payments to an inability to pay workers, culminating in a detrimental cash flow impact.

A Robust Strategy

Both general contractors and subcontractors must approach public projects with robust processes and compliance strategies in place. “Don’t start a prevailing wage job without advice or experience,” Manning cautions, highlighting the risk of trying to retroactively address compliance issues.

A Compliance Officer

Krauss and Manning also touch on the role of a compliance officer, whose importance rivals that of the financial team. A dedicated compliance professional ensures that all paperwork and project-specific requirements are in order, safeguarding the company from potential financial and legal pitfalls.

Their video, “Private vs. Public Construction Jobs: Mastering Prevailing Wage Compliance,” serves as an essential guide for construction professionals venturing into the realm of public works. It underscores the need for a proactive, informed approach to manage the financial intricacies of prevailing wages and union requirements effectively.

For more insights and strategies on prevailing wage compliance and financial management in construction, turn to the expertise of Zak Krauss and Brandon Manning. Their advice could be the difference between a profitable project and a financial misstep.

As a professional services company, cash flow is crucial to your success. Whether you’re in marketing, advertising, HR, IT, law, or any other professional service, managing your finances effectively is essential for sustainable growth. That’s where Signature Analytics comes in. 

As a leading provider of outsourced accounting services for professional services companies, we have the expertise to help you optimize your cash flow and improve your financial performance.

Streamlining Payment Collection: Benefits of ACH Authorization for Efficient Cash Flow

Efficient cash flow management is crucial for every business, relying on the prompt and streamlined collection of payments from clients. To optimize the accounts receivable (AR) process, businesses should consider implementing ACH (Automated Clearing House) authorization for payment collection instead of relying on checks.

One significant advantage for companies is the ability to process ACH payments in-house, without involving the client directly. This necessitates the completion of an ACH Authorization Form by the clients, granting permission for the company to process payments via ACH. Implementing this method has proven to be a game changer for our organization. By shifting to a Net 2 payment term, we are able to process payments promptly based on the agreed-upon terms. This streamlined approach allows us to collect payments swiftly, eliminating the need to spend valuable time chasing down outstanding balances.

Reduced Transaction Fees

Compared to credit cards, ACH payments offer lower transaction fees. When businesses process credit card payments, they must pay a percentage of the transaction value in fees. These fees can add up quickly, especially for businesses that process a large volume of transactions. In contrast, ACH payments typically incur a fixed fee, regardless of the transaction value. By using ACH payments for deposit payments, businesses can save money on transaction fees.

Minimized Chargebacks and Disputes

Credit card payments are vulnerable to chargebacks and disputes, which can negatively impact a business’s cash flow. Chargebacks occur when a client disputes a payment with their credit card company, and the payment is reversed. This can result in a loss of revenue and additional administrative costs for the business. In contrast, ACH payments are less susceptible to chargebacks and disputes. Once a payment is authorized and processed, it is more challenging for clients to dispute or reverse the transaction, resulting in more predictable cash flow.

Faster and More Reliable Payments

ACH payments are typically faster and more reliable than credit card payments, which can be subject to processing delays or issues. Once authorized, ACH payments are processed quickly, often within a day or two. This means that businesses can receive payment for deposit services promptly, allowing for smoother cash flow management. Additionally, ACH payments are more reliable than credit card payments since they are less likely to be declined due to issues such as expired cards or insufficient funds.

Less Administrative Burden

By using ACH payments for deposit payments, businesses can also reduce the administrative burden of managing AR. With ACH payments, businesses can set up recurring payments for deposit services, reducing the need for manual invoicing and payment tracking. This simplifies the AR process and frees up time and resources for other critical business activities.

Benefits of Requesting a Deposit

Apart from utilizing ACH for payment collection, businesses can adopt various strategies to optimize their cash flow. This deposit serves as an initial injection of funds, offering flexibility to cover expenses or capitalize on growth opportunities. Unlike an administrative fee, which focuses on generating higher margins, the deposit strategy directly contributes to enhancing cash flow within the business.

Improved Cash Flow

Charging a set up fee or requesting a deposit helps to improve cash flow management. By securing funds upfront, businesses can reduce the risk of delayed payments or non-payment from clients, which can impact cash flow. The upfront funds can be used to cover expenses and invest in growth opportunities, providing a cushion for the business to operate more smoothly.

Reduced Risk of Non-Payment

Another benefit of charging an upfront admin fee or requesting a deposit is that it reduces the risk of non-payment from clients. When clients pay a deposit or admin fee, they have a financial stake in the business relationship and are more likely to fulfill their obligations. This reduces the risk of late payments or non-payment, which can negatively impact cash flow and profitability.

Better Management of Expenses

By securing an upfront deposit or admin fee, businesses can better manage their expenses. They can use the funds to cover initial expenses such as equipment purchases, marketing, or other start-up costs. This reduces the need for businesses to take on debt or rely on credit lines to cover expenses, which can negatively impact cash flow.

Tracking Utilization Rates for Professional Services Companies

Professional services companies rely heavily on their workforce, and tracking utilization rates is critical to their success. Utilization rate refers to the percentage of time employees spend on billable work compared to their total available working hours. It is a key metric that reflects the efficiency of the workforce and the utilization of resources.

Methods for Tracking Utilization Rates

To track utilization rates, professional services companies can use time-tracking software, project management tools, or employee productivity monitoring tools. These tools allow businesses to track the time employees spend on specific tasks and projects, as well as their overall productivity.

Benefits of Tracking Utilization Rates

Tracking utilization rates provides numerous benefits for professional services companies. By tracking utilization rates, businesses can identify areas where improvements can be made to optimize their workforce and increase billable hours. This can result in higher revenue and profitability for the company.

Implementing Cost Control Measures for Professional Services Companies

Managing cash flow for professional services companies requires a focus on profitability and cost controls. Understanding profitability by client or project is crucial to identify which areas of the business are generating the most revenue and where costs can be controlled.

Detailed Financial Reports from Signature Analytics

Signature Analytics can provide professional services companies with detailed financial reports that break down revenues and expenses by client or project. These reports can help analyze profitability and make data-driven decisions. By identifying high-margin clients or projects and controlling costs, businesses can maximize their gross margin and SG&A (Selling, General, and Administrative) costs, resulting in improved cash flow.

Identifying High-Margin Clients or Projects

By analyzing financial reports, professional services companies can identify high-margin clients or projects. These are the clients or projects that generate the most revenue and have the highest profit margins. By focusing on these clients or projects, businesses can increase their profitability and improve their cash flow.

Controlling Costs

Controlling costs is another critical factor in managing cash flow for professional services companies. By identifying areas where costs can be reduced, businesses can improve their profitability and cash flow. Cost control measures can include reducing unnecessary expenses, negotiating better pricing with vendors, and optimizing resource allocation.

Final Notes

Signature Analytics can help streamline the accounts receivable process by recommending the collection of deposits through ACH, leading to reduced transaction fees, minimized chargebacks, and more reliable payments. Implementing strategies such as charging an upfront admin fee or requesting a deposit can also improve cash flow management, reduce the risk of non-payment, and better manage expenses. Tracking utilization rates and implementing cost control measures are critical in optimizing the workforce, identifying high-margin clients or projects, and maximizing profitability.

 To take your professional services company to the next level, consider working with Signature Analytics and implementing these cash flow management strategies. Let us help you improve your financial performance and achieve sustainable growth.

Learn more about our services, here. 

The Importance of Work-In-Progress Reporting

 

Join Zak Krauss and Brandon Manning as they explore the intricacies of estimating costs for construction businesses. Their main focus is the importance of work-in-progress (WIP) reporting.

Any seasoned construction business owner will tell you that understanding project budgets and estimated cost of completion is crucial. It’s more than just numbers; it determines the success of a construction project. When managing the process of estimating, a business owner has to address costs, contingencies, and change orders which can shift at a moment’s notice. It is imperative for construction businesses to be both agile and informed.

This is where WIP reporting comes into play.

WIP reporting provides a comprehensive understanding of what the final cost of a project will be. This includes all the change orders, the gains or shortfalls in estimating, and the remaining contingencies as the project moves closer to the finish line. WIP reporting is not just a tool for retrospective analysis. It’s forward-looking. With the insights drawn from this reporting method, businesses can make strategic adjustments, refining their estimating processes. It’s about learning from past projects and making informed decisions for the future. After all, every construction project is an opportunity to improve efficiency, and accuracy, and create better forecasting.

For construction businesses to thrive, they need more than just skilled labor and quality materials. They need the power of data and insights from tools like WIP reporting. As Krauss and Manning highlight, understanding your numbers today will set the stage for improved estimating and project management tomorrow.

Reach out to Zak and Brandon to see how the team at Signature Analytics can help your construction business to improve profitability and streamline operations through outsourced accounting and CFO business advisory services. 

In the dynamic world of Software as a Service (SaaS), understanding the financial pulse of a company is crucial for sustained growth and success.

In a recent episode of “SaaS Scaled,” Jason Kruger, a seasoned finance professional, sheds light on the critical interplay between finance and SaaS operations.

The Genesis of Signature Analytics

Kruger’s journey began in public accounting, where he observed a consistent pattern: businesses treating finance as a necessary but undervalued component. With Signature Analytics, founded in 2008, Kruger aimed to change this narrative by offering top-tier financial expertise on a fractional basis. The company’s mission is to provide the visibility and metrics that empower SaaS businesses to make strategic decisions and reach their growth potential.

Why “Analytics” and Not “Accounting”?

Signature Analytics was consciously named to emphasize the value of data analysis over mere accounting. Kruger believes in enabling businesses to make informed decisions through actionable metrics and real-time dashboards, which are particularly pivotal in the SaaS industry, known for its focus on metrics like churn rates and monthly recurring revenue.

Identifying the Ideal Client

Kruger and his team excel in collaborating with forward-thinking business owners who are determined to scale and grow. They support these visionaries by enhancing financial processes and providing the necessary leadership to ensure scalability, manage risk, and guide companies through various stages of their lifecycle.

Common Pitfalls and Strategic Planning

Many SaaS founders, according to Kruger, treat accounting and financial metrics as an afterthought, leading to potential cash flow issues. Signature Analytics emphasizes the importance of forward planning and cash management to avoid being caught off-guard by rapid growth or the need for additional investment.

The Entrepreneurial Mindset and Financial Leadership

The balance between optimism and pragmatism is delicate yet essential. Kruger stresses the importance of maintaining an entrepreneurial mindset while also implementing a structured, risk-assessed approach to financial decision-making.

On Taking the Leap

Reflecting on his own journey, Kruger acknowledges the leap of faith required to start a business. He underlines the importance of planning but also recognizes the entrepreneurial spirit needed to take calculated risks.

Recommended Reads for Aspiring Business Owners

To wrap up the conversation, Kruger recommends “Rich Dad Poor Dad” by Robert Kiyosaki for understanding the value of strategic partnerships and “Traction” by Gino Wickman for creating a structured framework to scale and manage a business effectively.

Jason Kruger’s insights remind us that while hope and optimism fuel entrepreneurs, it’s the strategic understanding and analysis of financial data that steer a SaaS company toward success.

[This summary is based on a conversation and aims to provide key insights. For the full dialogue, you can listen to the podcast episode embedded in this post.]

When it comes to construction businesses, precision in understanding your financials is not just helpful – it’s critical for survival and growth. This truth is vividly illustrated in a case story that Zak Krauss and Brandon Manning explore, demonstrating the powerful impact of knowing your margins.

The Backstory – Bidding Everything

A particular client, engaged in construction, took the approach of bidding on projects of all sizes, from the minuscule $5,000 jobs to the massive $3 million endeavors. However, a deep dive into the company’s financials revealed a startling pattern: the company was consistently losing money on projects below a specific financial threshold. Brandon Manning shares, “He wasn’t set up for efficiency in the smaller jobs, so every time he took on projects under a hundred thousand dollars, he was destined to lose.”

This was a revelation that shifted the entire strategy of the business. The larger projects had enough buffer to incorporate a higher profit margin, giving the company the wiggle room it needed to cover for inefficiencies and unexpected costs. On the contrary, the smaller projects were a drain, eroding the company’s profits.

Manager is using a laptop computer while analyzing the company's financial statements on the screen.

The A-Ha Moment and a Shift in Strategy

Brandon Manning reflects on the turning point: “Once we pinpointed the profitability tipping point, we advised the client to adjust their bidding strategy accordingly.” This strategic shift led to the client moving from a perilous financial position to a state of robust profitability.

The lesson here is clear: understanding which projects to pursue and which to pass can make all the difference. It’s not just about winning bids; it’s about winning the right bids that will add to your bottom line.

If you’re in the construction business, taking a closer look at your project margins might just reveal similar opportunities for a financial turnaround. It’s not about the volume of work; it’s about the value of work. Knowing where you make money and where you don’t is essential to making strategic decisions that will lead to sustainable growth and success.

Taking These Lessons and Applying Them to Your Own Company

This case story is a testament to how essential financial insights and analysis are in steering a construction company toward profitability. It’s a lesson many in the industry could stand to benefit from, and it underscores the importance of not just knowing your numbers, but understanding what they mean for your business’s future.

To get the full scope of how this client transformed their financial trajectory by understanding their margins, watch our discussion in the embedded video. It’s more than just a story; it’s a potential roadmap to your company’s success.

In nonprofit financial management, ensuring long-term stability and resilience is crucial. It’s not just about crunching numbers; it’s about understanding the intricate dynamics of cash flow and incorporating that understanding into your financial planning.  

In the video below,  Laura Bertagnolli, CPA, discusses why cash flow management is essential for nonprofit organizations. 

Why Managing Cash Flow is Important for Nonprofit Organizations

Nonprofit organizations have a unique set of financial challenges compared to their for-profit counterparts. While their primary mission is to serve their communities and further their charitable objectives, they must also ensure financial sustainability. One of the fundamental pillars of financial sustainability for nonprofits is effective cash flow management. 

Sustainability and Mission Continuity: The lifeblood of any nonprofit organization is its ability to carry out its mission effectively. A steady cash flow is essential to cover operational costs, pay staff, and fund essential programs and services. Without proper cash flow management, nonprofits risk interruptions in their operations, which can impede their ability to make a positive impact in their communities.

Budget Variability: Nonprofit funding often comes from a mix of sources, including grants, donations, and program fees. These funding sources can vary in timing and amount. Effective cash flow management helps nonprofits align their budgets with the actual cash they expect to receive, reducing the risk of budget shortfalls and financial strain.

Financial Planning and Forecasting: By incorporating cash flow management into their financial practices, nonprofits gain a clearer understanding of their financial health. This knowledge empowers them to plan for the future more effectively, anticipate challenges, and seize opportunities.

Contingency Planning: Nonprofits face external factors, such as economic downturns or unforeseen emergencies, that can affect their financial stability. Managing cash flow allows organizations to establish contingency plans and build financial reserves to weather unexpected challenges.

Credibility and Stakeholder Trust: Nonprofits are accountable to their donors, grantors, and the communities they serve. Demonstrating strong cash flow management and financial transparency enhances credibility and fosters trust among stakeholders. It reassures them that their contributions are being used effectively and sustainably.

Leveraging Opportunities: Cash flow management enables nonprofits to seize strategic opportunities as they arise. Whether it’s scaling successful programs, embarking on new initiatives, or making strategic investments, having a clear picture of available funds is essential for growth.

Strategic Decision-Making: Nonprofits that effectively manage cash flow are better positioned to make strategic decisions. They can allocate resources strategically, prioritize projects, and navigate financial challenges more effectively, ultimately advancing their mission.

“Nonprofits need to include a 12-month cash roll-forward to incorporate capital expenditures [and] any assumptions within the budget that give a different picture of the organization’s financial stability…. In fact, if you get to the point where you’re concerned really about what your cash flow is going to be, even over the next quarter, you’d want to institute a 13-week cash flow forecast, which is more in-depth.”

Businessman analyzing company's financial balance sheet working with digital augmented reality graphics. Businessman calculates financial data for long-term investment.

The Value of a 13-Week Cash Flow Forecast

A 13-week cash flow forecast is like a detailed financial map for nonprofit organizations. It offers several benefits:

Detailed Insights: Instead of a big picture, it provides a close-up view of finances over a quarter (13 weeks). This helps organizations see when money comes in and goes out in detail.

Early Problem-Solving: By looking ahead for 13 weeks, nonprofits can spot money problems early. This means they can fix things before they become big issues.

Cash Planning: The forecast helps nonprofits plan how they spend their money. It ensures they have enough for important things like salaries and bills.

Prepare for Emergencies: Nonprofits can use this forecast to make backup plans for unexpected money troubles. It’s like having an emergency fund for their budget.

Grant and Project Management: For nonprofits getting money from grants or events, the forecast helps them match when they get the money to when they need it for specific projects.

Smart Decisions: With a 13-week forecast, nonprofit leaders can make wise choices about starting new projects, expanding, or making other decisions that need money.

Cash Flow and Development Planning

Cash flow management plays a pivotal role in shaping the strategies of nonprofit organizations. 

Here’s how cash flow relates to development planning and why it’s a crucial aspect for nonprofit success:

Strategic Alignment: Nonprofits often set goals for program development, fundraising campaigns, and community outreach. Effective development planning relies on knowing when funds will be available. Cash flow management ensures financial resources are in sync with these strategic plans.

Program Expansion: For nonprofits looking to expand or launch new initiatives, understanding cash flow is essential. It helps identify periods when funds might be tight or abundant, allowing organizations to time their expansions effectively.

Fundraising Timing: Nonprofits frequently rely on fundraising efforts to support their programs. Cash flow insights help in choosing the right times for fundraising campaigns, ensuring that funds are available for immediate use when the donations come in.

Budget Adjustments: As the fiscal year progresses, cash flow analysis reveals whether an organization is on track with its budget or if adjustments are needed. This adaptability is key for making informed decisions and preventing financial shortfalls.

Mitigating Constraints: By closely monitoring cash flow, nonprofits can identify potential constraints in advance and take steps to address them. This proactive approach minimizes disruptions in program delivery.

Optimizing Giving Times: Nonprofits can strategically plan their fundraising campaigns during periods when giving tends to be higher. This approach fills in cash flow gaps and ensures stable funding.

In summary, cash flow management isn’t just about tracking dollars in and out; it’s a tool that empowers nonprofits to align their development plans with their financial capabilities. By utilizing cash flow insights, organizations can make strategic decisions, adjust their budgets, and ensure that they have the financial capacity to achieve their mission and expand their impact in the community.

Common Mistakes in Nonprofit Financial Management

Nonprofit financial management is a delicate balancing act, and while adopting best practices is crucial, it’s equally important to avoid common pitfalls that can hinder an organization’s financial health. Here, we’ll explore some of the prevalent mistakes in nonprofit financial management that nonprofits should be aware of.

“Mistakes made when nonprofits only look at the statement of activities, the 12 months that you planned on the budget, and not really doing the hard work to project out cash.”

Overlooking Cash Flow: One of the most common mistakes is focusing solely on the statement of activities and the annual budget while neglecting detailed cash flow management. Failure to project cash flow accurately can lead to unexpected shortfalls and financial stress.

Budget Rigidity: Nonprofits that adhere too strictly to their annual budget may find it challenging to adapt to changing circumstances. Budgets should be flexible enough to accommodate unforeseen expenses or revenue fluctuations.

Ignoring Reserves: Some nonprofits fail to establish and maintain adequate reserves. Without a financial safety net, organizations may struggle to navigate financial crises, resulting in compromised program delivery.

Insufficient Planning: Inadequate financial planning and forecasting can leave nonprofits ill-prepared to meet their obligations, pay staff, or seize strategic opportunities. Accurate and proactive financial planning is essential for sustainable operations.

Lack of Transparency: Failing to maintain financial transparency can erode stakeholder trust. Nonprofits must provide clear and comprehensive financial reporting to donors, grantors, and the community to maintain their credibility.

Misaligned Fundraising Efforts: Timing is crucial in fundraising. Not coordinating fundraising campaigns with the organization’s cash flow needs can lead to temporary imbalances and funding gaps.

Failure to Monitor Key Performance Indicators: Without effective key performance indicators (KPIs) and regular monitoring, nonprofits may miss early warning signs of financial challenges. It’s essential to have KPIs in place to track the organization’s financial health and performance.

Inadequate Financial Oversight: Nonprofits may lack the necessary financial expertise within their leadership or board. Proper financial oversight and governance are vital to ensure that financial management is effective and compliant with regulations.

How Signature Analytics Can Help Your Nonprofit

Signature Analytics’ nonprofit accounting services help you make financial decisions based on the highest quality accounting practices, while our day-to-day outsourced accounting teams implement the highest quality donor and government accounting standards.

For additional assistance with cash flow management, developing detailed nonprofit budgets, and audit support, contact Signature Analytics today.

In the construction business, the phrase “keeping the lights on” takes on a literal and figurative significance. Cash flow management extends beyond the individual project budgets—it’s the lifeblood of your entire operation. As Zak Krauss and Brandon Manning outline, it’s not just about ensuring there’s enough money to cover project costs; it’s about the overall financial health of your business, which includes the crucial overhead costs.

Overhead Costs and Retainage’s Impact on Cash Flow

Overhead costs encompass all the necessary expenses required to run your company, such as office rent, utility bills, administrative staff salaries, and their benefits. These costs don’t pause or fluctuate based on project success; they’re constant, demanding a steady cash flow to keep the business functional.

One aspect that’s often overlooked is the impact of retainers or retainage on cash flow. Contractors typically don’t receive the final 10% of a project’s payment until after completion, sometimes longer. Can your business sustain its overhead and continue to finance project costs while waiting for this final payment?

Robbing Peter to Pay Paul

Mismanagement of cash flow can lead a business into a perilous cycle. Utilizing profits or cash from ongoing projects to fund the completion of others, often referred to as “robbing Peter to pay Paul,” can create a snowball effect of financial stress. This is a precarious situation where a business finds itself constantly trying to catch up, a cycle that can rapidly escalate into a crisis if not managed correctly.

Proactive Cash Flow Planning

Effective overhead cost management in construction requires a robust understanding of your business’s financial landscape and proactive planning. It’s about having a clear view of your cash flow to cover both the project expenses and the ongoing costs of operating your business. This ensures that you’re not caught off guard by retainers or delayed payments, maintaining financial stability.

Understanding the nuances of cash flow, from project funding to overhead expenses, is vital. It allows for strategic decision-making that can keep your company from falling into risky financial patterns. By prioritizing cash flow management, construction business owners can secure their operations’ foundation, keeping those lights on and doors open for continued success and growth.

In a recent episode of the Management Blueprint podcast, Steve Brader talked with our very own Jason Kruger, President and Founder of Signature Analytics. Signature Analytics is an outsourced accounting firm specializing in elevating business performance through strategic financial direction. The conversation delved into various aspects crucial for small to medium-sized businesses aiming to optimize their finance function.

Jason’s Entrepreneurial Journey and the Birth of Signature Analytics

Jason Kruger’s entrepreneurial spirit was evident from the outset. However, he embarked on his career journey by honing his expertise in public accounting, notably with Deloitte. It was during these formative years that he observed a consistent challenge among small to mid-sized enterprises—a lack of robust accounting and finance mechanisms.

Redefining Finance’s Role: Moving Beyond a Necessary Evil

Many businesses, particularly in the mid-market, viewed finance and accounting as obligatory tasks—billing, paying invoices, or handling tax filing. However, Jason recognized that as these companies grow, they often falter due to the inadequacy of their financial functions. They struggle to present credible financials to investors or banks, hampering their progress. This realization prompted Jason to create a model that could deliver top-tier financial expertise to these businesses, transforming their perception of finance from a necessary evil to a value-driving asset.

Building a Strong Financial Framework for Small Businesses

One of the critical components discussed revolved around establishing a robust financial framework for smaller enterprises. At the core lies understanding cash flow—crucial for survival. However, beyond this foundation, focusing on the pillars of people, processes, technology, and reporting infrastructure becomes pivotal. These elements amalgamate to form a best-in-class finance and accounting function.

Leveraging Financial Data for Strategic Decision-Making

The conversation progressed to highlight the significance of harnessing financial data effectively. Jason stressed the importance of not just accumulating data but leveraging the right metrics to facilitate informed decision-making. Understanding margins, product lines, and market benchmarks emerged as vital components that enable businesses to fine-tune their strategies for enhanced profitability.

Technology’s Role: Power BI and AI in Financial Reporting

In today’s digital age, technology plays a pivotal role. Jason shed light on the significance of tools like Power BI, which consolidates information from various systems, offering real-time insights. Moreover, the incorporation of Artificial Intelligence (AI) in financial reporting simplifies repetitive tasks, creating efficiencies, and paving the way for strategic analysis.

Preparing Businesses for Exit Strategies

An area often overlooked but critical in the business landscape is exit strategies. Jason emphasized the need for businesses to have clean, transparent financials, crucial when seeking a potential sale or scaling up operations. Presenting robust financial information maximizes the value of the business in the eyes of potential buyers.

Connecting with Signature Analytics

For small to medium-sized enterprises seeking financial guidance and aiming to optimize their operations, Signature Analytics emerges as a beacon. Jason’s insights shed light on the firm’s approach, emphasizing long-term relationships and maximizing value for clients.

Conclusion: The Road to Financial Excellence

In wrapping up the discussion, the importance of solid financial infrastructure, strategic reporting, and leveraging technology for financial prowess was underscored. Jason’s passion for enabling businesses to thrive through financial expertise resonated throughout the conversation.

For project managers in the construction industry, making informed decisions is crucial, particularly when it involves financials and maintaining healthy subcontractor relationships. Brandon Manning and Zak Krauss dive into the nuances of managing project contingencies and the delicate balance of handling change orders.

Managing for the Long Game

Understanding the current financial standing of a project, including the remaining contingency, is essential for project managers. It can dictate whether it’s time to tighten up on subcontractors or if there’s wiggle room for flexibility. While the goal is to control change orders and match them with the owner’s approvals, there are times when maintaining a good relationship with a subcontractor may take precedence. “It’s about the long game,” Manning says, emphasizing the importance of relationships in construction projects.

Profitability Impacts

Change orders have a deep impact on a project’s profitability. Granting concessions to a subcontractor might mean digging into the projected profit margins. For example, a seemingly small change order can reduce a projected 30% margin down to 25%. This is why understanding the financial implications of every decision on-site is critical.

The Balance with Subcontractors

Striking the right balance between financial prudence and strategic relationship management is essential to both profitability and relationship building in the industry. Project managers must be well-versed in the project’s financial standing at every stage to make decisions that benefit both the current project and future collaborations.

For construction businesses seeking to optimize their project management strategies and maintain profitability, managing contingencies and navigating the complexities of change orders helps to preserve crucial subcontractor relationships and your bottom line.

Nonprofits share something truly special – a powerful mission that unites people. The attraction to nonprofit organizations is deeply rooted in the love for their purpose and mission. This shared purpose not only shapes a great culture but is also a compelling reason why many of us are drawn to this space.

Check out the video below for insight on how nonprofits can create a strong foundation of people, process and technology to drive success:

Navigating the Family-Like Atmosphere

Nonprofit organizations are unique in their ability to foster a familial atmosphere among their team members. This sense of unity and purpose is a beautiful aspect of working in the nonprofit space. People are drawn to these organizations not just for a job but because they deeply resonate with the mission and vision. This shared purpose creates a culture of passion and dedication that’s hard to replicate in other sectors.

However, this family-like culture, while a tremendous asset, can also present challenges. It’s not uncommon to find individuals within nonprofits who bring unwavering dedication and enthusiasm to their roles but may lack the necessary expertise or skills required for their positions. Their commitment to the mission is commendable, but the absence of expertise can hinder the organization’s ability to fulfill its mission effectively.

“The beautiful thing about working in the nonprofit space is there’s a mission that ties people together.”

It’s essential to strike a balance between passion and expertise. To achieve success, nonprofits must ensure that their team members have the right skills and knowledge to carry out their roles effectively. This involves identifying areas where additional expertise is needed and providing opportunities for ongoing training and development.

businessman working in office with using calculator and laptop. concept finance and accounting

The Cracked Foundation Dilemma

The foundation of a nonprofit organization is its financial stability and operational efficiency. Just as a building with a weak foundation is at risk of crumbling, nonprofits with financial instability can struggle to deliver on their programmatic commitments. This represents a significant dilemma for nonprofit leaders, as the success of the organization’s mission is at stake.

To address the “Cracked Foundation Dilemma,” nonprofits should:

Set Realistic Financial Goals: Establish clear financial goals that align with the organization’s mission. Ensure that these goals are realistic and achievable.

Monitor Financial Health: Regularly monitor the financial health of the organization by analyzing financial statements, budgets, and performance metrics. Identify areas of weakness that need attention.

Allocate Resources Wisely: Ensure that financial resources are allocated in a manner that supports the organization’s mission. Prioritize programmatic initiatives and allocate funds accordingly.

Rigorous Financial Management: Implement rigorous financial management practices, including accurate reporting, compliance with accounting standards, and efficient use of resources.

Foster a Culture of Financial Responsibility: Instill a culture of financial responsibility throughout the organization, emphasizing the importance of each team member’s role in maintaining financial stability.

By recognizing the significance of a strong financial foundation and taking these steps to address financial challenges, nonprofits can ensure that they are well-equipped to fulfill their missions and make a meaningful impact on the communities they serve.

The Importance of Expertise and Passion

Ensuring that the right expertise is in place is paramount. Nonprofits thrive when passionate individuals with the required expertise are in the right roles. Signature Analytics conducts comprehensive people assessments when partnering with organizations to identify areas where expertise and tools are needed to make a meaningful impact.

Documenting Processes for Continuity

Turnover situations can create confusion when departing staff leave behind little or no process documentation. To address this, it’s essential to create formal Standard Operating Procedures (SOPs) to ensure that processes are well-documented and can be smoothly replicated even in the absence of a particular team member.

The Password Management Challenge

Password management is a critical aspect that deserves attention. Secure systems for managing passwords are vital to maintain operational continuity during staff transitions. Having accessible and well-organized passwords safeguards the organization’s stability and minimizes risks associated with staff turnover.

In the nonprofit sector, the powerful culture of shared purpose is a driving force. It fuels dedication and passion, but it must be balanced with the right expertise and documentation to ensure a strong foundation. By placing the right people in the right roles, documenting essential processes, and managing passwords effectively, nonprofits can safeguard their missions and ensure they continue to make a meaningful impact.

How Signature Analytics Can Help Your Nonprofit

Signature Analytics’ nonprofit accounting services help you make financial decisions based on the highest quality accounting practices, while our day-to-day outsourced accounting teams implement the highest quality donor and government accounting standards.

For additional assistance with cash flow management, developing detailed nonprofit budgets, and audit support, contact Signature Analytics today.

For construction companies, efficient operations, and accurate financial reporting are vital to success. In this video, Zak Krauss and Brandon Manning, construction specialists at Signature Analytics, discuss how to choose the right ERP, what to look for, and what to expect. Step one is to assess company processes and technological needs.

A top-notch construction ERP should be tailored primarily for construction operations, not just accounting. The ideal ERP is about what works best for the construction team, ensuring smooth data flow from the field to finance.

“You really want to see what is the best thing for that operations team and what fits their processes best so that information flows to accounting in a good way. But you want to look for a construction ERP that does accounting well rather than an accounting system that does construction well.”

While accounting is crucial, the primary goal is to select an ERP that aligns with the construction team’s needs. The right ERP system can streamline operations, enhance financial reporting, and ultimately drive business success.

Want to see how an outsourced accounting team from Signature Analytics can help you improve profitability and make smarter business decisions? Reach out to Zak and Brandon and start the conversation. 

Laura Bertagnolli, an invaluable member of the Signature team, brings a wealth of experience and passion for the nonprofit sector. With nearly three years at Signature and a remarkable 11 years of nonprofit expertise, Laura’s commitment to strengthening nonprofits and building a solid foundation shines brightly.

Learn more about Laura in the video below:

A Background Rooted in Nonprofit Commitment

“I’ve been with Signature for three years, and I just feel very thankful to be able to work in the non-profit space at Signature.”

Laura’s journey is a testament to her dedication. She spent eight years working full-time within nonprofit organizations before joining Signature. This background provides her with a deep understanding of the unique challenges and opportunities that nonprofits face. It’s this experience that allows Laura to bring her talents and gifts to the table effectively.

A CPA Making a Difference

As a Certified Public Accountant (CPA), Laura leverages her financial expertise to help nonprofits thrive. Serving as the CFO for two large nonprofits and collaborating with several others, she plays a pivotal role in ensuring their financial health. Sometimes, she steps into the CFO role, while at other times, she provides advisory support to existing CFOs.

Group of volunteers working in community charity donation center.

A Team Leader and Advocate

Laura is not only an accomplished CFO but also a leader. She guides internal teams within nonprofits and plays a crucial role in the Signature team, offering unwavering support to their nonprofit clients. Her comprehensive approach ensures that nonprofits receive the assistance they need, whether in the form of advisory services or direct financial leadership.

Laura Bertagnolli’s work within the nonprofit space epitomizes the power of individuals who are committed to making a difference. Her blend of financial expertise, nonprofit experience, and leadership skills empowers nonprofits to achieve their missions and create a lasting impact in their communities. We are grateful to have Laura as an advocate for the nonprofit sector and a valued member of the Signature team.

Learn More About the Signature Analytics Team

We believe that smart business decisions start with excellent day-to-day financial management.  To run your business well and make the best decisions possible,  you need reliable financial insights. Whether your company is growing or pivoting or if you’re simply looking at the landscape and engaged in scenario planning, we can help ensure your decisions are being made based on real numbers.

With an outsourced accounting team from Signature Analytics, you get accurate, relevant, and timely reporting and financial insights to help you make smart business decisions.

Learn more about us, here.

In a recent episode of the Business Choreography Podcast, hosted by Michael Johnson, I, Jason Kruger, founder of Signature Analytics, discussed the intricacies of finance and the pivotal role rigorous accounting processes play for businesses.

Listen to the entire podcast here:

Here are some notable insights from our conversation:

Before starting Signature Analytics, I accumulated a diverse range of experiences in the finance domain, notably in financial audits. While at global firms like Deloitte and Touche, my primary mission during those financial audits was to instill confidence in banks and equity investors about a company’s financials.

A Gap in the Market:

I noticed a recurring trend among small to mid-market businesses. Numerous owners viewed accounting and finance merely as obligatory tasks, concentrating mainly on routine chores like bill payments, invoicing, and yearly tax preparations. But as these enterprises expanded, the shortcomings of this basic approach became evident. Owners started identifying the crucial challenges of making strategic decisions without precise and updated financial data.

Signature Analytics’ Mission:

To address this, I founded Signature Analytics in 2008. Our company offers outsourced accounting and CFO advisory services, tailored to fit the distinct needs of each client. Understanding that not every enterprise necessitates a full-time executive accounting team, we furnish a flexible, fractional solution. Our foremost objective is to equip businesses with precise financial insights, ensuring leaders can make decisions that spur growth. We integrate seamlessly with existing teams, emphasizing the significance of financial data in making pivotal decisions spanning operations, sales, and marketing.

Organic Growth and Expansion:

I began with just a computer, resonating with the hurdles many budding entrepreneurs face. Over time, I prioritized building a resilient foundation, leading me to grow and diversify our team. Today, Signature Analytics boasts 80 to 85 full-time members, serving 80% of our clientele remotely. We’ve positioned ourselves as trustworthy allies for our clients, steering them towards success via a deep understanding of their financial dimensions.

“Audit” is not necessarily a dirty word

It’s common for business owners to shudder at the term “audit”, often linking it with the IRS. However, it’s vital to grasp that audits can be advantageous. They give third parties a solid assurance about a company’s fiscal health. These assessments benefit a spectrum of stakeholders, from boards to investors and financial institutions. An audit validates adherence to accounting best practices. If discrepancies or issues arise, auditors highlight these, albeit with terms like “deficiencies”. Yet, these pinpoint areas ripe for refinement. The ultimate aim is for proprietors to trust their financials, streamlining decision-making. We at Signature Analytics don’t conduct financial audits. Instead, we bolster businesses in their internal accounting endeavors, ensuring smooth audits by furnishing accurate and timely data.

What is “Fractional” Accounting?

The “fractional” trend is gaining traction. At Signature Analytics, we use “fractional” and “outsourced” synonymously. Essentially, “fractional” signifies accessing specialized skills for the precise duration that aligns with your business’s immediate needs. Thus, if a full-time CFO isn’t the right fit, a fractional solution might be ideal. Business owners must ensure their teams possess the requisite expertise, even if not on a full-time basis. Though hiring a CFO can be an investment, they bring indispensable knowledge. Many SMEs recruit one individual for varied financial duties, which can lead to inefficiencies and possible inaccuracies. Employing a full-time CFO for smaller firms might result in them managing rudimentary tasks, which isn’t economical.

Our strategy is to delineate roles based on a client’s existing team, and fill gaps fractionally. Businesses may not always require a full-time CFO, but they invariably need strategic counsel. For instance, a manufacturer might be oblivious to their products’ exact profit margins. With fractional expertise, companies gain access to accurate data, fostering informed decisions, whether it’s promoting a high-margin product or enhancing a lower-margin one.

The Signature Analytics 5-Step Process

Onboarding an outsourced accounting team can be daunting. How will the process unfold? How long will onboarding take? Will the fit be right? At Signature Analytics, we’ve established a five-step process for our engagements to streamline the transition.

Understanding the Business: 

We begin by grasping the enterprise from the owner’s viewpoint, discussing aspirations, schedules, and how fiscal data influences choices.

Existing Team Evaluation: 

Before instigating changes, we liaise with the current team, understanding roles, efficacy, and challenges, aiming to bolster, not replace.

Four Critical Areas we evaluate are:

  1. People
  2. Internal accounting and finance Processes
  3. Technology and how it’s utilized
  4. Reporting infrastructure

Strategic Planning: 

Post-assessment, we craft a 3-6 month action plan. This could encompass reformatting data, refining reporting methods, or even tidying current financial data.

Structured Reporting: 

Based on the firm’s demands, we establish daily, weekly, or monthly report structures, enhancing visibility into operations.

Long-term Goals: 

As time progresses, our goal is to instill confidence in businesses regarding their fiscal functions.

Optimization is a journey, not a destination. By setting clear expectations, prioritizing tasks, and ensuring costs align with value, we aim to guarantee both immediate results and enduring success.

Being an entrepreneur is a thrilling journey. The smartest move to ensure success is self-education, and understanding the nuances of your venture. At times, it entails roping in external talent for specialized insights. If I had to encapsulate the essence of running a thriving business, it would start with “Cash is king.” It’s not a cliché. Grasping your cash flow, its sources, and future requisites is paramount. Every business is unique. So, acquaint yourself with your enterprise, be humble, and surround yourself with the right expertise to make informed decisions rooted in reliable data.

By: Jason Kruger, President & Founder at Signature Analytics

In October I appeared as a guest on the “SaaS Scaled” podcast, hosted by Arman Eshraghi, CEO and Founder of Qrvey, provider of embedded analytics for SaaS applications. Arman and I discussed common accounting mistakes, developing KPIs collaboratively, where successful SaaS CEOs spend most time, and more.

You can watch or listen to the podcast here and I covered some highlights of our discussion below.

What accounting mistakes do SaaS founders commonly make?

A common mistake is that business owners are living day by day without adequate forward-looking planning.

 

If the goal of a business is to grow and eventually have some level of exit, we always want to focus on maximizing enterprise value. Think not only about where we are today, but where we’ll be in the future. I often see that accounting is an afterthought or the metrics of the business and how they evaluate success are afterthoughts because they’re just trying to grow and retain the client base.

 

Client growth and retention are big metrics, but ideally, we should identify all the metrics up front, and really understand cash flows, specifically:

  • How much cash do you have now and how long will it last?
  • Do you have a cash burn rate or is cash depleting over time?
    • If so, we need to start thinking about that now and how we’re going to manage it.
  • Do you need a capital infusion?
  • Do you need to bring in additional investors?
  • Can you get financing in some way, or will your revenue growth be enough? 

 

Cash flow management is critical. We must understand that in advance so we can plan for the future.

What’s forecasting looking like so we can appropriately manage and grow the business? Let’s make sure we have the metrics in place now to evaluate the business. That creates enterprise value, so when we go to a third party, we look like a competent, well-run business that investors and third parties will be interested in partnering with.

 

How do you balance CEO optimism with necessary pragmatism?

At Signature Analytics, we want to understand and evaluate risk, but we also want to have an entrepreneurial mindset like our clients. We don’t want to come in and say, “Well, here are all the risky things and you can’t do anything,” because that’s the opposite of an entrepreneur mindset. 

 

Our mindset is, here we are today and here’s where we want to go. How are we going to accomplish that? Let’s make sure we have a roadmap where we can see growth and success. And so, on our team, we have CFO-level support and business advisory support to be that sounding board for our CEO and entrepreneur clients, so they can leverage expertise that they don’t have. 

 

What’s important for any business is also scalability. We want the business owner to be focused on what they know best. Many business owners and CEOs are caught up in spending time in accounting and finance, operations, or HR which is not the best use of their time. And they know it, but they have nobody else to support them. So, financial leadership is important. We want to provide financial leadership to take that off the plate of the CEO so they can focus on what they do best. Their expertise really is in achieving the goals of the business.

 

Where do successful SaaS CEOs spend the most time?

Most companies don’t have the resources to hire full-time C-level experts in sales, finance, marketing, HR, operations, etc. and so we want to make sure we understand the best path forward. Can we leverage certain resources on a part-time or fractional basis? What’s the skill set of the CEO? And then over time, we can build out the support team based on the performance of the business in alignment with leadership’s goals.

 

Ideally, it’s a slow process of delegation. Know every aspect of your business, but bring in expertise in every area to help you to grow to the next level.

 

How do you avoid viewing metrics in silos?

Sales, marketing, and operations should all work collaboratively with the CEO to develop metrics that define success. The metrics then define the activities moving forward. We have to understand the financial impact to make sure the businesses can support the activities. For example, if sales decides we want X level of growth in the next 6 months, and we need to hire 5 more salespeople, that’s a cost to the business. So, we need to then decide when to hire them, what activities they’ll perform, and when we should expect to see the impacts.

 

We want to be able to model it out so we understand from a financial perspective, can the business support that? If the business can support that through current cash flows, how long is the runway? And we have to measure against those expectations. If the expected returns are slower, then we have to adjust our financial model to make sure we have the necessary cash flow.

 

We also need to consider when to bring in additional investors, if at all. So, the metrics and the decisions that are made need to be modeled out in a forecast or a budget so we can see the impacts. We can then measure the success of what’s happening in each department and measure success against what we anticipated and then continue to make decisions accordingly. 

 

And I don’t like to use a strategy of hope when running a business. We want to understand how we’re going to react in different situations, so we have the time and the runway to react in a positive way to keep things moving forward.

Overall, building and running any company is a tough job.  You need insights into so many different areas and so much expertise to support you.  I started Signature Analytics because finance and accounting is my area of passion and expertise and providing that to companies as an outsourced partner is a great way to share that. It’s really interesting working side by side with founders and seeing their passion, and their drive and helping them grow. 

Have you ever wondered what drives the leaders of today? On the recent episode of ROI’s Into the Corner Office Podcast hosted by Brandt Handley, we had the pleasure of delving into the life and career of Jason Kruger, the president and founder of Signature Analytics. Jason’s perspective on business and accounting is changing the way owners operate, guiding them to better productivity, profitability, and smarter business decisions.

 

The Foundation of Business: Understanding Numbers

Jason’s narrative isn’t just about a singular focus on numbers. It’s about the combination of experience, personal values, exposure, and an undying passion for business.

In Jason’s Words: 

A Hands-on Start in Public Accounting

It’s true, the beginnings in public accounting felt like drinking from a fire hose. Fresh out of college, you’re plunged into the intricate world of accounting. To compare it to a trade seems apt; it’s a craft that demands both proficiency and patience. But mastering this trade is only part of the challenge. Being a professional extends beyond just honing technical skills—it involves cultivating effective communication, timeliness, and the adeptness to achieve desired results.

The initial years are a steep learning curve. However, with the right guidance, I quickly transitioned from a neophyte to someone capable of mentoring newcomers. Approximately two years into my journey, I began to manage fresh graduates, fostering their development and ensuring the success of our shared engagements. This managerial role also meant collaborating closely with seniors, including the audit manager and partners.

Early Management Challenges

Managing people in a professional setting was a novel experience. While my past roles, like officiating basketball games, taught me the importance of managing expectations, dynamics, and outcomes, corporate management had its unique challenges. Effective communication became the linchpin of my managerial approach. It’s vital to offer guidance and oversight but equally crucial to empower team members, allowing them room to succeed, and occasionally, falter. This balance ensures they grow without compromising the engagement’s success.

The 2008 Decision: Leaving Deloitte & Founding Signature Analytics

Leaving Deloitte during the 2008 economic downturn might’ve seemed audacious to many. The global economic landscape was in turmoil, but my resolution was unwavering. With supportive circumstances at home and an entrepreneurial fire within, I knew it was the right time. The initial news of Lehman Brothers’ collapse was shocking, but with no revenue or employees yet, I felt I could only ascend from that point.

The core motivation for establishing Signature Analytics was clear. My time at Deloitte had shown me a glaring gap in the mid-market sector. Many of these companies viewed accounting as just a routine, overlooking its potential as a tool for strategic insight. They had a vague idea of their overall margins but lacked a detailed understanding, limiting their ability to make informed decisions. Many were still reliant on basic bookkeeping, and inadequately prepared for interactions with banks or investors.

Introducing Signature Analytics

At its heart, Signature Analytics is all about value enhancement. Unlike traditional services from firms like Deloitte, we focus on augmenting a client’s accounting and finance functions. We assess their teams, refine their processes, and bolster their technological and reporting capabilities. Our goal is to transform accounting from a mundane task into a strategic asset, equipping companies with timely insights that inform decision-making.

For the mid-market, our solutions have been game-changing, blending thoroughness with scalability, and providing them with the top-tier expertise they deserve.

Businessman working on Desk office business

Our Takeaways: 

Efficient Accounting for Middle Market Companies

The hallmark of an efficient accounting process lies in a system that is both robust and streamlined, providing accurate and timely information. For mid-market companies, which often have more complex needs than smaller businesses but lack the resources of large enterprises, achieving this can be particularly challenging. Here are a few key markers of an efficient process:

Peace of Mind for the Business Owner: One of the most telling signs is the comfort and confidence the owner feels about their financial situation. They shouldn’t be worried about imminent financial obligations like payroll or doubt the liquidity and cash flow status.

Consistent and ARTful Reporting: The financial reports a business owner receives should be Accurate, Relevant, and Timely (ART). This ensures they can make informed decisions.

Rigorous Internal Processes: Closing the books consistently, maintaining detailed supporting schedules, and ensuring oversight of payments are integral components.

Effective Team Support: A robust lower-level team, managed and supervised properly, ensures smooth operational flow. This also involves processes for invoicing and payments that optimize cash flow.

Cash is King: Jason’s emphasis on cash flow underscores its paramount importance. Effective management of cash flow enables reinvestment and data-driven decision-making.

Metrics for Profitability

Gross Margin: A fundamental metric, the gross margin is the difference between sales and the cost of goods sold. Understanding this margin, especially in the context of the industry, provides insights into profitability.

Expense Management: Keeping a close watch on expenses can lead to substantial savings. Tech stack costs, for example, can spiral out of control. An audit of these costs can reveal wastages and areas of renegotiation.

Leadership Evolution

Jason’s leadership journey reveals insights valuable for any aspiring leader:

Humble Leadership: Recognizing that one doesn’t need to be the smartest in the room, but rather, needs to surround themselves with expertise.

Holistic Business Understanding: A CEO doesn’t need to be an expert in every business function, but they need to grasp each aspect. This knowledge ensures they can effectively guide and manage their teams, even if those teams have deeper expertise in their respective fields.

Advice for Aspiring Entrepreneurs

Some invaluable advice for those eyeing the corner office or looking to become entrepreneurs:

Full Commitment: Business owners have to have full commitment to achieve success. Those who dabble or try to juggle multiple ventures often find it challenging to succeed in any.

Willpower is Essential: Even when the results aren’t immediately visible, determination and a long-term vision can lead to eventual success. Willpower can propel individuals a long way.

Continuous Learning: CEOs or business leaders don’t need to be experts in every field, but they should possess a basic understanding of all aspects of their business, from finance to marketing. Hiring experts is essential, but having foundational knowledge enables better decision-making.

Expertise is a Game-Changer: Signature Analytics brings expertise to the table, helping CEOs understand their numbers better.

In Conclusion:

Jason’s journey from Deloitte to starting his company, Signature Analytics, underscores the importance of adaptability, commitment, and continuous learning. Whether you’re aiming for the corner office or striving to be a successful entrepreneur, understanding every facet of your business, communicating effectively, and surrounding yourself with the right people who have the right expertise are critical components of success. It’s not about being the smartest in the room but being the most dedicated, adaptable, and knowledgeable.

Learn More About Signature Analytics

Outsourcing accounting services can provide businesses with a cost-effective and flexible solution to managing their financial operations. With Signature Analytics, businesses can access a full-service accounting team that can provide expert advice, improved accuracy and compliance, and increased focus on core business functions.

 

Contact us today to learn more about our services and how we can help your business thrive.

Audits can be daunting for nonprofits. The scrutiny, compliance, and potential penalties can stress even well-managed organizations.

But the work doesn’t end with the audit.

After the audit, it’s essential not to just breathe a sigh of relief and move on. There’s more to do to keep your nonprofit in good standing and ready for future audits.

In this guide, we’ll take you through the crucial steps of post-audit cleanup, offering insights and tips to help you navigate this critical phase with ease.

Phase 1: Review and Correct

The first step in the post-audit cleanup process is to carefully review the audit findings. The audit report, provided by the auditing firm, serves as a roadmap to understanding what went well and what needs attention. It outlines any areas of concern, potential issues, or compliance discrepancies that were identified during the audit.

This review phase is critical. It provides you with the opportunity to gain a deep understanding of the specific issues that were flagged during the audit. Armed with this knowledge, you can move forward with confidence, knowing exactly where improvements are needed.

Once you’ve identified the areas that require attention, it’s time to roll up your sleeves and correct any errors or discrepancies. This may involve reconciling financial records, addressing compliance issues, or making adjustments to internal controls. It’s essential to ensure that your corrective actions are not only effective but also well-documented and traceable.

Phase 2: Plan and Improve

With a clear understanding of the issues at hand, the next step is to create an action plan. This plan should be based on the audit findings and outline specific steps, responsibilities, and timelines for implementing improvements.

In essence, you’re mapping  out your organization’s financial health. You may need to involve key staff members, board members, and financial experts to ensure a comprehensive approach. The goal is to prevent similar issues from arising in the future by implementing proactive changes.

Additionally, it’s essential to focus on strengthening your internal controls. Auditors often assess these controls to gauge the risk of financial mismanagement or fraud. Review your financial policies and procedures, and make necessary updates to enhance transparency and accountability. Stronger internal controls not only mitigate risks but also build confidence among stakeholders.

Phase 3: Communicate and Educate

Effective financial management is a team effort. To ensure that everyone in your organization understands their roles and responsibilities regarding financial compliance, invest in training and education for your staff and board members. This proactive approach not only helps prevent errors but also fosters a culture of financial accountability.

Transparency is a cornerstone of good governance in the nonprofit sector. If the audit findings and corrective actions have a significant impact on your organization’s stakeholders, it’s essential to communicate openly and honestly with them. Provide updates on the steps you’re taking to address the issues and reassure them of your commitment to financial responsibility.

Phase 4: Update and Monitor

Your journey through the post-audit cleanup isn’t complete without updating your financial policies and procedures. The lessons learned from the audit should inform this process. Ensure that your financial policies are not only compliant with regulations but also reflect best practices for financial management within the nonprofit sector.

Regular monitoring of progress is crucial to maintaining the gains made during the cleanup phase. Keep a close eye on the implementation of your action plan and internal control enhancements. This ongoing diligence allows you to catch and address issues before they become major problems. Consider conducting periodic internal audits or assessments to ensure ongoing compliance.

Phase 5: Seek Professional Guidance (As Needed)

Sometimes, despite your best efforts, implementing corrective actions or navigating complex financial matters can be challenging. In such cases, don’t hesitate to seek professional guidance. 

At Signature Analytics, we have an entire team dedicated to serving nonprofits through outsourced accounting and CFO-level business advisory services. Learn more about what we do for nonprofits, here.

Phase 6: Prepare for Future Audits

The best way to survive future audits is to be proactive. Maintaining accurate financial records, staying up-to-date with regulatory changes, and continuously improving your internal controls are crucial. Consider conducting a self-audit periodically to identify and address potential issues before they are flagged by external auditors. Being well-prepared not only reduces the stress of future audits but also demonstrates your commitment to financial transparency and accountability.

The Benefits of Post-Audit Cleanup

Post-audit cleanup may seem like a daunting task, but its advantages extend far beyond mere compliance. It’s a proactive investment in the overall financial health and credibility of your nonprofit organization. In this section, we’ll explore the key benefits of conducting a thorough post-audit cleanup.

1. Enhanced Financial Accuracy

By diligently addressing errors, discrepancies, and compliance issues uncovered during the audit, you significantly improve the accuracy of your financial records. This newfound precision ensures that your financial statements more faithfully represent your organization’s financial standing.

2. Improved Transparency

Transparency is essential for building trust with donors, stakeholders, and the community at large. A commitment to addressing audit findings transparently signals responsible financial management, fostering confidence in your organization.

3. Strengthened Internal Controls

Post-audit cleanup is an opportunity to fortify your nonprofit’s internal controls. By reviewing and updating financial policies and procedures, you reduce the risk of financial mismanagement, fraud, and operational errors.

4. Proactive Risk Mitigation

Taking prompt corrective actions post-audit is a form of risk mitigation. It helps prevent recurring issues and potential legal or regulatory consequences, saving your organization from costly penalties and disputes.

5. Long-Term Financial Health

Above all, post-audit cleanup contributes to your nonprofit’s long-term financial health. Clearer financial records and robust internal controls provide a solid foundation for sustainable growth, allowing your organization to advance its mission effectively.

How Signature Analytics Can Help Your Nonprofit

Signature Analytics’ nonprofit accounting services help you make financial decisions based on the highest quality accounting practices, while our day-to-day outsourced accounting teams implement the highest quality donor and government accounting standards.

For additional assistance with cash flow management, developing detailed nonprofit budgets, and audit support, contact Signature Analytics today.

In the world of construction accounting, managing the sprawl of information can be a daunting task. Zak Krauss and Brandon Manning are familiar with the scenario: all the pieces of financial and operational management are scattered, timecard systems are isolated, project management lives on an island, while purchase orders and job estimates are completely siloed. This fragmented landscape of data and processes can feel overwhelming, making it challenging to grasp the complete financial picture of your construction projects.

The Value of an ERP

The introduction of Construction ERPs (Enterprise Resource Planning systems) has been a game-changer in addressing information sprawl. Yet, as Krauss and Manning highlight, the value of an ERP system is directly tied to the effort and information you invest into it. Implementing an ERP system is more than an accounting upgrade—it’s a full-scale operational commitment requiring the engagement of the entire team, from accounting and administration to project managers and senior leadership.

 

Adopting an ERP system is not merely for the convenience of the accounting department; it’s a strategic move for the on-site teams. It empowers project managers and field staff with real-time insights, granting them a higher degree of control and ownership over their projects.

 

The success of integrating such a system lies in the details of process definition and the rigor of process mapping. Communicating these processes is crucial—not just to project managers, but all the way down the chain to the foremen and crew on the ground. Each team member’s buy-in is essential. They need to understand that accurate and efficient data input at the source is foundational for the entire system’s efficacy.

 

Good Data in Equals Good Reporting Out

Krauss and Manning stress the importance of accuracy from the get-go. Inaccuracies at the data entry point can ripple throughout the system, making it more challenging for project managers to manage their responsibilities effectively. Subsequently, this leads to the finance team grappling with unreliable data, complicating the analysis needed to build out crucial financial reports and job cost analyses.

Bringing Data Sources Together

To master information sprawl, Krauss and Manning suggest a holistic approach where every individual understands their role in the data ecosystem. From the moment information is captured in the field, through the various levels of review by project managers, all the way to the final financial analysis—each step must be meticulously planned and executed.

 

This concerted effort to streamline information flows and processes is not just about keeping numbers in check. It’s about enhancing the operational efficiency of the entire business, which in turn, drives better decision-making and, ultimately, the profitability of the business.

 

For construction companies ready to tackle information sprawl head-on, the message is clear: it takes a village, or in this case, the entire company, to realize the full benefits of an ERP system. With commitment and clear communication, construction businesses can leverage these powerful tools to gain a competitive edge through superior project management and financial insight.

Nonprofit organizations play a vital role in our communities by addressing various social issues and causes. However, many of these organizations tend to focus on their audits, budgets, and compliance items, often neglecting the strategic aspect of their operations.

In this blog post, we’ll explore the importance of Key Performance Indicators (KPIs) for nonprofits, shedding light on both financial and non-financial metrics that can guide their success and impact.

The Diversity of Key Performance Indicators

Nonprofit organizations come in all shapes and sizes, each with its unique mission and goals. Consequently, the KPIs they should track can vary widely. It’s important to understand that KPIs can be divided into two broad categories: financial and non-financial.

Financial KPIs

Financial KPIs are essential for every nonprofit. These metrics are often standardized and can be applied across both for-profit and nonprofit organizations. They provide a clear picture of an organization’s financial health. Some of the key financial KPIs include:

Program Expenses: This metric looks at the percentage of expenses dedicated to your core mission and programs. It’s a critical indicator that demonstrates your commitment to your cause.

Administrative Expenses: Administrative expenses as a percentage of total expenses help donors assess how efficiently your organization is managed. Lower administrative expenses indicate more resources directed towards your mission.

Fundraising Expenses: Similar to administrative expenses, this metric measures how efficiently you raise funds. Donors want to see that a substantial portion of their donations directly supports your programs.

Debt and Liabilities: Monitoring your debt and liabilities in relation to total assets is crucial. This is a metric often measured by organizations like Charity Navigator and GuideStar, which donors use to evaluate your financial stability.

Fundraising Efficiency: This ratio shows how much money you spend to raise each dollar. It’s a vital measure of your fundraising efforts’ effectiveness.

Non-Financial KPIs

Non-financial KPIs are more specific to the sector or field in which a nonprofit operates. For instance, a nonprofit focused on higher education will have different KPIs than one working in healthcare or social services. These non-financial metrics help you evaluate your organization’s performance in your specific domain and compare it to others in your space.

Donor Expectations

Charity Navigator and GuideStar are two prominent platforms that donors often consult before deciding to fund a nonprofit. Understanding what these platforms measure is crucial. They typically look at the financial KPIs mentioned above, so it’s essential to have a firm grasp of your organization’s performance in these areas.

The Importance of Liquid Unrestricted Net Assets (LUNA)

Liquid Unrestricted Net Assets (LUNA) is a metric that often goes unnoticed by nonprofits. It is vital to understand the availability of funds that can be used for operational purposes. Donations from well-meaning supporters may come with restrictions, meaning they cannot be freely used to cover operating expenses. To ensure the sustainability of your organization, you must have a clear understanding of your LUNA.

Final Notes

Nonprofit organizations are driven by their commitment to making a positive impact on society. To fulfill their missions effectively, they must pay attention to more than just audits and budgets. Key Performance Indicators, both financial and non-financial, are essential tools for nonprofits to measure their success and make informed decisions. 

By understanding these metrics and staying on top of their performance, nonprofits can not only thrive but also attract the support of donors who want to make a meaningful difference in the world. So, take a moment to assess your organization’s KPIs and ensure you are on the right track to achieving your goals.

How Signature Analytics Can Help Your Nonprofit

Signature Analytics’ nonprofit accounting services help you make financial decisions based on the highest quality accounting practices, while our day-to-day outsourced accounting teams implement the highest quality donor and government accounting standards.

For additional assistance with cash flow management, developing detailed nonprofit budgets, and audit support, contact Signature Analytics today.

The transformative power of artificial intelligence (AI) has touched nearly every industry, including the world of nonprofit organizations. AI can not only simplify various operational tasks but can also help foster growth and development within the team. 

At Signature Analytics, we want to help you understand the vital role that technology, and specifically AI, can play in supporting your nonprofit.

Upskilling Your Accounting Department’s Excel Capabilities

Excel has been a fundamental tool in financial management for years. However, today’s AI-powered tools, such as Excel’s ‘Ideas‘ feature, offer a game-changing advantage. These tools can actively analyze data patterns and provide valuable recommendations, transforming the way your team operates and significantly boosting efficiency.

Furthermore, AI can play a crucial role in error detection within extensive datasets. By identifying potential errors or discrepancies, it contributes to heightened accuracy and dependability in your financial reports. This translates into increased confidence in your financial data.

Another remarkable aspect is AI’s ability to assist accounting teams in various Excel tasks, such as searching, creating, modifying, and enhancing spreadsheets. This additional layer of support ensures that your team can harness the full potential of Excel, making their work more effective and less time-consuming.

Moreover, AI isn’t just about automation; it’s also about facilitating learning. AI can provide guidance through ‘How To’ questions, making it a versatile tool that empowers your team to excel in numerous areas of financial management.

Creating Initial Drafts of Grant Proposals

Drafting grant proposals can be a tedious process, especially given the stringent guidelines that must be followed. AI can help streamline this task by generating initial drafts or outlines based on your input parameters. For example, AI-powered language models like Chat GPT-4 can help your team outline ideas, propose narratives, and even offer suggestions for effective language usage.

However, as with all AI tools, it is important to remember that they should not replace human input entirely. While AI can handle data processing and draft creation, human oversight is essential to ensure accuracy, appropriateness, and alignment with grant requirements. Regular use and practice with AI tools will provide insights into their limitations and strengths, enabling your team to make the best use of them.

AI for Data Analysis and Decision Making

Nonprofits often handle large volumes of data, from donor information to program impact metrics. AI-powered data analytics tools can help you understand this data better, identify trends, and make data-backed decisions. Predictive analytics can also assist in forecasting trends, helping your nonprofit prepare for future challenges and opportunities. Using these tools can require trial and error and should be viewed as a part of a strategic initiative, not a replacement. 

AI For Streamlining Operations

In both nonprofit and regular business settings, routine administrative tasks often consume valuable time and sap productivity. AI-based automation tools come to the rescue by efficiently handling tasks such as database updates and data entry. This not only reduces the time spent on these mundane activities but also allows your team to shift their focus to mission-critical tasks, making it possible to deliver a more significant impact.

Consider the bustling atmosphere of nonprofit operations. Here, AI proves to be an invaluable asset when dealing with recurring tasks. From managing schedules to sending timely reminders and even taking care of data entry, AI seamlessly automates these processes. As a result, nonprofit teams are liberated from the daily grind, enabling them to channel their efforts into the strategic and creative aspects of the nonprofit’s mission, ultimately leading to a more profound and positive effect on their cause.

AI Revolutionizes Fundraising Strategies

AI’s power shines in fundraising, revolutionizing how nonprofits engage with donors. Through AI algorithms, organizations can dive deep into donor data to unearth valuable insights. By analyzing patterns, trends, and historical information, AI predicts which supporters are more likely to donate. This predictive analysis empowers nonprofits to personalize fundraising efforts, tailoring messaging to potential donors’ preferences and interests.

Real-World Success: St. Jude Children’s Research Hospital

St. Jude Children’s Research Hospital stands as a testament to AI’s impact. Leveraging AI and machine learning, St. Jude tapped into past donor data to discover that patient stories were the most effective communication format. With tools like Google’s target cost-per-acquisition bidding, AI-enabled language and audience testing scaled up donor reach. Notably, new donors now constitute 25 percent of the total YouTube donation revenue—a remarkable achievement powered by AI.

AI Enhances Communication and Outreach

Effective communication and outreach are critical components of nonprofit success. They form the foundation for engaging with supporters, spreading awareness, and ultimately achieving the organization’s goals. AI plays a pivotal role in elevating these efforts, offering specific benefits that can be harnessed.

Targeted Messaging: AI enables nonprofits to analyze data and understand their audience better. By identifying preferences, interests, and behavior patterns, organizations can craft more targeted and personalized messages. This approach ensures that communications resonate with recipients, increasing the likelihood of meaningful engagement.

Automation of Outreach: AI-driven tools can automate various outreach tasks, such as sending emails, newsletters, or social media posts. This automation not only saves time but also ensures that communications are timely and consistent, keeping supporters informed and engaged.

Data-Driven Insights: AI can analyze large volumes of data to provide valuable insights. Nonprofits can use these insights to refine their communication strategies, identifying which messages or channels are most effective in reaching their goals.

Chatbots for Instant Engagement: Chatbots powered by AI can provide instant responses to inquiries on websites or social media platforms. This real-time interaction enhances supporter engagement by addressing questions and concerns promptly.

Predictive Analytics: AI can predict trends and behavior patterns, helping nonprofits anticipate the needs and preferences of their supporters. This foresight allows organizations to proactively tailor their outreach strategies.

Navigating AI: Considerations for Nonprofits

As nonprofits explore the possibilities of AI integration, it’s crucial to be aware of potential challenges. While AI offers numerous benefits, here are some key considerations to keep in mind:

1. Oversight and Management

Effective AI implementation requires ongoing oversight. Monitoring AI systems ensures accurate outcomes and prevents misguided decisions. Regular evaluations, adjustments, and validations are essential to maintain AI’s reliability.

2. Financial Balances

AI’s predictive capabilities can impact financial forecasts. Relying solely on AI-generated predictions may lead to deferred revenue imbalances, affecting resource allocation. Combining AI insights with human judgment prevents financial discrepancies.

3. Ethical Concerns

AI systems can inherit biases from historical data, affecting decision fairness. Nonprofits should evaluate data sources for potential biases and address them to ensure ethical decision-making aligned with their mission.

4. Data Privacy and Security

AI relies on data, raising privacy and security concerns. Nonprofits must implement robust data protection measures to safeguard donor information and maintain compliance with regulations.

5. Balancing AI and Human Expertise

AI should complement, not replace, human expertise. Over-reliance on AI may detach decision-making from human judgment. Finding the right balance ensures AI enhances decision-making without undermining human insights.

A Final Note

AI presents numerous opportunities to increase efficiency, improve decision-making, and enhance overall nonprofit operations. However, remember that AI tools are just that—tools. They should be used in conjunction with, not in place of, human insight and expertise. Always double-check the information provided by AI tools, and continuously learn from practice and usage to maximize their value in your organization’s operations. Remember, AI is here to support and augment human efforts, not replace them.

How Signature Analytics Can Help Your Nonprofit

Signature Analytics’ nonprofit accounting services help you make financial decisions based on the highest quality accounting practices, while our day-to-day outsourced accounting teams implement the highest quality donor and government accounting standards.

For additional assistance with cash flow management, developing detailed nonprofit budgets, and audit support, contact Signature Analytics today.

In the construction industry, managing costs is essential to ensure the success of any project. While direct costs like labor and materials are often at the forefront of budget considerations, overhead costs are equally crucial to ensure profitability. 

 

In this article, we will discuss the intricacies of overhead budgeting and analysis for construction businesses, including the importance of calculating overhead costs, what constitutes these costs, methods for accurate calculation, and strategies to optimize overhead spending.

Why Do You Need To Calculate Overhead Costs?

Construction companies know that staying on budget and on time are critical aspects of a successful project. However, overhead costs often fly under the radar, leading to unexpected financial setbacks. Failing to calculate and account for overhead costs can erode profit margins and jeopardize project viability, especially for projects that operate on slim margins. 

 

So, how can construction companies avoid falling into this trap? Let’s take a look at what exactly makes up overhead costs for construction and how to calculate them.

What Is Included in Overhead Costs in Construction?

Overhead costs include a wide array of expenses that indirectly support the construction process. These include:

 

Administrative Expenses: Office rent, utilities, insurance, salaries, and professional fees.

Advertising Expenses: Billboards, online ads, flyers, mailers, and business cards.

Bonding and Insurance Expenses: Bonding premiums, general permits, and insurance premiums.

Equipment Expenses: Equipment that is not a direct job cost including leased equipment, owned equipment, maintenance, and repairs.

Vehicle Expenses: Leased vehicles, owned vehicles, fuel, maintenance, and repairs.

Labor Burden: Payroll taxes, workers’ compensation insurance, and other labor-related costs.

 

Directly attributable costs such as direct labor, direct material, and direct expenses are not part of overhead costs.

 

Two Ways to Budget Overhead Costs for a Construction Company

Budgeting overhead for a construction company is essential for effective financial management. There are a variety of ways a company can approach this, but here are two common approaches you can consider:

Historical Analysis:

This approach involves examining past financial records and historical data to estimate future overhead costs. Let’s discuss how to use historical data for more accurate cost projections.

 

Analyze the company’s financial statements from previous years to identify trends and patterns in overhead expenses. Break down overhead costs into categories such as utilities, rent, insurance, office supplies, and administrative salaries. Calculate the average annual expenses for each category over the past few years.

 

Adjust these historical figures for inflation, any anticipated changes in the business, or upcoming projects that may impact overhead costs. This approach provides a baseline estimate based on past performance.

Zero-Based Budgeting:

Zero-based budgeting (ZBB) requires a fresh start each budgeting period, where overhead costs are justified from the ground up. Instead of basing the new budget on past expenses, you begin with a clean slate.

 

Identify and list all overhead expenses from scratch. Every expense, no matter how small, must be justified and allocated based on the company’s current needs and objectives.

 

This approach encourages cost-cutting and efficiency improvements as each expense item is rigorously evaluated.

 

While ZBB can be time-consuming, it can help identify unnecessary overhead costs and lead to more efficient resource allocation.

 

Ultimately, the choice of budgeting approach will depend on your construction company’s specific circumstances, goals, and available resources. Some companies may benefit from a combination of these approaches to create a comprehensive and accurate overhead budget. Regularly reviewing and adjusting the budget as circumstances change is also crucial for effective financial management in the construction industry.

Methods for Overhead Allocation in Construction

Allocating overhead costs in a construction company accurately is crucial for determining the true cost of each project and for overall financial management. Here are three common methods for allocating overhead in a construction company:

 

Percentage Method:

This method allocates overhead costs as a percentage of the direct costs or project value associated with each project. Direct costs include expenses directly tied to a specific project, such as labor, materials, subcontractor fees, and equipment costs.

 

To use this method, you calculate a predetermined overhead rate (e.g., 10%) based on historical data and budgeted overhead expenses. Then, for each project, you apply this rate to the total direct costs to allocate a portion of the overhead expenses to that project.

 

For example, if a project has $100,000 in direct costs and the predetermined overhead rate is 10%, the allocated overhead would be $10,000.

 

Labor Hours or Labor Costs:

This approach allocates overhead costs based on the labor hours worked or labor costs incurred on each project. It assumes that overhead costs are directly related to the amount of labor required for each project.

 

Calculate the overhead rate by dividing the total budgeted overhead expenses by the total labor hours or labor costs for all projects. Then, for each project, allocate overhead based on the project’s share of the total labor hours or costs.

 

For example, if a project requires 20% of the total labor hours, and the total overhead costs are $100,000, the allocated overhead for that project would be $20,000.

Square Footage:

This method allocates overhead costs based on the square (or other measurement) footage involved in each project. It is commonly used in construction companies that work on building and renovation projects.

 

Calculate the overhead rate by dividing the total budgeted overhead expenses by the total square footage or square meters for all projects. Then, allocate overhead to each project based on the project’s share of the total space.

 

For example, if your annual project volume is 200,000 SF and project ‘A’  involves 10,000 square feet and the total overhead costs are $100,000, the allocated overhead for that project would be $5,000 (200,000/$100,000 = $0.50 per sf).

 

It’s essential to note that the choice of overhead allocation method should align with your construction company’s specific needs, the nature of your projects, and the availability of data. Some companies may even use a combination of these methods to ensure a more accurate representation of overhead costs. Additionally, regularly reviewing and adjusting your allocation method and rates based on changing volume, project characteristics and overhead expenses is essential for maintaining accuracy in your cost accounting.

How To Reduce Your Overhead Costs

Reducing overhead costs is a goal shared by all businesses. Strategies include:

 

Streamline Administrative Processes: Automate tasks, optimize scheduling, and improve labor management.

Optimize Significant Costs: Renegotiate leases, explore SAAS options, and optimize labor and material costs.

Review Recurring Expenses: Re-quote insurance policies and negotiate recurring costs like printers.

Manage Inventory Levels: Employ just-in-time supply chain management to avoid excess inventory.

Track Reimbursable Expenses: Use apps to track and reclaim costs like mileage.

Common Mistakes When Calculating Overhead Costs in Construction

Calculating overhead costs accurately in construction is crucial for making informed financial decisions. However, there are common mistakes that can lead to inaccurate overhead calculations. Here are some of the most common mistakes to avoid:

 

Misclassification of Expenses: One of the fundamental mistakes is misclassifying expenses as either direct or indirect overhead costs. It’s essential to clearly distinguish between costs that are directly attributable to a specific project (direct costs) and those that support the overall operation of the company (indirect overhead costs). Misclassification can lead to incorrect allocation and distort the true cost of a project.

 

Overlooking Variable Overhead Costs: Some construction companies may focus solely on fixed overhead costs, such as rent and insurance, while overlooking variable overhead costs. Variable overhead costs, like office supplies, utilities, or equipment maintenance, can fluctuate based on the level of activity and should be included in your calculations for accurate project cost estimation.

 

Using Outdated Data: Relying on outdated or inaccurate historical data when calculating overhead costs can result in inaccurate budgeting and cost allocation. Overhead costs can change over time due to factors like inflation, changes in the business environment, or technological advancements. Ensure that you regularly update your data and calculations to reflect current conditions.

 

Neglecting Seasonal Variations: Construction businesses often experience seasonal fluctuations in activity. Failing to account for these variations when allocating overhead costs can lead to underestimating or overestimating expenses for specific projects. Consider the seasonality of your projects and adjust your overhead allocation accordingly.

 

Failure to Consider Project Complexity: Not all construction projects are equal in terms of complexity and resource requirements. Failing to consider project-specific factors, such as the size, scope, location, and duration of a project, can result in inaccurate overhead allocation. Complex projects may require a higher level of overhead support.

 

Not Reviewing and Adjusting Overhead Rates: Overhead rates should be periodically reviewed and adjusted to reflect changes in the business environment, overhead costs, and project types. Failure to update these rates can lead to significant discrepancies between budgeted and actual costs.

 

Incomplete Documentation: Proper documentation of all overhead expenses is essential. Failing to keep detailed records of indirect costs and their allocation can make it difficult to track, verify, and justify overhead expenses.

To mitigate these common mistakes, construction companies should establish clear accounting practices, invest in robust cost tracking and management systems, and regularly review and update their overhead allocation methods and rates. Additionally, seeking the guidance of financial professionals or consultants with expertise in construction accounting can help ensure accurate overhead cost calculations.

How Outsourced Accounting Can Help with Overhead Budgeting and Analysis

Benefitting from Outsourced Expertise

In the world of construction finances, turning to outsourced accounting is a smart move for refining overhead budgeting and analysis. This approach involves partnering with financial experts who specialize in tackling the complexities of overhead cost calculations. By relying on these professionals, construction companies tap into industry-specific knowledge and skills.

Navigating Cost Details with Precision

Outsourced accountants are adept at pinpointing and categorizing both direct and indirect costs, providing a complete financial picture. Using tailored tools and techniques for the construction sector, they use advanced software to accurately track expenses, allocate costs, calculate burden rates, and analyze differences. This approach speeds up calculations while making overhead estimates more accurate.

Unleashing Internal Focus Through Outsourcing

Beyond the numbers, outsourcing frees up internal resources from intricate financial tasks. This lets construction businesses concentrate on their core work, innovation, and skilled project management.

Cultivating Smart Growth and Decision-Making

This streamlined operation not only boosts profitability but also nurtures an environment for strategic growth and well-informed decisions. With outsourced accounting, construction companies set the stage for financial expertise and operational excellence in an ever-changing industry.

Final Thoughts

Overhead budgeting and analysis are integral to successful construction projects. Calculating and managing overhead costs with precision can safeguard profit margins and streamline operations. By understanding the components of overhead, utilizing appropriate calculation methods, and implementing cost-saving strategies, construction businesses can optimize their financial health and project outcomes.

Learn More About Signature Analytics

At Signature Analytics, we support our clients’ day-to-day accounting functions, including:

  • Invoicing
  • AR management
  • Bill processing
  • AP management
  • Forecasting
  • Reporting
  • Monthly close
  • And more…

Ready to get started with outsourcing your day to day accounting services? Talk to an expert today. 

 

Then, read on to learn Why Your Construction Business Needs an Outsourced CFO.

Effective cash flow management is the backbone of a thriving construction company. Brandon Manning and Zak Krauss emphasize this in their discussion on navigating the complexities of financial planning in construction. With a myriad of costs from materials, subcontractors, and labor, to unexpected expenses, the ability to anticipate and manage these outflows is crucial.

Under vs Over-Billing

In an ideal scenario, billing ahead of work completion provides a buffer—an over-billing situation that makes cash flow easier to handle. However, this isn’t always possible. The agility to handle under-billing scenarios without compromising relationships with subcontractors and vendors is a skill that requires a deep understanding of cash flow tracking and management.

The Power of Cost Reporting Meetings

Establishing regular cost report meetings is a strategic approach to stay on top of every expense and phase of a project. Manning suggests monthly meetings involving project managers, senior project managers, and project accountants to discuss details down to specific phase codes—ranging from payroll to materials and potential change orders that aren’t yet documented. These gatherings are essential to understand the financial health of each project and to prevent cash flow surprises.

However, these meetings can be daunting. To mitigate the pain points, it’s important to maintain a rhythm—holding these meetings monthly to avoid playing catch-up with a backlog of data. Preparation is key. Ensuring that project management teams receive pertinent information ahead of time enables them to come prepared with insights and questions, fostering a more efficient and focused discussion.

Building a Culture of Consistent Financial Management

The goal is to cultivate a culture where project budgets are tracked consistently throughout the month, not just reviewed periodically. This vigilance allows for better control over the project numbers and the overall bottom line, safeguarding against any unpleasant financial surprises. Delay in this process equates to diminished control over your financials, leading to those surprises that, as Krauss notes, are “never in a good way.”

Through meticulous and regular financial oversight, construction companies can manage their cash flow effectively, making sure each project contributes positively to the company’s profitability, rather than becoming a liability. This disciplined approach is essential in managing the ebb and flow of cash and avoiding the pitfalls that can catch a business off guard.

As a construction business owner, you’ve got a lot on your plate – from handling projects to managing your team. But one thing you can’t afford to overlook is your finances. Let’s face it – managing your finance and accounting can be overwhelming, especially when you’re already juggling so much. That’s where outsourced CFO services come in.

In this blog, we will delve into the realm of outsourced CFO services, gaining an understanding of their essence and exploring their transformative impact on your construction business. Let us explore what these services entail and uncover the reasons why they are a significant game-changer for your company.

Outsourced CFO Services for Construction

When you opt for outsourced CFO services, you’re bringing in a finance expert to provide C-level guidance on your financial outlook. Your fractional Chief Financial Officer will provide strategic guidance, financial planning, analysis, and sophisticated insights you may not have access to otherwise. An outsourced CFO helps to ensure you’re headed in the right direction when it comes to your construction business’ finances – at a cost that doesn’t do the very opposite of what you’re hiring them to do.  

But how exactly can these services help your construction business succeed? Let’s discuss. 

Financial Management Challenges for Construction Businesses

Effectively managing finances can pose significant challenges for construction business owners. With constrained resources, a lack of financial expertise, and the need to prioritize core business activities, financial matters often take a backseat, leading to various pain points that require attention. Let’s delve into some of these pain points:

Limited Financial Insight: Without a financial professional, construction businesses may struggle to gain a comprehensive understanding of their financial situation. Analyzing financial data, identifying trends, and making informed decisions based on insights become challenging tasks without specialized expertise.

Strategic Decision-Making: Developing a robust financial strategy is crucial for long-term success, but it’s not always straightforward without the guidance of an experienced CFO. Aligning financial goals with overall business objectives and creating actionable strategies to drive growth and profitability may prove to be daunting.

Cash Flow Optimization: Efficient cash flow management is critical for construction businesses, which often operate on tight budgets. The absence of proper cash flow planning can lead to cash shortages, hindered growth initiatives, or difficulties in managing day-to-day expenses.

Key Metrics: Key metrics play a crucial role in evaluating the performance and efficiency of a construction company. These metrics provide insights into various aspects of the company’s operations, financial health, and project management. They may include project completion time, cost overrun percentage, safety incident rate, client satisfaction score, profit margin, revenue growth, and employee productivity. Monitoring and analyzing these metrics allows the company to identify areas of improvement, optimize resource allocation, ensure compliance with safety standards, and make informed strategic decisions. By consistently tracking these key metrics, a construction company can enhance its overall performance and maintain a competitive edge in the market.

Fortunately, outsourced CFO services present a viable solution to these challenges. By collaborating with a team of experienced financial experts, construction businesses can offload the burden of financial management and gain access to strategic guidance and valuable insights tailored to their specific needs. Let’s explore the key benefits and components of outsourced CFO services that can empower construction businesses to make informed financial decisions and propel their growth.

CFO Services: Key Deliverables for Construction

Make Informed Business Decisions with the Right Financial Insights

Sophisticated Business Guidance

Strategic Planning

Our team provides sophisticated business guidance, strategic planning, and in-depth analysis to empower you in making informed decisions. By collaborating closely with you, we develop a comprehensive roadmap aligned with your business goals, assess market trends, and create actionable strategies for growth and profitability.

Business Modeling for Enhanced Analysis

Through advanced business modeling techniques, we unlock your business’s full potential by conducting in-depth analysis and forecasting. Our robust financial models consider various scenarios, assess risks and opportunities, and guide decision-making.

Annual Budgeting for Financial Stability and Growth

Our dedicated experts work with you to develop annual budgets that serve as a roadmap for financial stability and growth. By considering your objectives, historical data, market conditions, and industry benchmarks, we help you allocate resources effectively, prioritize investments, and monitor performance throughout the year.

Breakeven and Margin Analysis for Profitability Assessment

We conduct comprehensive breakeven analyses to understand your business’s profitability and financial health. Additionally, our experts perform detailed margin analyses to evaluate the profitability of your products, services, or business segments.

Business-specific KPI Development and Strategic Pricing

We work closely with you to develop business-specific key performance indicators (KPIs) that align with your strategic objectives and provide meaningful insights into performance. Our experts also assist you in developing effective pricing models tailored to your industry, market dynamics, and customer segments.

Guidance on ASC 606 Revenue Recognition Standards

To ensure compliance and accurate financial reporting, our team provides comprehensive guidance and support in implementing ASC 606 revenue recognition standards. We help you understand the impact on your revenue recognition processes and financial statements.

A Dedicated Financial Intelligence Technology Team (FIT)

Custom Reporting Development

We acknowledge that each business has unique reporting needs. Our FIT team excels in developing custom reports that provide detailed financial analysis and insights specifically tailored to your organization and systems. Whether it’s connecting disparate systems, supporting new system implementaions, or developing new dynamic reports, we work closely with you to understand your reporting requirements and deliver meaningful reports that meet your needs.

Efficiency through Improved Integration

Managing financial data efficiently and accurately is crucial. Our FIT team ensures seamless integration of accounting data across various technology tools, eliminating the need for manual data entry and reducing the risk of errors. By leveraging automation and integration solutions, we streamline your financial processes and enhance data integrity. This allows you to focus on core business activities with confidence, knowing that your financial data is consistently accurate and up to date.

When to Consider Outsourcing CFO Services for Your Construction Business?

The perfect timing to explore outsourced CFO services is not during a crisis or as a last-minute attempt to salvage a struggling business. Instead, it is best to consider outsourcing CFO services during periods of growth and success when there is the capacity and enthusiasm to enhance existing processes and benefit from expert financial leadership.

That being said, if your business is currently in a state of crisis or approaching one, an outsourced CFO services company could be exactly what you need. They have extensive experience assisting other businesses in navigating challenging situations and can implement strategies tailored to your specific circumstances, drawing from their expertise across multiple industries.

Ready to Explore Outsourced CFO Services?

If your business needs forward-looking financial analysis but you’re not ready to hire a full-time CFO or require additional support for your existing team, explore the range of services offered by our experts at Signature Analytics. Our highly experienced accountants can function as your entire accounting department, from CFO to staff accountant. If that doesn’t fit your needs, we can work alongside your internal accounting staff to provide ongoing support, training, and forward-looking financial analysis. This ensures effective company management, operational analysis, and informed decision-making for the long term.

Have questions about our process? Contact us today for a free consultation.

For many nonprofit organizations, the effective management of cash flow is a common concern that often leads to the question, “How can I accurately track and manage cash flow to avoid financial issues?” 

Our solution: a 12-month cash roll forward.

In the video below, Laura Bertagnolli, CPA VP of Finance at Signature Analytics, discusses how nonprofit organizations can effectively manage cash flow using the 12-month cash roll forward. 

In this blog, we delve into the 12-month cash roll forward and how this tool can help nonprofits manage cash flow and drive success.

“We strongly advise including a 12-month cash roll forward in your financial presentation to the board of directors. This document lets you review and approve capital expenditures, helping you understand how your finances will look over the next year. It ensures that your available funds won’t fall below a limit set by your board.”

The 12-Month Cash Roll Forward: What It Is and How It Works

For nonprofit organizations, the 12-month cash roll forward is a powerful tool that merits a closer look. It plays a crucial role in addressing the complex issue of cash flow management while ensuring long-term financial stability. But what exactly is a 12-month cash roll forward, and how does it work? Let’s dive in.

Defining the 12-Month Cash Roll Forward

The 12-month cash roll forward is more than just another financial document; it’s a linchpin that connects budgetary forecasting and cash flow management. This tool provides nonprofit organizations with a comprehensive view of their financial health over an extended period.

How It Works

The 12-month cash roll forward operates by:

Offering Full-Spectrum Financial Insight

 Unlike traditional budgeting methods that primarily focus on revenue and expenses, the 12-month cash roll forward takes a more comprehensive approach. It considers all financial elements, including capital expenditures, which are typically excluded from surplus and deficit budgets. By including capital expenditures, nonprofits gain a holistic understanding of their financial position, empowering them to make more informed decisions.

Projecting Cash Flow

This tool extends financial projections for an entire year, allowing nonprofits to anticipate and navigate potential cash flow challenges. It provides a detailed week-by-week breakdown, giving organizations a deep understanding of when funds are expected to come in and when expenses need to be met. This level of granularity is instrumental in preventing cash flow crises.

Aligning with Reserves and Board Oversight

By incorporating capital expenditures and projecting cash flow, nonprofits can ensure that they do not dip below a financial “floor” set by their board. This means maintaining a financial cushion that safeguards against unforeseen challenges. The 12-month cash roll forward enables nonprofits to maintain this financial safety net and gain the confidence of their board members.

Facilitating Proactive Decision-Making

Armed with a 12-month cash roll forward, nonprofit leaders can make strategic decisions with clarity. They can allocate resources more effectively, embark on new initiatives with confidence, and tackle financial hurdles head-on. Whether it’s launching new programs, expanding services, or making critical investments, this financial tool provides nonprofits with the insight they need to make well-informed choices.

Addressing Common Nonprofit Financial Challenges

Nonprofits often face a myriad of financial challenges in their mission to create a positive impact. These challenges can include:

Inconsistent Cash Flow: Many nonprofits experience fluctuating income streams, making it challenging to meet regular financial obligations. The 12-month cash roll forward plays a pivotal role in addressing this issue by providing a comprehensive overview of expected cash flow. Nonprofits can anticipate periods of reduced income and take proactive measures to maintain financial stability.

Budget Shortfalls: Unexpected expenses, delays in funding, or changes in the economic landscape can lead to budget shortfalls that disrupt essential programs. By extending financial projections over an entire year, the 12-month cash roll forward acts as an early warning system, allowing nonprofits to identify potential budget shortfalls well in advance and make necessary adjustments.

Board Confidence and Transparency: Maintaining the trust and confidence of board members is crucial for nonprofit governance. Utilizing the 12-month cash roll forward demonstrates a commitment to sound financial management and transparency. It offers a clear picture of the organization’s financial position, instilling confidence in board members and ensuring collaborative, informed decision-making.

Strategic Planning for Impact: Nonprofits need to strategically allocate their resources to maximize their impact. With the insights provided by the 12-month cash roll forward, organizations can make well-informed decisions regarding resource allocation, timing of fundraising campaigns, and the launch of new initiatives. This tool empowers nonprofits to align their strategies with their mission effectively.

Long-Term Financial Resilience: The ability to project cash flow over an extended period is vital for building and maintaining financial reserves. These reserves provide a safety net that nonprofits can rely on during challenging times, ensuring the organization remains resilient even in the face of financial uncertainties.

Uninterrupted Mission Fulfillment: Ultimately, the 12-month cash roll forward safeguards an organization’s ability to deliver on its mission consistently. By ensuring reliable cash flow management, nonprofits can continue making a positive impact in their communities without disruptions or financial stress.

By addressing these common financial challenges, the 12-month cash roll forward is a versatile tool that empowers nonprofits to navigate the complexities of financial management and sustain their vital work.

How Signature Analytics Can Help Your Nonprofit

Signature Analytics’ nonprofit accounting services help you make financial decisions based on the highest quality accounting practices, while our day-to-day outsourced accounting teams implement the highest quality donor and government accounting standards.

For additional assistance with cash flow management, developing detailed nonprofit budgets, and audit support, contact Signature Analytics today.

Audits are a common aspect of nonprofit organizations, but they often feel like a never-ending cycle that drains both time and resources. In the nonprofit sector, where staff often wear multiple hats, the additional workload can be particularly challenging. However, there are steps you can take to make the audit process less painful and more efficient. 

In the video below, Laura Bertagnolli, CPA,  of Finance at Signature Analytics, dives into some strategies nonprofits can utilize to make audits more efficient.

 

Embrace Digital Documentation

“It’s all about having the information readily at your fingertips.”

One of the most significant advancements in audit preparation is the shift from paper documentation to digital records. Many modern ERP systems now allow you to attach supporting documents, such as vendor bills, directly to your financial transactions. 

This digital trail not only saves time but also allows auditors to access the necessary documents remotely. No more digging through file cabinets or scanning endless pages of paperwork. Going digital simplifies the audit process significantly.

Leverage Monthly Financial Statements

Producing monthly financial statements is an excellent practice for nonprofits. When auditors request your latest financial statements, you won’t find yourself scrambling. Instead, you can access them easily and share them with your audit team. This not only demonstrates your commitment to financial transparency but also makes you feel more prepared and in control.

Strengthen Fiscal Year Controls

In some nonprofits, there’s a problem with having the right rules and checks in place throughout the year. This can be a problem when it’s time for an audit. People might worry that there were mistakes made in the past, especially if the financial records aren’t being closed correctly and on time.

Also, it’s important to have clear rules about who does what in the organization. When these rules break down, it can create a risk of fraud, which could become a problem during an audit. So, you should always make sure that different people have control over different parts of the financial process.

For example, you wouldn’t want one person to be able to do everything from creating a new vendor, making a bill, paying it, and then balancing the bank account. If this were allowed, they could potentially set themselves up as a vendor, pay themselves, and no one would know because they’re also balancing the bank account. This is a big problem, and it’s an example of duties not being properly separated.

Even if your nonprofit is small, there are ways to make sure these duties are separated and that everything is in order. You can find resources online, such as information about “two-person segregation of duties,” to help you understand how to do it, no matter the size of your nonprofit.

Segregation of Duties and Internal Controls

Maintaining a clear separation of duties within your finance team is essential. No single individual should have too much authority over financial transactions. Proper segregation of duties reduces the risk of fraud, a significant concern for nonprofits. For example, you should never allow one person to create a new vendor, generate a bill, make a payment, and reconcile the bank account, as this setup creates opportunities for potential misuse. Even in small nonprofits, there are ways to implement two-person segregation of duties effectively.

Challenges Faced by Nonprofits in Audit Processes and Solutions

While audits are a necessary part of nonprofit operations, they often present several challenges. Understanding these challenges and having solutions at your disposal can help streamline the audit process and make it more efficient:

1. Limited Resources:

Challenge: Nonprofits frequently face resource constraints, both in terms of finances and personnel. This can make it challenging to allocate the necessary time and resources to prepare for audits adequately.

Solution: Start the audit preparation process well in advance. Allocate dedicated time and resources for audit-related tasks throughout the year to prevent last-minute rushes. Consider seeking pro bono audit services or financial support from grantmakers to alleviate financial constraints.

2. Complex Funding Sources:

Challenge: Many nonprofits receive funding from various sources, including government grants, private donations, and foundations. Keeping track of these diverse revenue streams and complying with their respective reporting requirements can be overwhelming.

Solution: Maintain meticulous records of funding sources and their specific reporting guidelines. Use accounting software that can help you categorize and track different revenue streams efficiently. Regularly review grant agreements and contracts to ensure compliance. Seek advice from experts who understand the unique challenges posed by diverse funding sources.

3. Rapid Growth and Expansion:

Challenge: Nonprofits experiencing rapid growth or expanding their programs may find it challenging to adapt their financial processes and controls accordingly. This growth can outpace the organization’s internal capacity to handle audits effectively.

Solution: Regularly assess your financial and internal control processes to ensure they scale with your organization’s growth. As your nonprofit expands, invest in financial software that can handle increased complexity. Consider engaging external financial experts to provide guidance and support during periods of rapid growth.

4. Compliance and Reporting Complexity:

Challenge: Navigating the intricate web of compliance requirements, especially when dealing with government grants, can be overwhelming. Ensuring that financial reports align with each grantor’s unique standards can be time-consuming and error-prone.

Solution: Stay informed about the specific reporting requirements of each funding source or grantor. Use accounting software that can generate tailored financial reports to meet individual compliance needs. Consider hiring a compliance expert or consultant to assist with reporting complexities.

5. Data Security and Privacy Concerns:

Challenge: Nonprofits often handle sensitive donor information and personal data, making data security and privacy a significant concern during audits. Ensuring that confidential information is protected is vital.

Solution: Implement robust data security protocols and encryption to safeguard sensitive data. Train your staff on data security best practices and maintain compliance with data protection regulations. Engage with IT security experts to conduct regular audits of your data security measures.

By understanding and addressing these common challenges, nonprofits can enhance their audit processes, making them more efficient and less burdensome. These solutions provide a starting point for nonprofit leaders looking to ensure their financial transparency and compliance while minimizing audit-related stress.

How Signature Analytics Can Help Your Nonprofit

Signature Analytics’ nonprofit accounting services help you make financial decisions based on the highest quality accounting practices, while our day-to-day outsourced accounting teams implement the highest quality donor and government accounting standards.

For additional assistance with cash flow management, developing detailed nonprofit budgets, and audit support, contact Signature Analytics today.

Annual budgeting can often feel like a recurring whirlwind that leaves nonprofit teams feeling overwhelmed. The process seems to come around faster than expected, and it’s not uncommon to hear collective sighs of “Here we go again.” 

However, the key to successful budgeting lies in getting the right people involved and embracing a “bottoms-up” approach.

Watch the video below to learn more:

Empowering Stakeholders with “Bottoms-Up” Budgeting

The success of your nonprofit’s annual budgeting process depends on active involvement from those who possess the most accurate and detailed information. This is where the concept of “bottoms-up” budgeting comes into play. Rather than crafting the budget in isolation within the finance department, the strategy begins by engaging program managers, development teams, and operations staff.

“The bottoms up approach with budgeting provides the most accurate information…Your plan is only as good as the information that you’ve put into it.”

The success of your nonprofit’s annual budgeting process depends on active involvement from those who possess the most accurate and detailed information. This is where the concept of “bottoms-up” budgeting comes into play. Rather than crafting the budget in isolation within the finance department, the strategy begins by engaging program managers, development teams, and operations staff.

“The bottoms up approach with budgeting provides the most accurate information…Your plan is only as good as the information that you’ve put into it.”

Ownership and Accuracy Go Hand in Hand

When key stakeholders actively participate in the budgeting process, they take ownership of the budget. They understand the intricacies of their departments and can provide insights that lead to a more accurate representation of future expenses. This ownership ensures that the budget genuinely reflects the needs and expectations of each department, enhancing its overall accuracy.

The Training Component

However, involving stakeholders isn’t just about assigning them budgeting tasks and expecting them to deliver. It’s essential to provide training and support to help them understand how to translate their departmental knowledge into financial formats. Sitting down with budget managers one-on-one to guide them through the process can help unlock the valuable knowledge they possess.

Creating a Structured Timeline

To streamline the annual budgeting process, it’s crucial to establish a well-defined schedule. This timeline should span approximately four months, allowing for comprehensive planning and collaboration. It’s during this period that various check-ins and events occur to ensure that all budget components align seamlessly.

Culminating in Board Approval

The journey towards creating an accurate and effective budget culminates in the presentation of a financial package to the board of directors. The goal is to obtain their approval before the start of the fiscal year, giving your nonprofit a solid foundation for the year ahead.

Zero-Based Budgeting vs. Flexibility

In the nonprofit world, there’s often a desire for budgets to align perfectly, where revenues and expenses meet at zero. This approach is known as zero-based budgeting. However, it’s essential to understand that this ideal scenario doesn’t always reflect the complexities of nonprofit finances.

Surpluses and Deficits: Part of the Plan

In reality, having a surplus doesn’t mean you’ve over-budgeted, but rather that you’re reinvesting in your organization’s mission. Surpluses can be used to bolster reserves, which can come in handy during challenging years. Conversely, a deficit in one year doesn’t equate to financial mismanagement if there are reserves in place to cover it.

The Unpredictable Nature of Giving

Nonprofit finances are affected by fluctuations in donor contributions. Some years may see surges in support, such as during the peak of the COVID-19 pandemic, while others might require drawing from reserves. The key lies in maintaining healthy reserve balances and having a financial runway that safeguards your organization’s sustainability.

In conclusion, nonprofit budgeting doesn’t have to be a stressful and unpredictable process. By embracing the “bottoms-up” approach and acknowledging the nuances of nonprofit finances, you can develop a more accurate, resilient, and adaptable budget that positions your organization for long-term success.

How Signature Analytics Can Help Your Nonprofit

Signature Analytics’ nonprofit accounting services help you make financial decisions based on the highest quality accounting practices, while our day-to-day outsourced accounting teams implement the highest quality donor and government accounting standards.

For additional assistance with cash flow management, developing detailed nonprofit budgets, and audit support, contact Signature Analytics today.

In 2023, many business owners have turned to outsourcing to streamline their businesses- From customer support to digital marketing to logistics, there’s an outsourcing team available to handle every aspect of your business. But many business owners share the same burning questions: how do these services actually work together? And, more importantly, how can these services collaborate to help my business succeed?

In this blog post, we’ll delve into the collaboration between outsourced accounting and IT, two critical functions that can greatly benefit your business. We’ll explore the advantages of outsourcing these services and how their synergy can drive your business towards success. Let’s dive in.

Understanding Outsourced Accounting and Outsourced IT

Outsourced Accounting

Outsourced accounting simplifies financial management by letting external experts handle it. Rather than dealing with financial tasks internally, you hire an accounting provider to handle important processes like managing finances, ensuring regulatory compliance, and generating accurate reports. Outsourcing accounting brings several advantages.

Firstly, it helps you save costs by eliminating the need for an in-house accounting team. Additionally, outsourcing provides access to specialized accounting expertise that your organization may not have. By leveraging the skills and knowledge of outsourced accounting professionals, you can enhance the efficiency and accuracy of your financial operations.

Outsourced IT Services

Outsourced IT services play a crucial role in managing your business’s technology needs. When you team up with an outsourced IT provider, they take care of your technology infrastructure, cybersecurity, software solutions, and technical support. By outsourcing your IT requirements, you enjoy enhanced security measures that shield your sensitive data from cyber threats. Additionally, scaling becomes simpler as your IT provider can adapt resources to accommodate your business’s growth. 

Outsourcing IT also grants you access to specialized IT expertise, empowering you to leverage advanced technologies and stay ahead in the competitive landscape.

Let’s take a look at how these two functions can work together to help your business succeed.

How Outsourced Accounting Works with Outsourced IT

When outsourced accounting and outsourced IT services join forces, they can significantly contribute to the growth and success of your business. Here’s a simplified breakdown of how these two functions work together:

Streamlined Financial Operations

By integrating outsourced accounting with outsourced IT, you can make your financial processes more efficient. Using technology, tasks like accounting calculations and record-keeping can be automated, simplifying workflows. This collaboration saves time and improves accuracy, allowing your team to focus on important strategic initiatives.

Enhanced Data Security

Outsourced IT services specialize in protecting sensitive information, including your financial data. They implement advanced security measures, such as firewalls, encryption, and threat monitoring, to safeguard against cyber threats. By partnering with outsourced IT, your financial information remains secure, reducing the risk of unauthorized access or data breaches.

Strategic Decision-making

To make informed decisions, you need accurate financial data and insights. Through collaboration between outsourced accounting and IT services, data exchange becomes seamless. This integration ensures timely and reliable financial reporting, enabling you to analyze performance, spot trends, and make well-informed decisions that drive business growth.

Scalability and Flexibility

As your business expands, both outsourced accounting and IT services can adapt to your changing needs. Outsourced IT providers possess the expertise and resources to support the growth of your technology infrastructure. Similarly, outsourced accounting providers can adjust their services to accommodate your evolving financial requirements. This flexibility allows you to scale your operations smoothly.

Cost Savings and Access to Expertise

Outsourcing accounting and IT functions can lead to cost savings. By eliminating the need for in-house teams and infrastructure, you reduce expenses associated with recruitment, training, and equipment. Additionally, outsourcing provides access to a pool of specialized professionals who bring expertise beyond what may be available within your organization. This expertise includes knowledge of the latest technologies and industry best practices.

Collaboration and Communication

Effective collaboration and communication between outsourced accounting and IT teams are essential for a successful partnership and efficient workflow. Regular meetings and open lines of communication allow both teams to align their efforts and work towards shared goals. By collaborating closely, the accounting and IT teams can ensure that financial data requirements are clearly communicated, technical considerations are addressed, and any potential issues are resolved promptly. This collaboration fosters a cohesive working environment, promotes knowledge sharing, and enhances overall productivity.

Integration of Accounting and IT Systems

Integrating accounting and IT systems brings numerous benefits that streamline processes and improve data accuracy. When financial data is synced with IT infrastructure, it enables seamless data transfers between accounting software, databases, and other relevant systems. This integration allows for real-time updates, ensuring that financial information is always up to date and accurate. By eliminating manual data entry and reducing the risk of human errors, businesses can enhance data integrity and minimize discrepancies. Additionally, integration simplifies the consolidation and analysis of financial data, providing a comprehensive view of the organization’s financial performance.

Key Considerations for Selecting Outsourced IT and Accounting Providers that Can Integrate Effectively

When choosing outsourced IT and accounting providers that can integrate effectively, it’s important to consider the following:

Expertise and Specialization: Look for providers with expertise and specialization in IT and accounting, especially in your industry. They should understand your specific needs and regulatory requirements.

Compatibility and Integration Capabilities: Ensure that the IT and accounting systems used by the providers are compatible and can seamlessly integrate with each other. This avoids any issues or delays during integration.

Communication and Collaboration: Effective communication and collaboration between the IT and accounting teams are essential. Consider the providers’ communication channels, response times, and their willingness to work closely with each other and your internal teams.

Data Security and Privacy: Prioritize providers with strong data security measures to protect your sensitive financial data from unauthorized access, breaches, and cyber threats. Check for security protocols, certifications, and privacy measures.

Scalability and Flexibility: Verify that the providers can scale their services to accommodate your business growth. They should have the resources and flexibility to adapt as your needs change.

Service Level Agreements (SLAs): Define clear expectations and performance metrics through well-defined SLAs. SLAs should cover aspects like response times, uptime guarantees, data backup and recovery, and compliance with regulations.

Reputation and References: Research the providers’ reputation and seek references or testimonials from their clients. This gives you insights into their service quality, reliability, and ability to integrate effectively.

Cost and Value: Consider the cost structure and value proposition offered by the providers. Assess whether the benefits of integration outweigh the costs, and ensure transparent pricing aligned with your budget.

By considering these factors, you can choose outsourced IT and accounting providers that meet your needs and have the ability to integrate effectively, ultimately contributing to your business’s success.

Interested in Learning More About Outsourced Accounting Services?

Signature Analytics outsourced accounting and CFO business advisory services teams get you access to finance and accounting expertise and insights. By putting the right people, processes, and technology in place, we facilitate accurate, relevant, and timely data so you can make smart business decisions.

Have questions about our process? Contact us today for a free consultation.

Learn more about our services, here. 

Welcome to The Faces of Business, hosted by Damon Alka, where conversations revolve around life and business experiences. Our aim is to entertain, engage, build a community, and offer insights that help others achieve their business aspirations. Today, we’re honored to host Jason Krueger, a linchpin from Signature Analytics, known for his substantial contribution towards ensuring financial clarity in businesses.

Listen on iTunes: https://podcasts.apple.com/us/podcast/creating-financial-clarity-for-the-business-sale/id1558858992?i=1000622548395 

Damon Alka:
We’re back on the Faces of Business, and I’m truly excited about today’s session. Jason Krueger, with his extensive experience at Signature Analytics, will give us a deeper understanding of financial clarity in business. Jason, it’s great to have you on board. You and your team at Signature Analytics have had a considerable run in this business providing outsourced accounting services. There must be some intriguing stories over the years. Tell us about some significant challenges you’ve faced.
Jason Krueger:
More often than not, we’re called in post-crisis. We’ve seen businesses facing issues like significant fraud. While it’s not always ideal, our primary focus remains on guiding businesses to understand their financials better. We want to help them in achieving their long-term objectives.
Damon Alka:
How did your journey start, and how did the idea of Signature Analytics come into being?
Jason Krueger:
I began my journey in public accounting during the late nineties, specifically on the financial statement audit side. I believed that understanding the numbers equated to understanding the business. My career began with Moss Adams, then transitioned to Deloitte for a larger SEC experience. However, my heart was always set on mid-market companies.
Over the years, I observed many businesses merely looking at accounting and finances as a necessary obligation. I recognized a void in the market; companies deserved better financial guidance. Many needed more resources or the right talent for their accounting needs. This realization inspired the birth of Signature Analytics in 2008. Our mission was clear: to assist small and mid-market businesses in navigating the world of finance, offering them clarity and peace of mind.

Challenges Mid-Market Businesses Face

Public accounting introduced me to a plethora of companies, differing not just in size, but also in the industries they thrived in and the leadership at their helms. It’s undeniable that larger, public companies are leagues ahead in terms of sophistication. They have a rigorous structure with all their policies documented meticulously, and a team comprising seasoned professionals who have grown up the corporate ladder.

On the flip side, the mid-market domain often comprises first-time entrepreneurs. They lack the resources to replicate the intricate corporate structure that their mammoth counterparts maintain. The initial realization of their shortcomings in financial and accounting expertise was a revelation, but now, it’s a common sight for me.

Often, I perceive this sector as the ‘wild west’ of business. Companies burst forth with innovative ideas, but there’s a glaring gap when it comes to the structural know-how of scaling up and monetizing these ideas. The talent deficit in the finance realm exacerbates this challenge. Fewer individuals are opting for accounting as a profession, which leaves a void in expertise, especially for these mid-sized businesses.

Honestly, I empathize with the youth’s perception of accounting. I didn’t delve into accounting with the intent to stick to it indefinitely. I was more intrigued by the intricacies of business it would reveal.

While public companies have a mandate to maintain their credibility through reliable projections, these burgeoning businesses are often left to navigate their trajectory without much guidance. Today’s business landscape, especially with entities like SaaS companies, is rapidly evolving. They might land substantial funding and hit the market running within a couple of years. It’s an unpredictable, fast-paced environment.

We’ve witnessed numerous companies that, upon securing capital, are immediately subjected to leadership changes influenced by their investors. They might bring aboard a proficient CFO, but the support structure beneath is often underwhelming, sometimes just limited to a low-tier bookkeeper. However, these scenarios are gratifying for us. These businesses have a defined vision. They value our expertise, allowing us to assist in fleshing out their operational backends, and propelling their growth trajectory.

Smaller businesses often overlook the monumental benefits they can harness from financial data. Efficiently leveraged financial insights can be transformative, ensuring swift, informed decisions. 

Cash is King – Especially in Manufacturing & Distribution

In the contemporary business landscape, particularly in our current climate, one axiom remains timeless: Cash is king. Healthy cash flow often masks underlying issues, but once there’s a hiccup in that flow, deeper problems surface, often catching business owners off-guard.

I’ve interacted with countless manufacturers, and it’s a common conundrum. They’ll present their income statement, their P&L, flaunting the profits, and then juxtapose it with their liquidity woes. “Why do I have no cash?” they’d ask. It usually boils down to two reasons. Firstly, the financial statements might have discrepancies. Secondly, and more often than not, the ‘missing’ cash is tied up in inventory. It’s on the shelves of their warehouse, waiting to be transformed into sales.

The intricate dance of managing inventory processes, aligning it with sales cycles, and ensuring optimal purchase patterns often trip manufacturers up. Their industry probably faces the most challenges in cash management, making it paramount for them to cultivate robust banking relationships. Fortunately, the inventory can serve as collateral, providing a bit of financial cushion.

For businesses seeking growth and expansion, there comes a moment of reckoning. Whether it’s for financing, attracting investors, or capitalizing on potential tax credits, they’ll need to present their financials to third parties. This is a litmus test of sorts. If their financial statements are not coherent or if they appear unreliable, it stalls their ambitions. That’s when they realize the importance of having sound, comprehensible, and accurate financial documentation.

Know Your Margins

Margin is the heartbeat of any business, driving profits and illuminating key financial health indicators. Surprisingly, many business owners have a somewhat vague grasp of their margins. When questioned, they might provide a broad range: “Oh, it’s somewhere between 50 and 60%”. Such vagueness can be dangerous. Businesses should know their margins to the exact percentage point. Further, this should be broken down by product and service line. Identifying which products or services are most profitable allows businesses to fine-tune pricing and cost structures. For a business with a turnover of $10 million, a margin improvement of just 1% translates to an extra $100,000 in profit. Accurate visibility into margins can drive impactful, immediate decisions.

Why Liquidating Inventory is Smart in Cash-Strapped Times

Growing businesses often find themselves cash-strapped, and more often than not, the culprit is inventory. Businesses might see impressive growth rates, but if their inventory growth outpaces revenue growth, liquidity issues arise. Inventory sitting on shelves not only ties up cash but can also incur interest if financed through a line of credit.

In recent years, supply chain disruptions have forced many businesses to stock up, leading to inflated inventory levels. Now, businesses have an opportunity. They can liquidate this excess stock, converting products into much-needed cash. Even if this means selling products at a reduced price, the infusion of liquidity can support other business needs, making it a strategic move.

How Accounting Technologies Have Improved Accounting Practices

The accounting landscape has been dramatically reshaped by technology. With the rise of electronic transactions, processes that once depended on paper checks or wire transfers are now faster and more efficient. While sophisticated solutions like ERP systems can be costly and daunting for small and mid-sized businesses, there are intermediate options, like QuickBooks, that serve many needs.

However, the key lies in proper implementation. If systems are incorrectly set up, teams might revert to manual practices like maintaining Excel spreadsheets on the side, leading to inefficiencies. Ideally, businesses should move away from practices like cutting paper checks, with platforms like bill.com offering automated solutions. The potency of these systems is undeniable, but they must be correctly tailored to each business’s unique needs. One of our primary focuses when onboarding clients is assessing their accounting environment, ensuring their systems and technology align seamlessly with their operations.

The Signature Analytics Assessment Process

When diving into the methodology of SA’s assessment, it becomes evident that the approach is all-encompassing. Their focus is not just on one dimension, but a holistic evaluation spanning people, processes, technology, and reporting structures. Within this vast landscape, technology holds a significant role. The assessment involves mapping out the present technological tools, understanding their applications, pinpointing their strengths and weaknesses, and discerning their integration capabilities. As the assessment unfolds, SA crafts recommendations. Interestingly, these suggestions aren’t rigid; they are thoughtfully adjusted based on a company’s financial health. If resources were unlimited, certain solutions might be ideal, but SA acknowledges the real-world constraints businesses face. Thus, they offer a balanced blend of quick efficiency boosts and long-term strategic plans. Emphasizing their tailored approach, SA firmly believes that each client requires a unique solution. This philosophy stands as a testament against a one-size-fits-all mindset. With SA, the journey goes beyond just “doing accounting”. It’s about crafting a plan, understanding the ecosystem, and then executing. A notable analogy draws attention to the roles of accounting and IT in businesses. Often, they’re like black holes – their intricacies remain mysterious until something goes awry.

The Importance of AR/AP Processes

The financial arteries of a business, Accounts Receivable (AR) and Accounts Payable (AP), have long held prominence in operational discussions. One of the primary tools to enhance cash flow, as discussed, is refining payment terms. It can be as straightforward as soliciting larger initial deposits, or perhaps invoicing with increased frequency. Many business owners, tethered to traditional beliefs, might be apprehensive. There’s a prevailing thought that customers might balk at these new terms. But as SA’s journey suggests, testing these waters, especially with new clientele, might yield favorable currents. The narrative evolves as we trace SA’s 15-year trajectory. The company transitioned from a 30-day term, predominantly check-driven model, to a more fluid system, and the positive impact on cash flow was palpable. This financial evolution underscores the need for consistency in AR and AP processes. From invoicing to collections and from strategizing payments to executing them, a regular rhythm is pivotal. And when discussing manufacturing businesses, the challenges amplify. These entities grapple with a unique financial puzzle – navigating the hiatus between procuring materials and securing customer payments.

Why a Good Banking Relationship is Crucial

Within the financial tapestry of a business, banking relationships emerge as crucial threads. Regardless of an immediate necessity, forging a sturdy partnership with a bank is indispensable for any business. This relationship is not just about transactional exchanges. It’s a strategic alliance that, even in higher interest periods, can offer growth avenues. The message is clear: nurturing a robust banking relationship is not a mere luxury but an essential strategy for business vitality.

Budgeting Best Practices

When it comes to financial reporting, budgeting is paramount. Unfortunately, some businesses treat budgeting as a box-checking exercise, creating one and then relegating it to a drawer, never to be revisited. A budget, when utilized properly, sets clear expectations. It’s an instrumental tool in gauging how your business is performing compared to what you anticipated. By dissecting the budget into its various components—revenue, cost of goods sold, margin, and other costs—one can gain a granular insight into the business’s health. It’s not about mere number crunching; it’s about understanding your business’s trends over time. And while a storm brews in the market, with rising interest rates and looming recession threats, it’s time for businesses to consider “weatherproofing.” This doesn’t equate to slashing budgets haphazardly. It’s about strategic preparation. Some sectors might necessitate investment to gain market share, while others present genuine opportunities for financial trimming. The current market landscape is a mixed bag: while some businesses are witnessing phenomenal growth, others are grappling with challenges. A lot hinges on the industry and its unique dynamics.

The Importance of Monthly Close

Consistency in financial reporting is non-negotiable for businesses. The ideal structure emphasizes a regular monthly close process, ensuring timely availability of financial packages. Companies lagging behind in their reporting find themselves grappling with outdated or irrelevant data. Take, for instance, Signature Analytics; the emphasis is on maintaining a consistent monthly reporting package. This comprehensive package delves deep, starting with the income statement, moving on to the balance sheet, and then addressing cash flows. But the analysis doesn’t stop there. To truly understand a business, it’s crucial to dissect revenue, break it down by product line, assess the cost of goods sold, margins, and other expenses. Furthermore, it’s essential to discern trends and understand their implications. But monthly reports aren’t enough. With the delay inherent in monthly reporting, businesses could be operating nearly two months behind the latest data. That’s where daily reports come into play. Real-time reporting tools like Microsoft Power BI are invaluable, providing daily insights and snapshots to help businesses stay on top of their game. This proactive approach is essential. Whether you’re a service-based business monitoring employee utilization or a high-volume retail outfit tracking monthly sales trends, you need to ensure you’re on track to meet your forecasts. Being reactive can spell disaster. If you’re behind on your targets, recognizing this early can mean the difference between a minor course correction and a major catastrophe. It’s crucial to understand the correlation between daily operations and the eventual impact on cash flow, especially in businesses with longer cash cycles.

Accrual Accounting Matters

Accrual accounting is pivotal for any business seeking clarity in their financial reporting. While the subject might seem a bit technical and perhaps tedious to some, its essence is quite straightforward. Accrual accounting ensures that the revenue generated in a given month aligns with the costs incurred for the products or services during that period. This gives businesses a realistic snapshot of their profitability and helps them gauge trends. For instance, if you rely solely on cash basis accounting, you might record revenue whenever a sale is made or an invoice is dispatched and log costs when a product is purchased. This approach could paint a misleading picture. You might have borne costs three months prior, and by not syncing those costs with relevant revenues, your books might show you’re performing exceptionally well when, in reality, you could be on the cusp of a downturn. Transitioning to accrual-based accounting isn’t just a recommendation; it’s a necessity for businesses wanting a crystal-clear view of their financial health.

Preventing Fraud 

The danger of having one person wear too many hats in the accounting department cannot be stressed enough. Many small businesses, driven by budget constraints, often allow a single individual to manage invoicing, bill payments, and payroll. Such a lack of segregation of duties is risky, making it easy for malpractices to slip through. A stark example of this can be found in a manufacturing setting where an individual with overarching control over accounting and payroll led the business astray. The owner’s disregard for accounting turned the inventory into an enigma, allowing the individual to manipulate the inventory balance and consequently the profitability figures. This person’s fraudulent activities stretched from claiming inflated expense reimbursements to setting up fake suppliers. While most fraudsters eventually get caught, the destruction left in their wake can be monumental. Even businesses with straightforward cash operations aren’t immune to fraud. The narrative underscores the significance of incorporating external oversight and robust internal controls, even if it means involving the CEO or executive team in the financial review processes.

The Future of Accounting (Technology)

At Signature Analytics, technology isn’t just incorporated—it’s embraced. The future of accounting is exciting, with innovations poised to streamline many traditional processes. The more we can automate and optimize aspects like reconciliations and data entry, the more bandwidth we have for value-added tasks. The introduction of AI, exemplified by tools like ChatGPT, has revolutionized how we visualize accounting. It’s not just about traditional financial statements anymore. Trend analyses, process documentation, and various efficiencies are within reach thanks to technological advancements. By leveraging a custom reporting tool compatible with software like QuickBooks and NetSuite, Signature Analytics ensures its clients receive comprehensive financial statements regularly. The goal is to perpetually augment value and efficiencies, even in sectors of accounting that might seem commoditized.

How to Get in Touch With SA

For those keen on delving deeper into what Signature Analytics offers or just to discuss business challenges and experiences, reaching out is easy. The best avenue is through their website, signatureanalytics.com. For more direct communication, interested individuals can email [email protected] or call (858) 228-5643. With a dedicated team of 85 professionals, Signature Analytics aims to bolster the small to midsize business sector. The philosophy is clear: if they can’t assist, they won’t force a solution. The essence is to share, guide, and collaborate with business owners nationwide.

 

Understanding margins is the cornerstone of any successful business strategy. Signature Analytics’ CEO, Pete Heald, and President, Jason Kruger, recently emphasized the importance of deep comprehension of your business’s margins, the influences that shape them, and the opportunities they present for improvement.

Why Knowing Your Margins is Essential

Margins, the difference between the selling price of a product or service and its cost, are a primary indicator of a business’s profitability. It’s not enough to understand the overall margin; businesses must also grasp the margins for individual product or service lines. As CEO, Pete Heald points out, having this understanding allows for effective measurement and goal setting.

Increasing the gross margin – the profitability after subtracting cost of goods sold (COGS) – even by a single percentage point can lead to significant improvements in a business’s bottom line. In a $10 million revenue business, for example, a 1% improvement in margin equals an additional $100,000 in net income. That much additional cash on the bottom line can make a huge difference in how a business makes decisions about inventory purchasing, hiring and workforce planning, real estate costs and many other operational choices.

Understanding Your Trends

Margins, much like other financial parameters, can trend upwards or downwards over time. Businesses need to mine these trends for the valuable insights they provide. A decreasing margin might signal a need for proactive adjustments, while an improving margin could indicate the effectiveness of certain strategies.

For example, if a $10M business can increase the price of a product by 2% while COGS remain the same, they will see an additional $200,000 bump to the bottom line. Understanding the details that drive these dynamics allows a business owner and leadership team to make strategic decisions to improve gross margin and profitability.

Beyond Gross Margin

Improving gross margin is only part of the puzzle. Businesses must also focus on managing their Selling, General & Administrative (SG&A) expenses to improve their net income margin. CEO, Pete Heald emphasized that the key to managing SG&A costs lies in understanding your numbers, trends, and what constitutes your margins by service or product line.

Once businesses have a firm grip on their margins, they can explore various strategies to enhance them. This could include sales strategies, purchasing strategies, or re-evaluating shipping agreements to name just a few. For businesses that manufacture or buy products, these elements can significantly impact margins.

Ultimately, the importance of margins cannot be overstated. They’re an essential part of the financial health of any business. As President, Jason Kruger stresses in the video above, small improvements of even 1-3% can make a substantial difference to a business’s bottom line, reinforcing the importance of not just understanding your margins, but also continually striving to improve them.

Nonprofit organizations face significant challenges when it comes to technology.  Justifying any kind of overhead spending that does not directly support the daily work of a nonprofit’s mission prevents many nonprofits from upgrading and updating their technology. Lower administrative costs garner accolades in watchdog publications such as GuideStar and Charity Navigator which report on how donor funds are spent, and all nonprofits want to show that their organization is promoting their mission-first philosophy. 

On top of budgetary concerns, there are limitations in staff experience. Some staff join a nonprofit because they are passionate about the cause but have limited training in technology skills. At the same time, other employees and members of the Board of Directors are passionate about the mission of the nonprofit and have a depth of expertise in the area of technology and software that goes above and beyond that of the rest of the organization.

Higher turnover, lower salaries, and limited resources add to the complex landscape many nonprofits face when advocating for the adoption of new accounting or project management technology. 

Here at Signature Analytics, we work with nonprofits of all sizes nationwide and have helped choose and implement accounting technology that fits our clients’ unique needs.  In this article, we will share our own experiences with software that works for nonprofits and why we think each is a good choice to support accounting operations, and your organization as a whole. 

The Best Accounting Software for Nonprofits: 

There are a lot of accounting software suites out there.  Complex systems and simple apps, custom architectures, and out-of-the-box solutions.  So how should a nonprofit choose which one is right? 

If your organization is already using an accounting software system but is unhappy with it or, if your organization has been cobbling together a combination of systems and is looking for a single source of truth, here are some software solutions to take into consideration. 

QBO for Nonprofits

Quickbooks Online (QBO) is a simple, versatile solution that we have found fits many of our small to mid-sized non-profit clients’ needs.  At a flexible price point with all the features you would likely need, a quick learning curve and the ability to be used by experts and novices alike, we think QBO is one of the very best solutions available for NFPs. 

Challenges like months of training, the need for deep technical expertise, high onboarding costs, and unforeseen upcharges for customization all are avoided by using QBO.  Additionally, when you hire staff or need to integrate your accounting software with other technology suites, QBO is easy to use and versatile. It “plays well with others”.

We find that ease of use is paramount for a new software and Quickbooks meets those criteria handily while still offering a wide array of features for the technically savvy user. 

Netsuite for NonProfits

Netsuite provides robust and highly customizable solutions for larger and more complex nonprofit organizations. With a custom solution like Netsuite one of the considerations must be the amount of training that has to be done first to get the organization into the system and then with every subsequent new hire. With a longer onboarding ramp Netsuite planning requires a strategic and focused approach.

Many times, we have heard from accounting teams, C-Suites, and staff that the Board of Directors wants them in Netsuite.  As outsourced accounting partners with many organizations of different sizes from $10M – $1.3B, we recommend abstaining from software selections until after our 30-day assessment.  During the assessment, we are learning about your organization’s needs, skills, capabilities, and requirements.  To recommend one system over another without that information would be overly hasty.

Other Non-Profit Accounting Software Options 

The great thing about this era in technology is that there are myriad solutions available.  The challenging thing is that there are SO MANY solutions available.  When we perform an assessment, we really get to know the skill sets of our clients, what their unique needs are, and how software can integrate in a helpful, painless, and affordable way to make their organization run more smoothly.  When an organization is already embedded in its systems, our teams are highly skilled and able to support accounting functions within the existing environments.  Some of the additional software systems that we are experienced in which are available for nonprofit accounting and finance departments include, Xero, Sage and Freshbooks. 

Xero provides an intuitive, easy-to-use platform that allows nonprofits to track donations, manage expenditures, and provide transparency with rich reporting tools. 

FreshBooks offers time-tracking capabilities, streamlined invoicing, and expense management, making it a great option for service-based nonprofits. 

Sage caters to nonprofits with features like grant management, budgeting, and advanced reporting options that can handle the complex financial needs of larger organizations. 

Whichever solution your organization chooses, the right software can significantly enhance the efficiency and accuracy of a nonprofit’s accounting processes, leading to more effective management of funds and better delivery of your mission.

What to consider when looking for Grants Management Software

First, evaluate the software’s ability to streamline the grant application process, making it easier for your team to apply for a variety of grants. Secondly, consider the software’s reporting capabilities – can it generate the necessary reports to demonstrate compliance and impact to funders? Lastly, take into account the software’s scalability to ensure it can handle your organization’s growth.

For example, Fluxx Grantmaker is a leading choice due to its robust grant tracking and application management features. It can automate processes, provide real-time analytics, and offer an intuitive platform for both grantmakers and applicants, making the process seamless.

Blackbaud Grantmaking, on the other hand, stands out for its comprehensive reporting capabilities. It allows organizations to create custom reports, dashboards, and visualizations that can illustrate a project’s progress and its impact effectively.

Lastly, SurveyMonkey Apply is notable for its scalability and flexibility. It provides a platform that can manage multiple grants, scholarships, or other application-based programs simultaneously, making it an excellent choice for growing organizations. Additionally, it offers an easy-to-use interface and intuitive design that simplifies the grant management process.

Each of these software options provides unique advantages, so it’s important to consider your organization’s specific needs when choosing the best fit.

Effective Multi-Departmental Budgeting Software for Nonprofits

Navigating the complexities of multi-departmental budgeting for nonprofits can be a daunting task. Fathom stands out as a robust solution, offering flexibility and seamless integration capabilities with leading accounting software like QBO and NetSuite, among others. This integration empowers nonprofits to track their budgets and financial performance across multiple departments with ease and precision.

At Signature Analytics, we thrive in the face of such challenges presented by software integration. We’ve honed our expertise in leveraging Fathom’s capabilities to create customized solutions for our clients. For instance, we’ve successfully improvised QBO for efficient department and grant tracking, harnessing Class/Customer features to our advantage.

Moreover, Fathom allows us to generate multiple comprehensive reports, enabling us to garner the insightful overview we need to make informed financial decisions. Whether it’s a report we’ve currently put together, one we’re using for continuing professional education (CPE), or a custom one tailored to your organization’s needs, Fathom’s versatile reporting tools equip us to deliver the insights you need for effective budget management and financial planning.

Comprehensive Aspects for All Software Selections

When considering software selection from a holistic perspective, synchronization is an essential factor. We at Signature Analytics recommend the use of a ‘heavy’ Salesforce integration specialist who is well-versed in managing intricate, wide-scale integrations. to work in tandem with your dedicated Signature Analytics team. 

Whatever your choice in software, you need your staff to get up and running quickly in order to be able to use it across levels of technological sophistication. Adding layers of complexity onto a department that is likely already working as fast and as hard as it can is a recipe for employee dissatisfaction. 

An additional consideration is recruiting and hiring in the future. Choosing a complex software solution can make it harder to recruit accounting staff if one of the job requirements is experience in highly complex accounting software. 

Our role is to ensure that all the finance and accounting needs of your organization are clearly defined and integrated successfully into the process. To accomplish this, we offer a comprehensive approach, ensuring every aspect of your financial and accounting needs is accurately captured and incorporated into your overall software solutions.

Best Project Management Technology for Nonprofits

Accounting is the great truth teller and reveals a lot about an organization.  As we work with our nonprofit clients we often uncover inefficiencies that are wasting precious resources.  One of those areas we frequently encounter is operations.  Many of our nonprofit clients, manage work and tasks via email, memos, and meetings and do not have a project management software that is easy to use and offers visibility.  

The goal of any software is to streamline and simplify a process. So with this in mind, we always weigh cost and complexity.  It is essential to understand what problem you are solving.  If it is a people problem, no amount of technology will fix it.  There has to be a clear and simple path to training & onboarding when any new software is implemented otherwise utilization will lag.  

 

Internally in our own organization, we use Asana.  We find that the simplicity and intuitive board layout make project tracking, time tracking, and manager visibility into team activities simple and efficient. 

Other project management software for nonprofits to consider: 

Monday.com

Monday.com is a flexible platform that enables teams to collaboratively manage and track projects in a visual, intuitive way. For nonprofit organizations, its ability to centralize all communication, tasks, and resources in one place can facilitate a streamlined workflow and encourage transparency. The software also provides comprehensive project tracking tools and allows you to create custom workflows that align with your nonprofit’s unique processes.

Teamwork

Teamwork is a project management tool that allows for seamless collaboration among team members, fostering an organized work environment. It is especially useful for nonprofits looking to monitor projects, assign tasks, and track time spent on specific activities. The software’s easy-to-use interface, integrated communication tools, and advanced reporting capabilities make it a versatile choice for managing and coordinating your nonprofit’s initiatives.

Trello

Trello is an excellent option for nonprofits seeking a simple yet effective project management solution. It operates on a board-and-card system, which allows teams to create, assign, and track tasks visually. This can be particularly beneficial for nonprofits, as it enables a clear overview of ongoing projects, deadlines, and responsibilities. Trello’s simplicity and intuitive design make it easy for all team members to adopt, reducing the learning curve typically associated with new software.

Basecamp

Basecamp offers an all-in-one approach to project management, combining the functionalities of messaging platforms, task assignment tools, and scheduling software. This makes it an efficient choice for nonprofits seeking to consolidate their project management processes in one place. With Basecamp, your team can easily share files, set up to-do lists, schedule events, and maintain open lines of communication, ensuring that everyone stays in the loop about project updates and changes.

Project management software often offers a trial subscription allowing you to try out the interface and see what is right for your team. 

How Nonprofits Can Benefit from Technology Upgrades

Efficiency is key in any organization.  Having more time means having more resources and needing to spend less money to execute your mission. 

For all technologies, one has to weigh cost, ease of use, training, implementation, and how the software communicates with the other technologies you already use or may implement in the future. While a custom program may work fine on its own, the rigidity of not being able to integrate might make it a poor choice to achieve the goal of streamlined operations. 

At Signature Analytics, we recently conducted a technology audit for ourselves – read more about our cost-saving techniques here How to Weather-Proof your business for a possible recession and we found areas of over-spending that we were able to address and refine. 

Currently, we use Quickbooks, Asana, BILL, and Ramp (among others) to run our own business. Here is a brief overview of these software options and how we find them to be most effective. 

BILL – For our team, bill.com provides ease of use,and affordability, and it helps us manage AP, Expenses, and some AR functions.  Here’s what Bill.com says about themselves:

Less: Paper, payables, mess, manual effort, and clunky processes, 

More time for your: Customers, strategy, mission, and clients.

Bill.com is the intelligent way to create and pay bills, send invoices, and get paid. 

Ramp: Ramp is an expense management software that helps us manage our corporate credit card usage, offers additional AP options to what Bill.com offers and is easy to use for an accounting team & for the users. With Ramp, there is a convenient cashback rewards feature. Additionally, one of the features we like is that our team can add the Ramp card to Apple Pay. We are able to manage spending limits in real-time which helps us to track & manage spending for our team who are located all over the US!

Here’s what Ramp says about themselves: 

Ramp is the ultimate platform for modern finance teams. 

Free your finance team to do the best work of their lives — and save an average of 3.5%

Have a software you have been considering that we didn’t mention? Send us an email and we’ll check it out and give you our take on whether it would be a good fit for your nonprofit’s needs. 

In a recent conversation, Signature Analytics’ CEO, Pete Heald, and President, Jason Kruger, shed light on a critical issue faced by businesses in the current economic environment – managing inventory while carrying debt. They highlight how companies can rethink their processes and operations to improve profitability, by addressing excess inventory and thinking strategically about mounting interest rates associated with debt.

Inventory Surplus and Cash Shortage

The COVID-19 pandemic and ensuing supply chain disruptions led many companies to accumulate excess inventory. Many resorted to leveraging credit lines or financing to procure stockpiles of inventory to offset supply chain disruptions. However, with the rise in interest rates, some companies now find themselves cash-strapped, which hampers their ability to manage and run their businesses effectively.

Understanding the Cost of Inventory

To navigate these challenges, business leaders need a deep understanding of the current cost structure of both existing inventory and new incoming stock. While holding additional inventory made sense during the disruptions of the pandemic, it is now time to examine price structure, inventory, and margins more strategically. The decision to liquidate stock, even at a lower profit margin, could be more beneficial than retaining it while paying higher interest rates on the underlying loans that afforded the initial purchase. Converting inventory into cash allows businesses to pay off their debt and reduce interest payments, freeing up capital to run operations more strategically and with less fear of cash shortages in other areas. 

Streamlining Inventory Management

Looking ahead, President, Jason Kruger, advises businesses to reevaluate how quickly they’re turning their inventory. The buying pace of 3 years ago can now give way to leaner inventory management with the supply chain opened back up and delivery times more reliable. 

Depending on your unique situation, you may find that reducing or even liquidating a portion of your inventory can improve cash flow, lower storage costs, and reduce the risk of being left holding the proverbial bag as it relates to obsolete stock. 

Coupled with the right strategic support, businesses can optimize their inventory management processes to better align with changing market dynamics and the current economic climate. This proactive approach to inventory management, as recommended by Pete Heald and Jason Kruger, can be instrumental in improving a company’s profitability in these challenging times.

Reach out to learn more about how Signature Analytics helps business owners make smart business decisions based on accurate, relevant, and timely data and excellent accounting and financial management. 

Read the Show Notes and listen to this and other podcasts on Tyler’s website here: https://thinktyler.com/podcast_episode/cash-flow-secrets-jason-kruger/

Jason advocates that knowledge of one’s business is the linchpin to success and profitability. With the right financial foresight and accounting tools at your disposal, profitability soars, productivity amplifies, and smarter business strategies emerge.

Join us in this edition of the Think Business with Tyler podcast, where we delve into the importance of comprehensive financial understanding, the essential element of cash flow for budding enterprises, the wisdom of not always being the smartest person in the room, and the importance of understanding all the elements of your business financial realities to ensure success and smart business decisions.

Essential Takeaways:

  1. Decoding Business Metrics: Grasping your business metrics isn’t a luxury; it’s a necessity. Jason emphasizes, “Mastering your numbers, supplemented with a solid financial backdrop, is foundational. Start there. With that clarity, you can delve into your business’s depths, identify avenues for enhancement, and brace against economic downturns.”
  2. Cash Flow – The Small Business Lifeline: In the nascent stages, cash flow management is paramount. It’s the pulse of your business. Positive cash flow paves the way to achieving long-haul aspirations. Jason opines, “Cash stands as the backbone for emerging businesses. Comprehend the cash implications of your budgetary choices. Rapid growth often strains cash, necessitating an understanding of your investments and their cash ramifications.”
  3. Valuing Collective Wisdom: Surround yourself with ingenious minds. For entrepreneurs, it’s not about always being the most astute but about absorbing knowledge from those around. Jason shares, “Entrepreneurs should recognize and cherish the collective intelligence around them, focusing on their overarching business vision.”
  4. Business Mastery: A successful entrepreneur is one who understands the nuances of their venture. It’s about having a grasp, not necessarily mastery, over every component. Jason elucidates, “Know your venture inside out. While outsourcing expertise is viable, owning the essence is vital. Whether it’s sales, marketing, or operations – be well-versed.”

With the planned obsolescence of QuickBooks Desktop 2020 by Intuit on May 31, 2023, many businesses are confronted with crucial decisions about the future of their accounting operations. The transition away from QuickBooks Desktop (QBD) 2020 presents an opportunity to upgrade your tech stack and enhance the collaborative capacity of your business by leveraging real-time data. As a provider of outsourced accounting services, Signature Analytics can help you navigate this transition smoothly, ensuring that you continue to have access to robust, up-to-date financial information for strategic decision-making.

The main change to note is that while QBD 2020 will remain available for current users, it will no longer receive updates or support. If your business relies on add-ons such as the popular payroll service, this transition could disrupt your operations. But don’t fret – Signature Analytics is prepared to support you through this process, working alongside your team to restructure your accounting systems and maintain business continuity.

Transition to QBO or Stay on Desktop?

If you’re considering whether to move to a more recent version of QBD or switch to QuickBooks Online (QBO), Signature Analytics can provide expert guidance to help you weigh the pros and cons. With the sunsetting of QBD 2020, shifting to QBO could be a strategic move. As an outsourced accounting partner, we can help you harness the potential of QBO’s cloud-based platform, providing you with real-time data access, increased mobility, and better collaboration among your team members.

If you’re thinking about upgrading your tech stack, we can also provide insights into alternative software solutions to QuickBooks. For example, if you’re looking to replace certain features lost when transitioning from QBD to QBO, inFlow might be a viable option. It offers sales orders, inventory tracking, a range of reports, and seamless integration with QBO. Our team at Signature Analytics can guide you through this software selection process and ensure seamless integration with your existing systems.

How Hard is it to Transfer from Quickbooks Desktop to Online?

One of the key benefits of working with an outsourced accounting team like Signature Analytics is our technical expertise and ability to adapt quickly to changes in your business environment. With the discontinuation of QuickBooks Desktop 2020, we can help your business transition smoothly to a new accounting software, whether it’s an upgraded version of QuickBooks Desktop, QuickBooks Online, or another alternative. In doing so, we can help ensure that your business retains access to accurate and timely financial data, while also enabling more collaborative and mobile operations through real-time data access.

Transitioning your accounting software is an opportunity to enhance your tech stack, streamline processes, and improve collaboration within your team. With Signature Analytics on your side, you can leverage this transition to upgrade your systems, enabling your business to become more agile, data-driven, and resilient in the face of future changes.

Let’s look at a direct comparison between QuickBooks Online and QuickBooks Desktop:

  • Cost: You can get QuickBooks Online for as low as $30 per month, while QuickBooks Desktop will cost you starting from $549 annually.
  • Third-Party Software Compatibility: QuickBooks Online can integrate with over 650 different applications, whereas QuickBooks Desktop only accommodates just over 250.
  • Accessibility: With QuickBooks Online being cloud-based, you can access it from any location with internet access and a web browser. QuickBooks Desktop, on the other hand, is installed on your local device but can be self-hosted at an additional cost for more accessibility.
  • Industry-Specific Solutions: QuickBooks Desktop comes in seven versions each tailored to a specific industry. However, QuickBooks Online’s large number of integrations provides the flexibility to cater to various industries.
  • Life-cycle of Software: Intuit periodically discontinues older versions of QuickBooks Desktop, as seen with the retirement of QuickBooks Desktop 2020. This results in loss of support for key add-on functions such as payroll and credit card processing. QuickBooks Online, being a cloud-based solution, does not face this issue.

Both QuickBooks Desktop and Online provide the following features:

  • Robust accounting capabilities
  • Integrations numbering in the hundreds
  • Invoicing
  • Management of contacts
  • Tracking of expenses and time
  • Inventory management
  • Project management functionalities
  • Budgeting tools
  • Reporting capabilities
  • Support for taxes
  • Add-ons for payroll
  • Mobile application support

However, only QuickBooks Online offers:

  • A fully cloud-based format
  • Compatibility with Mac
  • 600 extra integrations
  • Invoices with high-quality design
  • The capacity to auto-schedule invoices
  • Invoicing capabilities in multiple languages
  • Optional support for live bookkeeping

While, only QuickBooks Desktop offers:

  • A format that’s installed locally
  • Sales orders
  • An additional 50 reports
  • Optional features that are industry-specific
  • Optional industry-focused reporting

Consider QuickBooks Online if:

  • You’re seeking software that’s user-friendly and easy to learn.
  • You want the flexibility to handle your accounting remotely via mobile apps.
  • You value time-saving automations and integrations.
  • You wish to integrate payment processing for online invoice payments.
  • You require international invoicing capabilities.

On the other hand, QuickBooks Desktop may be the right choice if:

  • You prefer accounting software that’s installed locally.
  • You require the industry-specific features offered by QuickBooks Premier or QuickBooks Enterprise.
  • Your business processes include sales orders.
  • Your accounting needs are particularly complex.

Learn More About Signature Analytics – Discover How We Can Help You

With an outsourced accounting team from Signature Analytics, you get accurate, relevant, and timely reporting and financial insights to help you make smart business decisions. 

Signature Analytics outsourced accounting and CFO business advisory services teams get you access to finance and accounting expertise and insights. By putting the right people, processes, and technology in place, we facilitate accurate, relevant, and timely data so you can make smart business decisions.

Learn more about our outsourced accounting services, here.

As the economy wobbles on the edge of a recession or slowdown and inflation and the job market remains stubbornly high, business owners are looking for innovative ways to be flexible in the way they manage their workforces.  While in years gone by accounting, HR, compliance, IT, and marketing were all handled in-house, it is increasingly accepted that outsourced solutions can provide next-level flexibility while delivering a higher caliber of service than a company would be able to afford should they hire in-house [check out our outsourced vs in-house analysis here]. 

In this article, we’ll explore the functions of outsourced HR and outsourced accounting, how outsourcing non-essential functions can benefit companies, and how, as an outsourced accounting provider, we at Signature Analytics,  work with outsourced HR companies. 

How Do Outsourced Accounting and Outsourced HR Work Together?

The term non-essential is somewhat of a misnomer. Both HR and accounting are essential to any business.  For HR, not only is it essential from a regulatory perspective, but also because your people need to get paid, obtain benefits, be trained, and have an outlet to voice concerns.  The “resources” part of Human Resources can fall by the wayside when a single HR employee or small HR department is tasked with managing a larger workforce than they can effectively handle. 

Outsourcing your HR means you get the right size HR team with the right level of expertise in whatever area your team needs.  That’s true of whatever outsourced relationship you engage in. 

For us, when we work with a client who chooses to outsource HR, we celebrate!  An outsourced HR partner is a great asset in our world because we can coordinate payroll processes with experienced professionals who know the industry and are tech-savvy and efficient. We can collaborate on complex problems and streamline operations to better handle any cross-departmental challenges that come our way.  

For the business owners we work with, outsourcing HR means their internal people are less stressed, more proactive, and more motivated to improve the culture of their organization. Productivity increases when culture improves and that’s good for morale and the bottom line. 

And for us, improved margins, increased efficiencies, and a happy C-Suite are always good news. 

What Services Do Outsourced HR Firms Provide?

Outsourced HR comes in many shapes and sizes.  There are outsourced HR companies that focus on recruiting, there are those that handle compliance and handbooks, there are project-based Learning & Development Outsourced HR companies, and Fractional HR teams that work on recurring retainers.  There are outsourced HR firms that focus on culture and those that handle complex payroll relating to Davis Bacon and service contracts.  Whatever kind of outsourced HR support you’re looking for, you can bet there’s a good fit for you. 

What Services Do Outsourced Accounting Firms Provide? 

Outsourcing your accounting team is, as you may already have guessed, our area of expertise.  For us, we believe that the Signature Analytics model is the best way to access expertise without breaking the bank.  While some outsourced accounting companies only provide Outsourced CFOs and others place bookkeepers, at Signature Analytics, we take an integrated, holistic approach to every engagement. 

We start off with an assessment phase. During the first 90 days, your Signature Analytics outsourced accounting team is hard at work learning your existing strengths and identifying your areas of concern.  We are not passively sitting by observing though, our day-to-day accounting process starts on day one getting into the technologies and processes that exist for your organization and creating a plan for best practices in your business moving forward. 

The Assessment results in a plan of action and recommendations for the skillsets and effort we feel will be most beneficial to your company.  The great part? We’re flexible so as you grow we can add additional staff with a diverse range of skills to support that growth; if you should need to pull back, we can reduce the effort to match your needs. 

Our teams consist of Staff accountants, Accounting managers, Controllers, and CFO-level business advisory specialists. For our clients, our goal is to streamline accounting procedures and develop reporting so that the data that comes out of the month-end close is useful, practical and gives the company leadership the kind of valuable insights they need to make smart business decisions. 

Outsourced Accounting and Outsourced HR: A Winning Combination

Choosing to use outsourced accounting and outsourced HR services can be a game-changer for businesses.  With a flexible outsourced team at your fingertips, your teams can create a holistic approach to managing financial and human resource functions. 

Making Financial and HR Processes Smooth and Accurate

When outsourced accounting and HR services team up, they create a seamless flow of precise financial data. This means that the accounting provider can deliver accurate information to the HR provider, making payroll management, budgeting, and financial planning in HR more efficient. By aligning these processes, businesses can reduce errors, avoid data discrepancies, and ensure consistency in reporting and decision-making. It’s all about streamlining and improving accuracy for better overall operations.

Maximizing Cost Savings and Resource Management

By combining outsourced accounting and HR services, businesses can effectively optimize costs and allocate resources. Outsourcing these functions allows for reduced reliance on internal resources such as dedicated accounting and HR staff, office space, software, and infrastructure. This cost-effective approach opens up valuable resources that can be redirected to core business activities like product development, customer acquisition, and strategic initiatives.

Leveraging Specialized Knowledge and Expertise

When businesses opt for outsourced accounting and HR providers, they tap into a wealth of specialized knowledge and expertise. These providers bring unique skills to the table, which contribute to enhanced efficiency and effectiveness. Accounting professionals possess in-depth financial expertise, ensuring accurate financial reporting, compliance with regulations, and proactive financial analysis. On the other hand, HR providers bring comprehensive knowledge of HR practices, employment laws, and talent management, making it easier for businesses to navigate complex HR challenges.

Securing Compliance with Regulations

To steer clear of penalties, legal troubles, and harm to reputation, businesses must prioritize compliance with financial and HR regulations. Outsourced accounting and HR providers come to the rescue with their expertise in this area. They possess a thorough understanding of regulatory requirements and establish strong processes to ensure compliance. By teaming up with these experts, businesses can stay informed about evolving regulations, minimize risks associated with compliance, and confidently concentrate on core business activities.

Fueling Strategic Growth and Success

Accounting and HR functions both contribute strategically to business growth and success. When businesses integrate outsourced accounting and HR services, they gain access to valuable guidance and support in areas like workforce planning, talent management, organizational development, and succession planning. This collaboration allows businesses to align their financial and HR strategies, ensuring that both functions work together towards shared goals and objectives.

What Industries Most Benefit from Outsourced HR and Accounting?

Many industries can benefit from outsourcing HR and accounting services, particularly industries that need cost-effective solutions, specialized expertise, and streamlined processes. (That’s kind of everyone).

Small and Medium-sized Enterprises (SMEs): SMEs often have limited resources and may find it challenging to maintain in-house accounting and HR departments. Outsourcing provides them with professional services without the need to hire dedicated staff or invest in infrastructure. It enables SMEs to effectively manage their finances and HR functions with expert support.

Professional Services: Businesses in fields like legal, consulting, marketing, and design often require specialized financial expertise and HR support. Outsourcing these functions allows professionals to concentrate on serving their clients while relying on experts to handle accounting tasks such as invoicing, financial analysis, and tax compliance, as well as HR responsibilities like payroll and talent management. Understanding utilization rates can help with workforce planning and having a grasp on profitability by client can inform rates and benefits package adjustments. 

Technology Companies: Businesses in the technology sector require agility and flexibility to focus on their core operations. Outsourcing accounting and HR functions allows them to allocate their resources to product development, innovation, and scaling while leaving the financial and HR management to specialized providers that can grow with their erratic and often meteoric growth trajectories.

Construction: Construction companies often have complex financial management needs, including project accounting, cost tracking, and compliance with industry regulations. Outsourcing accounting services can help them streamline these processes, ensure accurate financial reporting, and stay on top of their financial obligations. Additionally, outsourcing HR functions can assist construction companies in handling workforce management, payroll administration, employee benefits, and compliance with labor laws.

Manufacturing and Distribution: The manufacturing and distribution industry involves intricate inventory management, supply chain operations, and financial transactions. Outsourcing accounting services can provide these businesses with expertise in inventory valuation, cost accounting, and financial analysis. It can also help them optimize their supply chain by providing accurate and timely financial information. Outsourcing HR functions can support these companies in managing their diverse workforce, tracking employee time and attendance, and implementing effective labor strategies.

Recovery and Wellness Centers: Recovery and wellness centers, including rehabilitation facilities, mental health clinics, and wellness retreats, have unique HR requirements related to staff scheduling, credentialing, and compliance with healthcare regulations. Outsourcing HR services can assist these centers in managing their staffing needs, ensuring compliance with industry standards, and maintaining accurate employee records. By outsourcing accounting functions, these centers can focus on providing high-quality care while leaving financial management, billing, and insurance claim processing to experts.

Life Sciences and Biotech: The life sciences and biotech industries require precise financial management due to complex research and development processes, regulatory compliance, and intellectual property considerations. Outsourcing accounting services can help these companies in effectively tracking research expenditures, managing grants and contracts, and ensuring compliance with financial regulations. Additionally, outsourcing HR functions can support life sciences and biotech companies in talent acquisition, managing payroll for specialized roles, and implementing employee training and development programs.

Nonprofit Entities: Nonprofit organizations, such as charities, foundations, and social service agencies, can benefit significantly from outsourcing HR and accounting functions.

These are just some of the industries that can benefit from outsourcing accounting and outsourced HR.

Final Notes

Outsourcing accounting services is an effective way for businesses to streamline their financial operations and access expert financial professionals. By combining outsourced accounting services with outsourced HR services, businesses can achieve a comprehensive solution for managing their financial and human resource functions. 

Discover the Benefits of Outsourced Accounting with Signature Analytics

At Signature Analytics, we are dedicated to delivering top-quality service to our clients. Our team comprises highly skilled professionals with extensive experience in all aspects of financial and accounting services, including a focus on financial compliance management. We leverage integrated, cutting-edge technology and tools to streamline your accounting processes, maximizing efficiency, saving time and money, and ensuring best practices.

Our comprehensive outsourced accounting services support your day-to-day financial operations, including:

  • Invoicing
  • AR management
  • Bill processing
  • AP management
  • Forecasting
  • Reporting
  • Monthly close
  • And more…

Contact us today to learn more about how our comprehensive accounting services can help your business thrive. 

Right-Sized Teams at the Right Time

One of the things we looked at as we were going through the end of Covid and into this year was growth. We were fortunate to experience a lot of growth and opportunity during the pandemic, and we had increased the size of our team to meet that demand. As we got into 2023 it became clear that the slowdown was going to affect us all and we had to make some tough decisions to right-size our people costs. We know we’re not alone. We’re hearing the same story from a lot of our clients and prospects as well. So here are the elements we feel are most important to address as you manage your business and prepare to weather this slowdown in the economy.

 

Questions to ask yourself and your leadership

  • What were the investments we made in our growth?
  • What do we see that actual growth being?
  • Are the size of your team and the growth projections aligned?
  • If not, where can you make strategic cuts and still provide the level of service/ support/ delivery that your customers are accustomed to?

Businesses grappling with their growth and cost strategies need a thorough understanding of financials, coupled with the ability to critically assess assumptions. When it comes to making decisions about people, it’s always – well – personal. But with a clear eye and good data decisions about hiring or reducing the size of your staff can be made knowing that it is the right choice for your business going forward.

For businesses that are asset-heavy or equipment-heavy, or a combination thereof, the right-sizing discussion will be multi-layered. Really, as you look at ways to prepare for a slower economy the key is to understand your numbers and your trends and clearly define your goals based on that data. A strategic partnership with Signature Analytics provides that kind of guidance. We make sure our clients know their budget, forecast, cash flow projections and can right-size their companies based on those numbers.

Making Hard Decisions Easier

As a business owner, it’s not that hard to identify excess costs or call out underperforming team members. But having the data to support those assessments ensures that you’re making smart cuts, not just those that are most obvious.
For us, At Signature, we took a hard look at our people costs, real estate costs, technology costs, and other costs within our organization to determine which costs make sense, which are adding value to our company now, and which roles and activities we see adding value in the future.

Because we did a comprehensive cost assessment, in some cases, we didn’t cut costs, we increased them because we uncovered opportunities to take advantage of trends in the market that didn’t exist a year ago.

It’s not just about slashing roles and reducing people costs, there are nuances that go along with knowing your numbers. Understanding what your historical trends are, understanding the impact of expenses and investments and what they’ve made to your business is critical.

Accountability in Decision Making

At Signature Analytics, we know the value of having an accountability partner – someone who can challenge your assumptions. We act as a strategic partner for our clients to add a collaborative approach to decision-making. With an expert at your side, it’s easier to ensure the organization continually aligns with the changing market realities and doesn’t just rely on past successes.

Having an accountability partner or a person, either as a consultant or within your company who helps you challenge those assumptions is a vital role. The assumptions we made a year and a half ago, needed to be challenged. When we took the time ourselves to address our human capital costs and many other costs holistically, we decided some areas need to be cut, some teams, streamlined, some costs reduced and others increased.

Our CFO Business Advisory services help our clients have access to the kind of expertise you get from a full time CFO but at a fraction of the cost – and for a fraction of the time. Making smart and well thought out decisions that don’t have to be rolled back saves everyone time, money, and lost revenue.

Do you know what your profitability is at the project level? For many construction company owners, the answer is a resounding, “sort of.” At Signature Analytics we know that understanding your Job Costing, Project Tracking, and WIP Management makes all the difference in ensuring profitability. With multiple projects running at one time, it’s easy to lose track of the intricacies of each job.  But, in order to grow and maintain profitability, each of these elements listed above must be executed accurately to ensure that all costs are captured. 

The construction industry has complex and consequential accounting requirements. For many construction companies, bringing on an outsourced accounting team can mean more accurate financial reporting, the ability to scale and grow to the next level,and eliminating the cycle of the good years merely offsetting the bad. 

There are several critical aspects of accounting for construction businesses, particularly for subcontracting companies. Job costing, project tracking, comprehending gross profit margins, accurately capturing revenue in the appropriate periods, managing payroll against projects, and understanding which job sizes best suit a company’s operational structure to manage cash flow are just a few of those aspects. 

You need clear financials and experienced people to make sure your financial reporting is giving you the information you can use to bid jobs more accurately, manage your workers more effectively and increase profits today and into the future. 

Here are seven elements essential to managing your construction company’s finances. 

1: Monitoring Project-based Margins:

Identifying which projects – large or small – are most profitable can help guide strategic efforts toward more lucrative ventures. Reviewing job costing across multiple projects can uncover patterns. Recognizing these trends can improve future job bidding, ensuring accurate cost assignment for bid components.

2: Aligning Payroll with Projects:

Proper tracking of project-specific salary and benefits expenditure can provide valuable insights into labor cost management. Noticing that labor costs tend to rise at specific project stages might cause you to hire differently or manage performance-based incentives to ensure the timely completion of challenging stages. 

3: Maintaining Precise Work-in-Progress (WIP) Analysis:

Accurate WIP analysis is crucial to determine the appropriate milestones for billing, ensuring effective revenue recognition and cash flow management.

4: Recognizing Cash Flow Patterns:

Job costing accuracy aids in predicting your expected weekly cash flow in the complex environment of the construction industry, where billing and payments can be unpredictable. You may need to bill more upfront or, you may have to manage your cash flow differently if your projects have costs that arise before their associated billing periods. Having reliable cash flow projections can mitigate stress and enable better planning for potential expenses.

5: Leveraging the Right Software:

Software that integrates job tracking with your other financial reporting systems supports the alignment of costs, sales, profits, and cash flow planning. Construction accounting software should include project tracking, job costing, and payroll tracking. A mobile time-tracking app can provide real-time labor data as well.

6: Simplifying Cost Codes:

While more detailed cost codes can provide in-depth insights, they can also complicate reporting and processing. Take a look at your least and most frequently used codes, and question whether they should be more specific or whether they should be pared down.

7: Allocating Overhead Expenses:

Overhead expenses, including administration costs, rent, utilities, equipment, etc., must be allocated by project to get a precise picture of your profit margins. Payroll and benefits should be tracked separately from overhead to understand job costing elements separately. 

When it comes to payroll management, building in burdens for employees, such as health and other benefits, can be allocated to the projects. This includes the overhead costs related to the employees captured as part of the burden rate, ensuring it’s not just booked as an overhead expense.

 

An outsourced accounting partner can guide you to a better understanding of your profit margins and help you make smart choices to enhance them. Have questions about your unique situation? Talk to An Expert. 

What Nonprofits Need to Know to Breeze through Annual Audits Featuring Jason Kruger on The Nonprofit MBA Podcast

Read the Executive Summary or Listen to the Podcast HERE:  What Nonprofits Need to Know to Breeze through Annual Audits

Annual audits offer numerous benefits for nonprofits, including improved financial accountability, enhanced internal controls, compliance with legal requirements, increased donor confidence, informed decision-making, and positive public perception. By conducting regular audits, nonprofits can foster their mission, maintain transparency, and effectively manage their financial resources to serve their communities. In today’s podcast, Jason Kruger from Signature Analytics and  Stephen Halasnik from Financing Solutions, a great provider of nonprofit lines of credit, discuss what nonprofits need to know to breeze through the annual audits.

About Jason Kruger from Signature Analytics

On today’s episode, we have the pleasure of speaking with Jason Kruger, the President and Founder of Signature Analytics. Jason is shaking up the way business owners run their businesses by highlighting the gaps in data and reporting that many business owners face and sharing insights on how to improve profitability, increase productivity and run your company smarter. Jason has 20+ years of experience in the accounting and business advisory field working with mid-market companies and nonprofits. Join us as we share actionable insights and strategies to help you run your Organization smarter

About Stephen Halasnik, The Nonprofit MBA Podcast, and Financing Solutions

Stephen Halasnik co-founded Financing Solutions, the leading provider of lines of credit for nonprofits and church financing. The credit line program for nonprofits & churches is fast, easy, inexpensive, and costs nothing to set up, making it a great backup plan when cash flow is temporarily down. Mr. Halasnik is also the host of the popular, Nonprofit MBA Podcast. The podcast brings experts to discuss fundraising, nonprofit grants, executive director leadership, nonprofit boards, and other important topics. You can learn more about the nonprofit line of credit program here or call 862-207-4118.

Understanding Annual Audits for Nonprofits

Annual audits play a pivotal role for nonprofits by fostering improved financial responsibility, bolstering internal controls, ensuring legal compliance, boosting donor trust, aiding informed decision-making, and fostering a positive public image.

While legal obligations might drive some nonprofits to conduct annual audits, the broader reason lies in promoting transparency, reliability, and trust with stakeholders. Given the potentially overwhelming nature of the audit process, nonprofits can benefit immensely from a deeper understanding of the key aspects of annual audits.

Why Are Nonprofits Audited?

Nonprofit entities prioritize public interests over personal profits. As a result, they largely depend on donations, grants, and other philanthropic funds. Audits, conducted by independent professionals, ensure these organizations are transparent, accountable, and compliant with pertinent legal standards. Key focus areas for these audits include:

  • Financial Responsibility: Audits confirm the authenticity of financial statements, shedding light on the organization’s income, expenses, assets, and liabilities. Such rigorous examination of financial records assures stakeholders of the diligent management of funds and that the organization’s financial dealings align with relevant accounting norms and laws.
  • Regulatory Compliance: Annual audits inspect if nonprofits adhere to a myriad of regulatory standards, including state and federal regulations. This reinforces the nonprofit’s commitment to legal compliance and accountability.
  • Strengthening Internal Controls: Audits scrutinize a nonprofit’s internal control measures, encompassing financial administration, governance, and risk management protocols. These evaluations help pinpoint and remedy any control shortcomings, fortifying the institution against fraud or mismanagement.
  • Building Donor Confidence: Transparent financial operations and independent audits amplify an organization’s credibility, assuring donors and stakeholders of its commitment to the intended charitable causes. This boosts the organization’s image, inviting increased backing and resources.
  • Board Oversight: Board members, responsible for steering the nonprofit, rely on audits to gain insights into the organization’s financial well-being, pinpoint areas of improvement, and guide the organization’s trajectory.

Nonprofit Audit Types

Different audits cater to distinct organizational needs:

  • Financial Audit: A comprehensive review of an organization’s financial statements to verify their accuracy and legal compliance.
  • Internal Audit: Undertaken by internal teams, these focus on the efficacy of internal controls and compliance with in-house policies.
  • External Audit: Independent CPAs or audit agencies carry out these assessments to vouch for the credibility of an organization’s financial reports.
  • Compliance Audit: A scrutiny of an organization’s adherence to specific legal, regulatory, or industry benchmarks.
  • Operational Audit: This centers on evaluating the efficiency and effectiveness of an organization’s day-to-day operations.

How To Streamline the Audit Process for Nonprofits

Achieving hassle-free audits is possible with a deeper understanding of the following aspects:

  • Stay Abreast with Audit Norms: Stay updated with financial reporting protocols like GAAP or IFRS. This knowledge is instrumental in readying your organization for an audit.
  • Keep Flawless Financial Records: A robust record of all financial operations forms the bedrock of successful audits. Employ suitable accounting tools to maintain these records and perform routine reconciliations.
  • Adopt Rigorous Internal Controls: Implement a robust control framework to stave off financial discrepancies. Divide financial responsibilities among different individuals to introduce checks and balances.
  • Regular In-house Assessments: Periodic internal checks can preempt potential audit challenges by detecting financial irregularities early on.
  • Select the Right Auditor: Partner with a seasoned auditor familiar with nonprofit intricacies. It’s crucial that they resonate with your organization’s ethos.
  • Assemble Essential Documents: Compile pertinent financial documents systematically to ensure the audit proceeds without hitches.
  • Maintain Transparent Dialogue with Auditors: Engage in candid interactions with auditors. Furnish requisite information and address their inquiries promptly to ensure a smooth audit journey.
  • Glean Insights from Audit Outcomes: Use audit findings as a learning curve. Understand the recommendations and refine your organization’s financial protocols, reinforcing its financial soundness and diminishing future audit challenges.

In the ever-shifting business landscape, one of the significant overheads that organizations grapple with is real estate costs. The lingering impacts of the COVID-19 pandemic have redefined the traditional workspace model, prompting companies to reevaluate their real estate strategies. Here’s how businesses can optimize their approach to real estate to remain resilient in a slowing economy.

The Post-COVID Workspace Conundrum

Three prominent workspace models have emerged in the aftermath of the pandemic:

  • Full-time in-office: A model many companies have adhered to for decades, but one that’s now being received with apprehension by employees post-pandemic.
  • Hybrid: This model offers flexibility, with employees spending a few days in the office and the rest working remotely. It appears to be the middle-ground many are leaning towards.
  • Completely Remote: With the entire workforce operating remotely, this model completely eliminates the need for physical office space.

Our company, along with many others, found that a full-time return to the office post-pandemic wasn’t feasible if we intended to retain top talent. The hybrid model, while attractive, poses its own set of challenges. How does one justify the complete cost of real estate if it’s being used only a fraction of the time?

The Remote Advantage

Choosing a fully remote operational model allowed us significant savings on real estate costs. Not only did this free up cash, but it also provided us the flexibility to redirect those funds towards enhancing company culture, a component that can sometimes be diluted in a fully remote setting.

However, going fully remote isn’t without its challenges. Maintaining a unique company culture, ensuring adequate training and development for new entrants, and fostering team cohesion are all areas that require careful consideration.

Evaluating Real Estate as a Business Expense

Every cost in business should be measured against the value it brings. From a cash flow perspective, the savings from eliminating or reducing real estate costs can be significant. Additionally, going remote or adopting a hybrid model can open up doors to a wider talent pool, no longer restricted by geographical boundaries.

However, the decision shouldn’t be solely based on cash flow. It’s crucial to ask, “What value is this expense adding to my business?” If an expense, like real estate, isn’t adding the desired value, it might be time to reconsider.

The slow pace of the economy demands agility and adaptability from businesses. In such times, rethinking fixed costs like real estate and aligning them with the evolving needs of the workforce can not only result in cost savings but also lead to a more dynamic, resilient, and future-ready organization. As we sail into uncharted economic waters, businesses that periodically evaluate the value derived from each expense will be best positioned to thrive.

Prepare for a slower economy across the board with these insights from Jason Kruger and Pete Heald Weatherproofing your business for a slowing economy 

 

Outsourced accounting has become an increasingly popular option for businesses looking to streamline their financial and accounting functions. By outsourcing, businesses can access the expertise of accounting professionals without the costs and responsibilities associated with an in-house team. 

In this blog, we will explore the benefits of outsourced accounting, how to find the right outsourced accounting company, and the factors to consider when choosing a partner. 

What Is Outsourced Accounting?

Outsourced accounting refers to the practice of hiring a third-party company or service provider to manage a business’s financial and accounting functions. This may include tasks such as bookkeeping, payroll, month end close, and financial reporting. Instead of having an in-house accounting team, businesses can rely on outsourced accounting services to handle these functions. Outsourced accounting can be done remotely or on-site, depending on the specific needs of the business.

Why Are More Businesses Outsourcing Their Accounting?

There are several reasons why more businesses are turning to outsourced accounting services. For one, outsourcing can be a more cost-effective option compared to hiring a full-time accounting team. By outsourcing, businesses can save on the costs of salaries, benefits, and office space. Outsourcing also allows businesses to access the expertise of accounting professionals without having to invest in training and development.

Benefits of Outsourced Accounting

Access to Expertise

Outsourced accounting firms typically have a team of experienced accounting professionals who are trained in various areas of accounting, such as bookkeeping, payroll, month end close, and financial reporting. By outsourcing accounting functions, businesses can access the expertise of these professionals and receive expert advice and guidance on financial management and strategy.

Cost Savings

Outsourcing accounting functions can be a cost-effective option for businesses compared to hiring an in-house accounting team. With outsourced accounting, businesses can avoid the costs associated with salaries, benefits, office space, and equipment. Outsourcing also allows businesses to pay only for the accounting services they need, which can help them save money in the long run.

Improved Efficiency and Productivity

By outsourcing routine accounting tasks, businesses can free up time and resources to focus on core operations and strategic initiatives. This can improve efficiency and productivity within the organization and enable businesses to grow and expand more quickly.

Access to Advanced Technology and Software

Outsourced accounting firms typically have access to advanced accounting technology and software that may not be affordable or practical for businesses to invest in on their own. By outsourcing accounting functions, businesses can take advantage of these tools and improve their financial management and reporting.

Scalability

Outsourced accounting services can be scaled up or down depending on the specific needs and budget of the business. This allows businesses to access the accounting services they need when they need them, without having to worry about managing an in-house team or hiring additional staff.

Risk Reduction

Internal accounting teams create a variety of potential risks for the business including turn over, lack of expertise, and fraud.   Outsourced accounting firms offset this risk with added resources, a pool of expertise that clients can draw upon, and implementing checks and balances.

How to Find an Outsourced Accounting Company

When looking for an outsourced accounting company, it’s important to do your research and consider a few key factors. Here are some steps you can take to find the right outsourced accounting company for your business:

Identify your accounting needs:

Before you start looking for an outsourced accounting company, it’s important to identify what accounting services you need. This will help you narrow down your search and find a company that can provide the services you require.

Check credentials: 

Make sure the outsourced accounting company you are considering has the necessary credentials, such as certifications or licenses. This can ensure that the company has the expertise and experience to provide high-quality accounting services.

Read reviews: 

Look for reviews and testimonials from other clients of the outsourced accounting company. This can give you an idea of the company’s reputation and the quality of their services.

Schedule a consultation:

Once you’ve narrowed down your options, schedule a consultation with each outsourced accounting company to discuss your needs and learn more about their services. This can help you determine if the company is a good fit for your business.

Factors to Consider for Your Partner

When evaluating outsourced accounting companies, it’s important to consider a few key factors to ensure you find the right partner for your business. Here are some factors to consider:

Defined Processes and Approach

Look for an outsourced accounting company with defined processes.  How will they onboard you, do they implement best practices, will they be a good partner to work with?

Technology and Software

 Make sure the outsourced accounting company uses up-to-date technology and software to manage your accounting functions. This can improve efficiency and accuracy and provide you with real-time access to your financial data.

Communication and Responsiveness

 Look for a company that has good communication and is responsive to your needs. This can ensure that you receive timely and accurate financial information and that any issues are addressed quickly.

Cost

Consider the cost of the outsourced accounting services and make sure they fit within your budget. Look for a company that offers transparent pricing and does not have hidden fees.

Service Level Agreement

 Make sure the outsourced accounting company offers a service level agreement (SLA) that outlines the scope of services, expectations, and responsibilities. This can ensure that both parties are on the same page and can help prevent misunderstandings or disputes in the future.

By considering these factors, you can find the right outsourced accounting partner for your business and ensure that your accounting functions are managed effectively and efficiently.

Learn More About Signature Analytics – Discover How We Can Help You

With an outsourced accounting team from Signature Analytics, you get accurate, relevant, and timely reporting and financial insights to help you make smart business decisions. 

Signature Analytics outsourced accounting and CFO business advisory services teams get you access to finance and accounting expertise and insights. By putting the right people, processes, and technology in place, we facilitate accurate, relevant, and timely data so you can make smart business decisions.

Learn more about our outsourced accounting services, here.

Technology costs can be the secret drain of cash in any business.  The slow incremental (or sometimes rapid) rise of technology costs can occur under the radar of even the most vigilant CEO.  At Signature Analytics, we recently conducted a technology audit and discovered so opportunities to cut costs and improve efficiency all in one swift change of vendor. 

 

The Ever-Evolving Tech Landscape

There are so many options when it comes to software and technological tools. From Software as a Service (SaaS) solutions to the burgeoning field of Artificial Intelligence (AI), there is an ever-growing list of options. However, these services often come with incentives that make them appear more affordable in the first year or initial agreement, leading to costs that can quickly escalate as time goes on.

When we looked at our own technology expenses, we discovered that we had areas that were easy to trim back such as maintaining more ‘seats’ than needed, and areas where our contracts had jumped in cost upon renewal.  We know we’re not alone.  This happens to our clients all the time.  

Research and Negotiation

An essential step we took was a comprehensive review of our technological assets: which technologies were in use, who was using them, and what value they brought to the company. This process illuminated areas of over-payment and under-utilization, paving the way for cost-cutting measures.

Take some time to research the current market, you may find new platforms that offer greater functionality at a more cost-effective rate than your existing systems. Yes, switching takes time and effort.  But it also focuses your teams on their internal processes and for soem software requires a deep dive into data that may have become muddled over time.

Can’t find a better solution? Research offers a benchmark to bring to your current provider to start a renegotiation. By understanding the competitive landscape, you can approach current vendors and negotiate better pricing to get the best value for your investment.

Strategic Cost Evaluation

The key to reducing expenses is strategic trimming not across-the-board cost-cutting. When you understand your numbers, analyze cost trends, and determine the value driven by those expenses it becomes very clear where you’re overpaying and what services you can reduce or eliminate entirely.

When you reduce costs in one area it can officer an opportunity to invest in areas you may have been constrained in.  Reduced software costs and better systems might leave room for leadership coaching for middle management or an increased spend in marketing.  Or even that outsourced accounting team you always wanted to support your in-house accounting staff! 

It’s all about finding ways to increase efficiencies in cost structure and manage your business more effectively.

Technology is an essential aspect of any business, so it is critical to ensure it is providing value proportional to its cost. Regular review, market research, and strategic cost evaluation are vital to keep these expenses in check, ensuring they are both necessary operational costs and strategic investments driving your company forward.

Outsourcing accounts payable is a popular choice for businesses aiming to streamline their financial processes. By delegating this task to a third-party provider, companies can save time, reduce costs, and improve accuracy. However, accounts payable is best viewed as part of a comprehensive solution within outsourced accounting services.

When businesses opt for outsourced accounting, they entrust a third-party provider with managing their entire financial ecosystem, including accounts payable. This holistic approach ensures seamless integration and optimization of all accounting functions, resulting in streamlined workflows, increased accuracy, and cost savings.

Comprehensive Accounting Solutions: Integrating Accounts Payable Services 

Accounts payable is a crucial component of outsourced accounting services, and it is best viewed as part of a comprehensive solution rather than a standalone service. 

By incorporating accounts payable within the broader scope of outsourced accounting, businesses can streamline their financial processes, improve accuracy, and save valuable time and resources. 

This comprehensive solution allows businesses to leverage the expertise of the outsourcing provider across all accounting functions, leading to enhanced efficiency, cost savings, and access to specialized knowledge. Ultimately, it is the synergy and cohesion of outsourced accounting services that yield the most significant advantages for businesses.

Benefits of Outsourcing Accounting with a Holistic Approach

Streamlined Workflow:

When businesses choose to outsource accounting with a holistic approach, including accounts payable, they gain the ability to streamline their financial workflow. By consolidating all accounting functions under a single provider, duplicate processes can be eliminated, manual tasks can be reduced, and the handling of financial data becomes consistent and efficient. 

This integration ensures a seamless flow of information between different accounting processes, allowing for better coordination, faster processing times, and improved overall efficiency. With a streamlined workflow, businesses can focus on core operations while leaving the complex financial tasks in the hands of experts.

Cost Savings:

Outsourcing accounting with a comprehensive solution offers significant cost-saving benefits for businesses. By opting for outsourcing instead of maintaining an in-house accounting team, businesses can avoid the expenses associated with hiring, training, and managing employees. The costs of salaries, benefits, office space, and equipment are eliminated. 

Additionally, outsourcing eliminates the need for investing in accounting software, infrastructure, and ongoing maintenance. With outsourcing, businesses can achieve cost efficiency while gaining access to professional accounting services and expertise without the heavy financial burden.

Increased Accuracy:

Integrated accounts payable, as part of outsourced accounting, plays a crucial role in improving accuracy in financial processes. Professional accounting providers have established procedures, quality controls, and experienced staff dedicated to minimizing errors and ensuring precise recording, tracking, and payment of invoices. By leveraging their expertise and specialized knowledge, outsourcing providers can reduce the risk of errors, discrepancies, and data inaccuracies. 

The result is improved financial accuracy, enhanced audit readiness, and increased confidence in the integrity of financial information.

Access to Expertise:

Outsourcing accounting with a holistic approach provides businesses with access to a team of accounting professionals who possess specialized knowledge and expertise. These professionals stay updated on accounting regulations, best practices, and industry trends, enabling them to offer valuable insights and guidance. 

With access to such expertise, businesses can navigate complex financial challenges, make informed decisions, and optimize their financial strategies. By partnering with experienced professionals, businesses can tap into a wealth of knowledge, ensuring compliance, efficiency, and strategic financial management.

Focus on Core Competencies:

Outsourcing accounting functions allows businesses to concentrate on their core competencies. By entrusting the financial management tasks to experts, businesses can redirect their time, energy, and resources towards strategic initiatives, innovation, and revenue-generating activities that drive growth.

 This focus on core competencies can lead to improved competitiveness, increased agility, and enhanced customer satisfaction. With the burden of accounting lifted, businesses can dedicate their efforts to what they do best, gaining a competitive edge in the market.

Scalability and Flexibility:

One of the key advantages of outsourcing accounting is the scalability and flexibility it offers. Businesses experience fluctuations in their financial management needs due to factors such as growth, seasonal demand, or market expansion. With outsourcing, providers can quickly adapt their services to accommodate these changing requirements. 

Whether it’s scaling up during peak periods or adjusting resources during slower times, outsourcing providers can ensure a seamless financial management process that aligns with the evolving needs of the business. This scalability and flexibility empower businesses to navigate changing market conditions efficiently and effectively.

Data Security and Compliance:

Data security and compliance are paramount in financial management. Reputable outsourcing providers prioritize data security by implementing robust protocols and secure systems to protect sensitive financial information. They also adhere to regulatory standards and industry-specific compliance requirements. 

By outsourcing accounting, businesses can mitigate risks associated with data breaches, maintain data confidentiality, and ensure compliance with legal and industry regulations. This focus on data security and compliance provides businesses with peace of mind and safeguards their reputation.

Customized Reporting and Analytics:

Outsourced accounting services open the door to customized reporting and analytics. With integrated accounts payable as part of outsourced accounting services, businesses can benefit from customized reporting and analytics. Professional outsourcing providers have the expertise to generate tailored financial reports, key performance indicators (KPIs), and analysis specific to the business’s needs. These customized reports provide businesses with deep insights into their financial performance, allowing them to make informed decisions, identify trends, and uncover opportunities for improvement.

 By leveraging accurate and comprehensive financial data, businesses can gain a competitive edge, optimize their financial strategies, and drive long-term success.

Improved Vendor Relationships:

Efficient accounts payable management, facilitated by outsourcing, can contribute to stronger vendor relationships. By ensuring timely and accurate payments, businesses can enhance their reputation as reliable partners. Prompt payments build trust and credibility with suppliers and vendors, which can lead to better negotiation leverage and favorable terms. 

Furthermore, outsourcing providers often have established relationships and partnerships with vendors, allowing businesses to tap into a network of trusted suppliers. Strengthened vendor relationships can lead to improved collaboration, cost savings through negotiated discounts, and enhanced supply chain management.

Focus on Long-Term Success:

Outsourcing accounts payable, as part of a comprehensive accounting solution, allows businesses to adopt a long-term approach to financial management. By leveraging the expertise and support of outsourcing providers, businesses can establish a solid financial foundation, improve profitability, and achieve sustainable growth. Outsourcing enables businesses to benefit from proactive financial planning, forecasting, and strategic guidance. With a long-term perspective, businesses can identify opportunities for expansion, manage cash flow effectively, and make informed investment decisions. By partnering with outsourcing providers who share their vision for long-term success, businesses can position themselves for a prosperous future.

Final Notes

Outsourcing accounting with Signature Analytics can offer a range of benefits, from cost savings to increased efficiency and accuracy in financial processes. By choosing the right outsourcing provider, businesses can reap these benefits and focus on their core competencies. 

Learn more about our services, here. 

As a business owner, you know that managing your finances effectively is essential for success. However, handling bookkeeping in-house can be time-consuming, complex, and costly. That’s where outsourced bookkeeping comes in.

For many business owners the difference between outsourced accounting and outsourced bookkeeping is virtually indistinguishable.  After all, both involve the day to day running of the company’s finance and accounting functions.  At Signature Analytics, we think of bookkeeping as just another way to talk about a business’ accounting functions. While we don’t offer bookkeeping as a standalone service, our outsourced accounting teams provide the highest caliber of day-to-day boots on the ground accounting support for our clients. 

In this blog post, we will explore what outsourced bookkeeping is, why it’s important, how it works, and the reasons why you should consider outsourcing your accounting and bookkeeping to a trusted partner like Signature Analytics.

What is Outsourced Bookkeeping?

Outsourced bookkeeping refers to the practice of hiring an external accounting firm or bookkeeping service provider to handle your company’s financial records, transactions, and reporting. Instead of having an in-house team, you can outsource these tasks to a specialized provider, who will handle them on your behalf, typically using cloud-based accounting software.

What Do Bookkeepers Do & Why Are They Important?

Bookkeepers play a crucial role in maintaining accurate financial records and ensuring compliance with accounting standards and tax regulations. They handle various tasks, including recording financial transactions, reconciling accounts, managing invoices and expenses, preparing financial statements, and providing financial reports. Bookkeepers are essential for businesses as they provide accurate and up-to-date financial information, which is crucial for making informed decisions and managing cashflow effectively.

How Does Outsourced Bookkeeping Work?

Outsourced bookkeeping typically involves partnering with a professional accounting firm, like Signature Analytics, that specializes in providing accounting services. The process starts with our comprehensive Assessment which is designed to help us understand your business’s financial needs and goals.

Once the scope of work needed and pricing are agreed upon, we set goals and KPIs and a roadmap for your company’s accounting. Our outsourced accounting team sets up the right systems to collect and process your financial data. This involves providing access to your financial accounts, implementing cloud-based accounting software, and establishing communication channels for ongoing collaboration.

When you work with an outsourced accounting / bookkeeping team like Signature Analytics, we then handle all the day-to-day bookkeeping and accounting tasks, providing regular financial reports and insights to help you make smart decisions about your business.

5 Reasons to Outsource Your Bookkeeping

  1. Cost-Effective: Outsourced bookkeeping can be more cost-effective compared to hiring an in-house bookkeeping team. With outsourced bookkeeping, you can avoid costs associated with hiring, training, and managing employees, as well as providing employee benefits and office space. You can also access specialized expertise at a fraction of the cost of hiring a full-time bookkeeper.
  2. Time-Saving: Managing bookkeeping in-house can be time-consuming, taking away valuable time and resources from your core business operations. Outsourcing bookkeeping allows you to focus on growing your business and leave the financial tasks to the experts, saving you time and effort.
  3. Expertise and Accuracy: Outsourced bookkeeping providers are specialized in their field, with expertise in financial accounting and reporting. They are skilled at accurately recording financial transactions, reconciling accounts, and preparing financial statements, reducing the risk of errors and ensuring compliance with accounting standards and tax regulations.
  4. Scalability: Outsourced bookkeeping can easily adapt to your business’s changing needs. Whether you are a small start-up or a growing enterprise, the outsourced bookkeeping provider can scale their services up or down based on your requirements, providing flexibility and cost savings.
  5. Access to Advanced Technology: Outsourced bookkeeping providers typically use advanced cloud-based accounting software, which provides real-time access to financial data, automation of repetitive tasks, and enhanced data security. This allows you to have a streamlined and efficient bookkeeping process, with access to accurate and up-to-date financial information.

Costs Associated with Outsourced Bookkeeping

The costs associated with outsourced bookkeeping and accounting can vary depending on the size and complexity of your business and the scope of services provided by the bookkeeping provider. With Signature Analytics, our outsourced bookkeeping services are priced based on the complexity of a company’s financial records and the level of expertise required. We work on a monthly retainer base model and often provide customized pricing packages.

It’s important to note that while there are costs associated with outsourced bookkeeping, the benefits of increased accuracy, time-saving, access to expertise, scalability, and advanced technology can outweigh the costs in the long run. Outsourced bookkeeping can be a cost-effective solution compared to hiring and managing an in-house accounting and bookkeeping team.

Who Typically Outsources Their Bookkeeping?

Many businesses and industries benefit from outsourced bookkeeping, including professional services companies like marketing, advertising and PR, HR and IT, law firms, and more. These businesses often have unique financial needs and require specialized expertise in managing their financial records and transactions. Outsourced bookkeeping can provide professional services companies with the necessary expertise and flexibility to handle their bookkeeping efficiently while they focus on their core operations and growth strategies.

Best Factors to Look for in Outsourced Bookkeeping

When considering outsourcing your bookkeeping and accounting, it’s important to look for a reputable and experienced accounting firm that specializes in your industry. Some of the best factors to look for in outsourced bookkeeping include:

Expertise:

Look for a provider with a team of experienced and qualified bookkeepers who are well-versed in financial accounting and reporting, and are familiar with the unique requirements of your industry.

Customized Solutions:

Choose a provider that offers customized solutions tailored to your specific business needs, rather than a one-size-fits-all approach. This ensures that the bookkeeping services are aligned with your business goals and requirements.

Technology and Security: 

Ensure that the outsourced bookkeeping provider uses advanced cloud-based accounting software that provides real-time access to financial data and offers enhanced security measures to protect your financial information.

Communication and Collaboration: 

Look for a provider that maintains open and transparent communication channels, and encourages collaboration to ensure that you stay informed and involved in the bookkeeping process.

Reputation and References: 

Check the provider’s reputation in the industry and ask for references from their existing clients. This can give you insights into their reliability, professionalism, and quality of services.

Our Outsourced Bookkeeping Process & Services

At Signature Analytics, we offer comprehensive outsourced accounting and bookkeeping services. Our process starts with a thorough assessment of your business’s financial needs and goals. We then set up a system to collect and process your financial data, using advanced cloud-based accounting software.

Our team of experienced bookkeepers handles all the day-to-day bookkeeping tasks, providing you with regular financial reports and insights to help you make informed decisions about your business. Our services include financial transaction recording, accounts reconciliation, invoice and expense management, financial statement preparation, and customized reporting to track utilization rates, profitability, cost controls, and client by client profitability metrics.

How Outsourced Bookkeeping Can Grow Your Business

Outsourced bookkeeping / accounting can be a strategic move for your business, unlocking various opportunities for growth. By outsourcing your bookkeeping to a trusted provider like Signature Analytics, you can:

Focus on Core Operations: 

Outsourced bookkeeping allows you to focus on your core business operations, such as marketing, sales, and client services, without being bogged down by financial tasks. This can help you allocate your time and resources more effectively and drive business growth.

Make Informed Decisions:

Accurate and up-to-date financial information provided by outsourced bookkeeping can help you make informed decisions about pricing, cost controls, profitability, and client management. This can result in better financial performance and improved profitability.

Enhanced Financial Management: 

Outsourced bookkeeping provides you with professional financial management that can help you better understand your financial position, manage cash flow, and make strategic financial decisions. This can lead to improved financial stability and growth for your business.

Scalability: 

Outsourced bookkeeping can easily adapt to the changing needs of your business. As your business grows, the volume and complexity of financial transactions may increase. Outsourced bookkeeping services can scale up or down to accommodate these changes without any disruption, providing you with a flexible and scalable solution.

Access to Expertise:

By outsourcing your bookkeeping, you gain access to a team of experienced bookkeepers who are well-versed in financial accounting and reporting. They can provide valuable insights, financial analysis, and expertise to help you make better financial decisions for your business.

Cost Savings: 

Outsourcing your bookkeeping can result in cost savings compared to hiring and managing an in-house bookkeeping team. With outsourced bookkeeping, you don’t have to worry about costs associated with salaries, benefits, training, software, and infrastructure. This can free up valuable resources that can be invested in other areas of your business.

Discover How Signature Analytics Can Help You

At Signature Analytics, we are a leading provider of outsourced accounting and outsourced bookkeeping services. Our experienced team specializes in managing the unique financial needs of businesses in a wide variety of industries such as professional services, IT and Tech firms, BioTech and Life Science companies, Manufacturing and distribution., Wellness and recovery centers, law firms and many more.  With our comprehensive bookkeeping services, advanced technology, and customized solutions, we can help you streamline your financial processes, improve financial visibility, and make informed decisions to drive business growth. Contact us today to learn more about how Signature Analytics can support your business’s accounting and finance needs.

Outsourcing accounting services has become increasingly popular among businesses due to its cost-effectiveness and improved results, enabling businesses to focus on their core competencies while delegating accounting tasks to external experts. While outsourcing can reduce the need to hire and train in-house staff, businesses should also be aware of the different types of costs involved, including direct, indirect, and hidden costs. 

With minimal potential downsides, outsourcing accounting services can help businesses cut costs, reduce fraud, save time, increase profitability and operational efficiency, and access greater skills and resources.

Understanding Outsourcing Accounting: The Basics

Outsourcing accounting services has become an increasingly popular practice among businesses of all sizes. This involves hiring an external service provider to perform tasks or functions related to the accounting and finance department of the business.

The main reason why businesses outsource accounting services is to increase quality and reduce costs. By outsourcing, businesses can eliminate the need to hire and train in-house staff, which can be expensive. Instead, they can rely on the expertise and experience of an external provider who can offer cost-effective solutions.

Let’s take a look at these costs.

The Cost of Outsourcing Accounting

When it comes to outsourcing, there are different types of costs that businesses should be aware of. Direct costs are expenses that are directly associated with outsourcing, such as the fees paid to the outsourcing company. These costs are typically outlined in the outsourcing contract and can be budgeted for accordingly.

Indirect costs, on the other hand, are expenses that are not directly associated with outsourcing but arise as a result of it. For example, the cost of managing the outsourcing relationship or the cost of training internal staff to work with the outsourcing company can be considered indirect costs.

Hidden costs are expenses that are not immediately apparent, such as the cost of transferring knowledge to the outsourcing company.

At Signature Analytics, our monthly retainer typically falls within the range of $5,000 to $15,000 per month, depending on the size of the business and the level of services required. This fee includes a full-service, fully trained accounting team, including a CFO-level advisor, accounting manager, staff accountants, and bookkeepers.

How Outsourced Accounting Can Help Businesses Cut Costs

Hiring an outsourced accounting team is more affordable than hiring an entire in-house accounting team. Hiring in-house incurs expensive overhead costs including costs regarding hiring and onboarding, PTO, health insurance, retirement, vacation, workers’ compensation, sick days, and more.

Outsourced Accounting Can Reduce the Likelihood of Fraud

According to research conducted by Price Waterhouse Coopers (PwC), 46% of organizations surveyed reported experiencing fraud, corruption, or other economic crimes in the past 24 months in 2022. Private companies and small businesses were the most common victims, with up to 42% falling prey to fraud and incurring median losses of $164,000. Such losses can be catastrophic for small and mid-sized businesses.

One reason why internal fraud occurs more frequently with in-house accountants is that small businesses usually lack the checks and balances found in large enterprises. Additionally, internal controls in small businesses are often weak, and with just one person responsible, there is little opportunity for correction. However, outsourcing accounting services can significantly reduce the likelihood of fraud and other economic crimes.

Outsourced Accounting Can Save Business Owners Time and Increase Profitability and Operational Efficiency

By engaging an outsourced team, you can expedite the process. With a ready-made team at your disposal, you save time and avoid the need for training. Moreover, the hiring company can rid itself of the onus of mentoring, training, onboarding, and managing accountants (typically not their core skillset).

Outsourced accounting teams bring with them a wealth of experience from different industries. They can introduce novel and efficient methods of tackling old problems. An external team’s unbiased viewpoint can uncover operational gaps or hidden drains on profitability, which can be addressed promptly.

Outsourced Accounting Increases Access to Greater Skills and Resources

When opting for an in-house accountant, you are limited to a single individual’s expertise. However, outsourcing provides access to an entire accounting team with a wealth of experience in handling day-to-day accounting processes such as accounts payable, accounts receivable, and month-end close. These professionals are well-versed in providing accurate, relevant, and timely numbers to businesses across various industries. 

Moreover, outsourcing allows for the flexibility to cater to specific needs such as controllers or accounting managers, unlike in-house accountants with limited skill sets.

Outsourced Accounting Costs: FAQs

What is the Cost of Outsourcing?

The cost of outsourcing varies depending on a number of factors, such as the type and scope of services being outsourced, the location and experience level of the outsourcing provider, and the duration of the outsourcing engagement. Typically, businesses will pay a set fee for the services being outsourced, and this can either be a fixed amount or based on hourly rates.

What Are Three Important Costs of Outsourcing?

Three important costs of outsourcing to consider are direct costs, indirect costs, and hidden costs. Direct costs are expenses that are directly associated with outsourcing, such as fees paid to the outsourcing company. Indirect costs are expenses that are not directly associated with outsourcing but arise as a result of it, such as the cost of managing the outsourcing relationship. Hidden costs are expenses that are not immediately apparent, such as the cost of transferring knowledge to the outsourcing company.

Is Outsourcing Really Cheaper?

Outsourcing can be cheaper than hiring and training full-time employees for certain tasks, but this depends on a number of factors. For example, outsourcing can be cost-effective for tasks that are not core to the business’s operations, or for tasks that require specialized expertise or equipment that the business does not have in-house. However, outsourcing may not always be cheaper than hiring and training employees, especially if the business needs full time support.

What is the Main Argument Against Outsourcing?

The main argument against outsourcing is that it can lead to job loss and a decline in the quality of work. Critics argue that outsourcing can lead to the loss of jobs for local workers, as companies choose to outsource work to lower-cost providers in other countries. Additionally, outsourcing can sometimes lead to poor quality work if the outsourcing provider does not have a good understanding of the business’s specific needs and processes. However, proponents of outsourcing argue that it can actually help create jobs by allowing businesses to grow and become more competitive.

Learn More About Signature Analytics

At Signature Analytics, we support our clients’ day-to-day accounting functions, including:

  • Invoicing
  • AR management
  • Bill processing
  • AP management
  • Forecasting
  • Reporting
  • Monthly close
  • And more…

Ready to get started with outsourcing your day to day accounting services? Talk to an expert today. 

The health of any manufacturing or distribution enterprise is determined not just by the number of products it sells or the revenue it generates, but also by its efficiency in managing assets. Chief among these assets is inventory. Yet, despite its importance, inventory management often remains an under-optimized function, especially in fluctuating economic scenarios. Here’s why understanding and streamlining inventory processes can be a game-changer for businesses.

Cash on the Shelf: The Hidden Cost of Inventory

It’s a simple equation. Every product that sits on a shelf represents cash that’s tied up. For manufacturers or distributors, inventory can be visualized as money frozen into a tangible form, waiting to be liquidated upon a sale.

Inventory might be an essential buffer against unexpected demand or supply chain disruptions, but there’s a caveat. When it’s mishandled, inventory transforms from an asset into a liability. The logic is straightforward: the longer products sit unused or unsold, the longer the capital is tied up without generating any return. Moreover, if businesses are resorting to lines of credit to purchase more inventory, they end up bearing the added weight of interest costs on unsold goods.

Navigating Post-COVID Inventory Challenges

The pandemic brought with it an array of supply chain challenges. Many businesses, in response to uncertain product availability, increased their inventory holdings to navigate potential disruptions. While this might have been a prudent strategy in the thick of the pandemic, clinging to it post-COVID can be financially draining.

With the most acute supply chain disruptions largely behind us, businesses must reevaluate their inventory needs. Holding onto larger stocks might have made sense when the future availability of materials was in question, but as we move towards economic normalization, such practices might be more of a burden than a boon.

The Metrics Matter

Understanding the duration inventory sits on the shelf, often referred to by metrics like Days Sales Outstanding (DSO), is crucial. These metrics provide insights into inventory turnover rates and can help businesses pinpoint inefficiencies in their ordering and sales processes.

Adapting to a Changing Economic Landscape

As whispers of economic downturns get louder, businesses need to recalibrate their strategies. Lessons learned during the pandemic are invaluable, but they must be applied judiciously, given the evolving economic context.

In conclusion, for those in the manufacturing or distribution sectors, it’s not just about having inventory—it’s about having the right amount of inventory. Proper inventory management practices can free up cash, reduce unnecessary interest payments, and ensure smoother operations. As we transition into a new economic era, businesses that proactively manage their inventory, understanding it as cash on the shelf, will be better poised to weather challenges and seize opportunities.

Running a successful business requires making informed decisions, and accurate financial reporting is a crucial part of that process. However, sifting through mountains of data to identify key insights can be overwhelming, and insufficient reporting can lead to misguided decisions. This is where finding the Goldilocks Zone of reporting becomes essential – not too much, not too little, but just right.

At Signature Analytics, we understand the challenges of financial reporting and the impact it can have on business operations. In this blog post, we’ll discuss the importance of accurate reporting, the challenges it presents, and how finding the Goldilocks Zone can help businesses make informed decisions.

So, What Types of Business Reports Should Business Owners Focus On? Let’s Discuss Key Reports

The five most important and commonly referenced financial reports are:

  • Income statement
  • Balance sheet
  • Statement of cash flows
  • AR aging report 
  • Budget vs actual

Income Statement 

An income statement, also known as a profit and loss statement, is a financial document that summarizes a company’s revenue, expenses, and profits over a specific period of time. The income statement is used to measure a company’s financial performance.

Balance Sheet

A balance sheet is a financial statement that provides a snapshot of a company’s financial position at a specific point in time. It lists the company’s assets, liabilities, and equity and shows how these elements are related to each other: Assets = Liabilities + Equity. The balance sheet is used to assess the company’s financial strength and stability, as well as its ability to pay debts and meet obligations.

Statement of Cash Flows 

A statement of cash flows is a financial statement that provides information about a company’s cash inflows and outflows over a specific period of time.. The statement of cash flows is used to understand how a company is generating and using cash, which is critical for its short-term liquidity and financial stability.

AR Aging Report 

An aging report, also known as an accounts receivable aging report, is a financial document that shows how long it takes for a company to collect payment from its customers. The aging report categorizes the company’s accounts receivable into different aging buckets, such as 0-30 days, 31-60 days, 61-90 days, and over 90 days, and provides a summary of the amount of money the company is owed in each category.

Budget Vs Actual

Budget versus actual reporting, also known as budget variance analysis, is a financial management tool that compares a company’s actual financial performance to its budgeted or planned performance. The objective of budget versus actual reporting is to identify variances or differences between actual results and budgeted or planned results and to analyze the causes of these variances.

Nonprofit Reporting Is Just as Key as Reporting for For-profits 

Nonprofit organizations rely on accurate and timely financial information to operate effectively and fulfill their mission. The role of board reporting is critical in this regard as it provides nonprofit board members with the information they need to make informed decisions about the organization’s financial health and future direction. In addition to financial statements, key reports for nonprofits include budget versus actual reports, which compare actual financial results to the budget, and program expense reports, which help track spending related to specific programs or initiatives. 

Accurate and reliable financial information is essential for nonprofit boards to make informed decisions, allocate resources effectively, and ensure compliance with legal and regulatory requirements. Without proper reporting, nonprofit organizations may struggle to attract and retain donors, secure grants, or make sound financial decisions, which can have significant implications for their long-term sustainability and success.

Garbage in – Garbage out: Why Clean Data is Key

Having a single source of truth for financial data is crucial for accurate and effective reporting. It involves aggregating data from multiple sources and creating a centralized database that is easy to access and analyze. Signature Analytics specializes in creating customized reporting solutions that ensure businesses have clean, reliable data to inform their decision-making. 

With their expertise, businesses can gain a clearer understanding of their financial health and make informed decisions based on trustworthy information. Clean data is the foundation of successful financial reporting, and Signature Analytics helps businesses achieve this by providing tailored solutions that work for their unique needs.

Good People, Processes, and Technology

Reporting is a critical component of business operations, but getting it right can be a challenge. The amount of data available can be overwhelming, and insufficient or inaccurate reporting can lead to misguided decisions.

 Signature Analytics understands these challenges and provides tailored reporting solutions that balance the right amount of information with ease of use. Their approach combines good people, processes, and technology to provide businesses and nonprofits with the right insights for informed decision-making. By leveraging their expertise and technology, organizationscan ensure they have access to clean data and the right reports to make smart decisions.

In Conclusion

Accurate and reliable financial reporting is essential for businesses and nonprofits to make informed decisions. The Goldilocks Zone of reporting is finding the right balance between too much and too little information. Signature Analytics provides tailored reporting solutions that help businesses achieve this balance by combining good people, processes, and technology. With their help, businesses can access clean data and the right reports to make smart decisions based on accurate financial information.

About Signature Analytics

By working with an outsourced accounting team, businesses can focus on their core activities, knowing that their financial operations are being handled efficiently and effectively, freeing up their own internal resources to focus on driving growth and profitability.

Signature Analytics is the Smart Choice for both nonprofit and for-profit organizations. Why? Our assessments provide a deep dive into your existing accounting structures and processes and help us customize the right solution for your business. With those insights, we then bring in the right outsourced team to get you the Accurate, Relevant, and Timely financials you need to run your business successfully.

Contact our team of experts to learn more. Then, read on to learn more about How Outsourced Accounting Supports Non-Profit Annual Audits.

And other accounting roles, responsibilities and costs: 

 

Employee turnover can be a disruptive and stressful experience for any business owner. Losing a key member of the finance or accounting team can have significant operational and financial consequences. The search for a replacement can be a daunting task, especially when the departing employee takes institutional knowledge with them. This can lead to process gaps and disruptions across multiple departments.

 

Replacing the departed employee can take months and require extensive training on your company’s operations. Finding the right skill level and culture fit is crucial, and the search process can be time-consuming and costly. Meanwhile, your business must continue running, and the absence of a key finance or accounting team member can cause unnecessary stress and strain.

Assessing the Cost and Value of In-House Finance and Accounting Teams

As a business owner, you may be wondering how much you should pay to replace key finance and accounting team members such as CFOs, VPs of Finance, Controllers, Accounting Managers, Staff Accountants, or Bookkeepers. However, before we delve into that question, it’s essential to determine if it’s the right one to ask. In many cases, small to mid-market businesses may not need a full-time CFO or VP of Finance, but rather require on-demand financial insights.

 

Before we discuss the benefits of outsourcing, let’s examine the state of the hiring market nationwide. It’s worth noting that the following statistics are based on national averages, and areas such as San Diego, LA, and OC may have significantly higher salary ranges.

Current Average Salaries for Finance and Accounting Positions

Here is a breakdown of the current average salaries for finance and accounting positions in the United States, based on recent data from Glassdoor and the Bureau of Labor Statistics (this is salary information only):

 

Chief Financial Officer (CFO): The average annual salary for a CFO is around $160,000 to $230,000, depending on the industry and company size.

Vice President of Finance: The average annual salary for a VP of Finance is around $120,000 to $170,000, depending on the industry and company size.

Accounting Manager: The average annual salary for an Accounting Manager is around $80,000 to $120,000, depending on the industry and company size.

Staff Accountant: The average annual salary for a Staff Accountant is around $50,000 to $70,000, depending on the industry and company size.

Bookkeeper: The average annual salary for a Bookkeeper is around $35,000 to $50,000, depending on the industry and company size.

 

When adding up the total costs of these positions include salaries, bonuses, benefits (15 to 20%), and overhead (computer, office space, etc.), It becomes apparent with the math that hiring an in-house accounting team is a significant investment for any company as it involves recruiting, training, and retaining staff, along with providing them with benefits, bonuses, and salaries. 

An Alternative Solution? Outsourcing Accounting Services

Outsourcing accounting services can provide a more cost-effective and flexible solution. By outsourcing these services, businesses can benefit from a range of advantages that can help them overcome the disruption caused by employee turnover and maintain their financial operations.

 

At Signature Analytics, our monthly retainer typically falls within the range of $5,000 to $15,000 per month, depending on the size of the business and the level of services required. This fee includes a full-service accounting team, including a CFO-level advisor, controller, staff accountants, and bookkeepers.

By Outsourcing Accounting Services, Businesses Can Benefit From: 

Reduced Costs

Outsourcing accounting services can significantly reduce costs for businesses. In fact, outsourcing can save businesses up to 50% compared to maintaining a full in-house accounting team. This is because outsourcing delivers the right person at the right time doing the right job and eliminates the issues of a junior person trying to do work outside of their skillset or a senior person becoming bored doing junior level work.. 

Increased Flexibility

Outsourcing accounting services provides businesses with increased flexibility. Businesses can access a range of accounting services based on their specific needs as they grow and change. This includes basic bookkeeping,  financial reporting, audit support, special projects, and even CFO-level strategy and planning services. Outsourcing providers can quickly scale services up or down to match the needs of their clients.

Access to Expert Advice

Outsourcing accounting services provides businesses with access to experienced and knowledgeable professionals. Outsourced accounting providers often have a team of professionals who specialize in different areas of accounting and finance. This allows businesses to access expert advice and guidance on various financial matters, including tax planning, budgeting, financial forecasting, and more.

Improved Accuracy and Compliance

Outsourcing accounting services can improve accuracy and ensure compliance with financial regulations and reporting requirements. Outsourcing providers have a team of professionals who specialize in accounting and finance. They have a deep understanding of financial regulations and reporting requirements, ensuring that businesses remain compliant with applicable laws and regulations. Additionally, outsourcing providers use advanced accounting software and technology to minimize errors and improve accuracy.

Increased Focus on Core Business Functions

Outsourcing accounting services allows businesses to focus on their core functions and strategic initiatives. Managing an in-house accounting team can be time-consuming and resource-intensive. By outsourcing accounting services, businesses can free up time and resources that can be directed towards core business functions such as sales, marketing, and product development. This can result in increased efficiency and productivity, ultimately leading to improved profitability.

Learn More About Signature Analytics

Outsourcing accounting services can provide businesses with a cost-effective and flexible solution to managing their financial operations. With Signature Analytics, businesses can access a full-service accounting team that can provide expert advice, improved accuracy and compliance, and increased focus on core business functions. 

 

Contact us today to learn more about our services and how we can help your business thrive.

How utilized are your employees? What percent of their time is being spent working on projects that are not billable to the client? How much is that costing your company in productive capacity? If you do not know the answer to these questions, you could be missing out on potential revenue benefits.

For service-based organizations, analyzing employee utilization is imperative. Knowing where and how employees are spending their time enables professional services firms to:

  • Appropriately set their rates
  • Properly assess how much to invoice clients accounts
  • Decide what to pay their employees
  • Determine if they are over or understaffed

The Importance of tracking Utilization Rates and Billable Hours

Professional services companies spend a lot of time and effort around managing people.  However, with many professional services companies, the crucial metrics of utilization rates and billable hours go overlooked or, at best under valued. Signature Analytics’ CEO Pete Heald and President Jason Kruger discuss best practices for all kinds of professional services companies who want to set pricing, hire staff and manage scope using accurate financial data. 

Setting the Right Goals

For a professional services firm, setting accurate billable hour goals is foundational. However, as both Pete and Jason highlight, these goals can differ depending on the role. While lower-level employees might spend the bulk of their time billing hours to clients, senior-level personnel could be more involved in initiatives like sales, demanding a different metric for them.

Setting the right goals for the members of your team and then communicating them effectively and setting accountability around goal achievement are essential steps to managing using the data from your financials as opposed to being reactive to client demands or employee inspiration.

Checking in with leadership to assess each employee’s value to the company is important when setting these goals for billable vs non-billable hours.  If someone isn’t billing hours, what are they contributing to the organization? Being clear on expectations and understanding where your people are ringing the most value is a crucial step to improving productivity and profitability.

What about fixed-fee Professional Services?

Even if a company operates on fixed fees, understanding the time and efficiency involved in each engagement is crucial. This ensures profitability remains on point, and businesses can set realistic and competitive fixed fees. Setting those fees should result directly from a granular understanding of the utilization rate and billable/ non billable horse of the team.  IF the margins don’t add up, this data allows an owner to address pricing or bring in support to assess team efficacy. 

Price setting is a little bit of a science and a little bit of an art. Even if a firm uses a fixed fee structure, determining an hourly rate is vital as it forms the basis for those fees. To determine this rate, Pete suggests starting with desired gross margins. For instance, if a firm targets a 40% gross margin and has clarity on the hours each team member works, they can backward calculate potential hourly rates.

Regular Tracking

Regularly monitoring billable hours – be it daily, weekly, or monthly – is crucial. Choosing the right project management software streamlines the process of tracking hours and managing staff. For most companies: even those with under a million in revenue, Excel spreadsheets just won’t cut it. Good project management and tracking software not only provides actionable insights into utilization but also assists in setting goals and managing to those goals Moreover, incorporating incentives for employees who meet or exceed their targets can bolster productivity and enhance value.

Hiring Decisions & Capacity Understanding

With accurate data in hand, a company can better predict when to hire the next individuals. This preemptive workforce planning approach ensures businesses aren’t scrambling to keep up with contracts after the fact but are strategically prepared for growth. Understanding current capacity helps in determining when to onboard new clients and when to expand the team.

Balancing Rates, Compensation, and Margins

Jason concludes by highlighting a trinity in professional services – the rate billed to clients, the compensation offered to employees, and the resultant margins. The market often determines billing rates, but they can also be a reflection of the unique value a firm offers vis-a-vis competitors. These rates, in turn, play a pivotal role in deciding employee compensation and the margins a firm can achieve.

In sum, while utilization and billable hours might seem like mere metrics, they lie at the heart of a professional service firm’s operational and strategic decisions. Firms that master these dynamics position themselves for both profitability and growth.

Calculating Employee Utilization Rates

The resource utilization rate is a balanced relationship between billable hours and working hours available and is a key metric of employee productivity.

For example, if there are 168 eligible working hours in the month of May and Penny spends 100.80 hours on billable client projects then Penny’s utilization rate is 60%.

Billable Hours / Eligible Working Hours = Utilization Rate

Now let’s say that Penny’s annual salary is $50,000, or $4,167 per month. In the month of May, she spends the remaining 40% of her productivity time on business development efforts (10%) and general and administrative (G&A) tasks (30%). That would mean the company is paying Penny $1,250 in May to work on non-revenue generating processes.

Monthly Salary x Time Spent on G&A (%) = Employee Cost

If this general and administrative time is benefiting the company then it may be worthwhile. Otherwise, this time could be used for other work, clients, or spent attending networking and other events to help grow the productive capacity of the business.

If Penny were to increase her utilization from 60% to 80%, her general and administrative employee costs would decrease to $417 per month – increasing efficiencies AND generating additional revenue.

Improving Employee Utilization Increases Profitability

From a revenue perspective, let’s assume that clients are billed at an hourly rate of $150. At 60% utilization, the company is making $15,120 in May; however, 80% utilization would bring in $20,160, or $5,040 of additional revenue. Furthermore, if you have 5 employees who can each increase their employee utilization rate from 60% to 80%, you could generate an additional $25,020 of revenue per month.

Higher Utilization = Increased Profitability

Using Utilization Rates to Guide Business Decisions, A Case Study

Earlier this year, Signature Analytics was hired by a professional services firm in San Diego to provide outsourced accounting services. In addition to performing monthly accounting maintenance and bookkeeping services (preparing financial statements, balance sheets, income statements, cash flow statements, etc.), we put together a Utilization Summary Report so the client would have visibility into their employee utilization rates month over month.

The metrics report revealed that in the month of January, the company’s average utilization rate for billable employees was 60% resulting in a $95k loss for the month. In February, average utilization was 63% indicating a consistently low utilization rate for the company. To show how utilization rates impacted the bottom line, we also compiled an “if-then” summary report which revealed that increasing average utilization to 75% would generate a profit of $130k for the month.

Using this utilization percentage information, the company decided to make personnel changes in the month of March that would increase its profitability. This included letting go of an underperforming non-billable sales associate. They also replaced a billable-time employee with consistently low utilization with a new billable employee whose skills and capacity could be better utilized by the company. Additionally, the firm set personal billable utilization goals for every employee to help encourage the staff to improve productivity and maximize billable projects and hours.

Following the changes, average employee utilization increased to 76%, resulting in a profit increase of $230k for the month of March.

Read another case study: Unknown employee utilization causing unknown or inaccurate client profitability.

Talk to An Expert

Improve Your Firm’s Utilization

At Signature Analytics, we help several professional services firms use utilization rates to make key strategic decisions that drive profitability. Preparing utilization summary reports and “if-then” analyses are one way we enable our clients to visualize the effect of increased utilization rates. We are also able to show the company key metrics for unbilled general & administrative time by applying utilization rates to salaries and separating these wages on the financial statements. Furthermore, we have helped clients implement time tracking systems – which is the first step in determining utilization rates – and assisted with the development of company policies to ensure time is accurately entered by employees.

 

As a small to mid-market business owner, you rely on timely and accurate financial reporting to make informed decisions about your business. However, if your accounting team is struggling to keep up with your monthly close, it can be frustrating and stressful.

In this blog post, we’ll discuss how long you should wait for your monthly close and what you can do to speed up the process.

First, What is a Monthly Close?

A monthly close is the process of finalizing your financial statements for the month, including your profit and loss statement, balance sheet, and cash flow statement. This process typically involves reconciling your bank and credit card accounts, reviewing your transactions for accuracy, and ensuring that all necessary journal entries have been made.

To learn more about best practices for the month-end closing process, read our blog, here.

Benefits of an Accurate, Relevant, and Timely Monthly Close

When done right, the month-end close provides your company a with accurate, timeley, and relevant financial statements and information to improve your organization, decision making, and risk management.

Decision Making

The month-end close allows you to keep accurate financial records throughout the year so you can see trends and make insightful business decisions at any time, not just at the end of the year.

At a quick glance, you can get a snapshot of where there are revenue problems, expense issues, operational issues, or inconsistencies within your company The month-end close supports your efforts to keepyour business  on the right track through monthly reviews of key financial data.

Transparency

The month-end close also makes your business transparent to others, instead of only having annual-financial data that could be months old and tell an inaccurate story. This provides great value for when you’re seeking a much-needed loan, or if there are potential buyers looking at an acquisition.

Risk Management

The monthly close process allows for the identification of errors or irregularities in financial statements, which could signal potential risks to your business. By detecting and addressing such issues early, you can mitigate their impact and prevent them from escalating into more significant risks.

It also involves a series of checks and balances designed to ensure the accuracy and completeness of financial data. These controls can help identify and address potential risks related to fraud, errors, or omissions in financial reporting, thereby reducing the risk of financial misstatements.

How Long Should the Month-end Close Process Take?

The length of time it takes to complete a monthly close can vary depending on the size of your business, the complexity of your accounting processes, and the efficiency of your accounting team. In general, a monthly closae should take between 5 and 15 business days. This means that if your month ends on the 31st, you should expect to receive your financial statements the following month.

What Can You Do to Speed Up the Monthly Close Process? 

If your accounting team is struggling to keep up with your monthly close, there are several things you can do to speed up the process:

Evaluate Your Current Accounting Processes

Review your current accounting processes to identify areas where you can streamline or automate tasks. This may include investing in accounting software, creating standardized procedures for recurring tasks, simplify procedures, or outsourcing certain functions.

Bring in an Outsourced Accounting Team

Bringing on an outsourced accounting team with expertise in day-to-day accounting and accurate reporting can provide significant value for small to mid-market business owners. Not only can they help streamline your monthly close process, but they can also provide valuable insights and expertise to help you make informed decisions about your business. 

Additionally, outsourcing your accounting functions can help you reduce overhead costs associated with hiring and managing an in-house accounting team.

At Signature Analytics, we specialize in providing outsourced accounting services to help businesses achieve timely and accurate financial reporting. Our team of experienced professionals can help you streamline your accounting processes and provide valuable insights to help you grow your business.

Set Clear Deadlines

Establish clear deadlines for the monthly close and communicate them to your accounting team. This can help ensure that everyone is on the same page and working towards the same goal.

Conduct Regular Reviews

Regularly review your accounting processes to identify areas of weakness and opportunities for improvement. This can help you identify bottlenecks and streamline your processes.

Common Challenges and How to Overcome Them

Missing Data

Missing data is a significant issue in the monthly close process because it can cause delays in reconciling accounts and make it challenging to report accurate financial information. When financial data is incomplete or missing, accountants may need to spend additional time tracking down missing information and reconciling accounts, which can significantly slow down the monthly close process. Inaccurate financial reporting can also lead to costly errors and misrepresentations of the company’s financial health, which can have serious consequences for the business.

Too Many Data Sources

Many organizations rely on spreadsheets, emails, phone calls, and in-person meetings to gather the data for their month-end close.

This causes delays as your accounting team is trying to recover the necessary information from employees, software systems, and accounts. It’s vital that, when it’s time for the month-end close to begin, you can draw all your financial data from as few sources as possible including a centralized source, such as Netsuite \, Quickbooks, or other accounting platform..

Manual Processes

Unfortunately, human beings are error prone. While this may be okay when you spill your coffee in the morning, you don’t want human error anywhere near your accounting system.

You can reduce human error by automating your accounts with the right software and avoid mistakes that are often made with manual entry of data.

Poor Project Management

Any area of your business is going to falter with poor project management, and your accounting department is no exception.

When performing the month-end close, you want to have systems in place that increase accountability and quality-check the collected data. You also want your accounting team to have good time management processes by setting up deadlines and goals for them to work towards.

Learn More About Signature Analytics

A timely monthly close is critical for small to mid-market business owners who rely on up-to-date financial information to make smart decisions about their business. If your accounting team is struggling to keep up, there are several steps you can take to speed up the process. 

At Signature Analytics, we specialize in helping businesses improve their accounting processes and streamline their monthly close. Contact us today to learn how we can help you achieve a faster and more accurate monthly close.

If you’re interested in outsourcing the month-end close process, or any of your other accounting needs, contact us today.

Running a successful business involves more than just generating revenue and making sales. Accounting is a critical aspect of business operations, but it is often overlooked or not given the attention it deserves, especially by small and medium-sized enterprises (SMEs). Accounting errors such as late or inaccurate financial statements, double payments to vendors, and other mistakes can have a significant impact on the health and sustainability of a business.

In this blog, we will discuss the little ways that poor day-to-day accounting can kill your business and what you can do to avoid these errors. First, we will explore the consequences of accounting errors, including poor decision-making, cash flow problems, missed tax deadlines, and vendor disputes. These consequences can have serious ramifications for your business, from financial losses to damage to your reputation and relationships with vendors.

The Little Ways Poor Day-to-Day Accounting is Killing Your Business

Inaccurate or late financial statements, double payments to vendors, and other accounting errors can have a significant impact on your business. Here are some of the ways that these errors can harm your business:

1. Poor Decision Making 

One of the most significant impacts of inaccurate or late financial statements is poor decision-making. Without accurate and timely financial statements, it’s challenging to make informed decisions about your business. You may miss opportunities, make poor investments, or overspend in areas that aren’t generating revenue. All of these decisions can harm your business in the long run.

2. Cash Flow Problems

Late or inaccurate accounts receivable reports can lead to cash flow problems. This can make it difficult to pay bills, invest in growth opportunities, or even meet payroll obligations. Cash flow is the lifeblood of any business, and if it’s not managed correctly, it can lead to significant issues down the line.

3. Missed Tax Deadlines

Missing tax deadlines can result in penalties and interest charges. It can also lead to audits and investigations, which can be costly and time-consuming. Tax laws and regulations are constantly changing, and it can be challenging to keep up with all the deadlines and requirements. But failing to do so can have serious consequences for your business.

4. Vendor Disputes

Double payments, late payments, and/or inaccurate payments to vendors can result in disputes and misunderstandings that damage your business’s reputation. It can also lead to legal battles and damage to vendor relationships. Maintaining strong vendor relationships is crucial for any business, and disputes or misunderstandings can hurt your business’s bottom line.

5. Inability to Plan for the Future

If your business is not keeping accurate records of its finances, you won’t be able to create a realistic plan for the future. Financial statements, cash flow reports, and other accounting documents are essential for creating budgets, setting goals, and making projections. Without these tools, you won’t be able to plan for growth or respond to changes in the market.

6. Stress and Burnout

Poor accounting practices can create stress and burnout among your employees. If your accounting processes are inefficient, your staff may be forced to work overtime or struggle to keep up with deadlines. This can lead to employee burnout, lower productivity, and higher turnover rates. By improving your day-to-day accounting practices, you can create a more positive work environment and reduce stress levels.

7. Lost Opportunities

Inaccurate or incomplete financial records can cause you to miss out on potentially lucrative opportunities for your business. For example, if you’re not tracking your expenses and revenue properly, you might miss opportunities to invest in growth areas or take advantage of price or tax breaks. Without a clear picture of your financial health, you could also miss out on opportunities to secure financing or partnerships that could help you take your business to the next level.

8. Inability to Get Financing

Inaccurate or incomplete financial records may cause your bank or other financial institutions to lose confidence in your business.  This may lead to financial consequences on current obligations and/or the inability to get new or additional financing to fund your business.

How to Improve Your Day-to-Day Reporting (and Keep it From Killing Your Business)

The first step in avoiding these problems is to partner with a reputable accounting firm like Signature Analytics. Our five-step process ensures that your accounting processes are streamlined and accurate, giving you the information you need to make informed decisions and run your business more efficiently.

In addition, there are several other steps you can take to avoid accounting errors, including:

1.Regularly Review Your Financial Statements

Make it a habit to review your financial statements regularly, so you can catch errors before they become major issues. This includes reviewing your balance sheet, income statement, and cash flow statement.

2. Use Accounting Software

Invest in accounting software that automates many of your day-to-day accounting processes. This can help you streamline your accounting processes, reduce errors, and save time and money.

3. Train Your Team

Invest in training your team on accounting best practices and ensure they have the skills and knowledge needed to manage your business’s accounting processes effectively.

4. Conduct Regular Audits

Regularly conduct audits of your accounting processes to identify areas of weakness and opportunities for improvement. This can help you identify potential errors and fix them before they become major issues.

5. Stay Up-to-date on Tax Laws

Stay up-to-date on changes to tax laws and regulations that may impact your business. This can help you avoid penalties and ensure compliance with applicable laws.  A recent example is remote work and employers hiring employees in multiple states with different reporting and tax requirements.

Five Step Process to Streamline Accounting Practices

At Signature Analytics, we understand that every business is unique, with different goals, drivers, and concerns. That’s why we have developed a five-step process to ensure that your accounting processes are streamlined and accurate, and your business can operate at its full potential.

Step 1: Goal Development & Roadmap

We begin by getting to know your business, its industry, goals, and drivers. This helps us to understand your immediate needs and priorities, and develop a roadmap that aligns with your business objectives.

Step 2: Information & Process Validation

The next step is to evaluate your existing information and processes to ensure that your business has a solid foundation for timely and accurate reporting. We review your team’s capabilities and skillsets, validate your existing processes, and implement new ones where necessary.

Step 3: Day-to-Day Accounting

With good people, processes, and technology, we manage your day-to-day accounting processes. This includes the month-end close process, financial statement production, documenting SOPs, audit support, cash flow management, monthly management report, AR/AP aging reports, invoicing, collections, AR management, inventory process development and setup, and bank covenant requirements.

Step 4: Financial Reporting

We provide accurate, relevant, and timely financial reporting that enables you to make sound decisions. This includes custom reports based on your business needs, profit and loss statement, balance sheet, and cash flow statement, monthly management report, and AR/AP aging report.

Step 5: Financial Analysis & Support

In addition to standard reporting, we provide business modeling and financial analysis that can help you achieve your goals. This includes utilization analysis, annual budgeting, M&A support, profitability analysis, margin analysis, and business-specific KPIs.

Learn More About Signature Analytics

Accounting is a critical aspect of any business, and errors can have a significant impact on your bottom line. At Signature Analytics, we understand the importance of accurate and timely financial reporting, and we have developed a five-step process to help your business operate more efficiently and effectively. By partnering with us and implementing the steps outlined above, you can avoid accounting errors and run your business with confidence.

Accrual vs Cash vs GAAP Accounting: 

For small business owners, there is a choice to be made between cash basis accounting and accrual accounting. Larger corporations, however, are required by the IRS to utilize accrual accounting. As a business grows and passes the threshold beyond which cash-based accounting is practical it is important to transition to accrual accounting.  That process is no small feat and can cause businesses to have some eye-opening financial discoveries.  The fact is, that managing financials on a cash basis, can cause business owners to inadvertently deceive themselves. If your business is still using a cash-based accounting method, read on from the steps you’ll need to take to transition to accrual, why you need to do it sooner than later, and how Signature Analytics can help. 

Accrual Basis Accounting 

When using accrual accounting, revenue is spread out over the period in which a service is provided. Accrual accounting provides a more precise understanding of a business’ current financial picture, allowing business owners to make more informed decisions. Expenses are reflected as they are incurred, as opposed to when cash is disbursed. Therefore, short-term fluctuations in cash flow do not dramatically alter the overall financial picture.

Accrual accounting is the recommended method for almost all businesses. This method allows you to track revenues and expenses in order to assess the profitability of your business and identify trends in performance. It provides a more reliable measure of Gross Margins, giving you the insight needed to make educated business decisions. Cash accounting may appear simpler, but accrual accounting is by far the superior choice.

Cash Basis Accounting 

Cash accounting is a method of bookkeeping that records transactions as they occur, rather than when revenue or expenses are actually earned. When using cash accounting, revenue from services rendered in April, May, and June will not be reflected in the financial statements until payment is received in July. This can create a false impression of business decline, despite services having been performed and earned in the prior months. This method of accounting can lead to misinformed decisions being made concerning staffing, pricing, ordering, and many other key decisions a business owner must make. To ensure accurate financial reporting, it is important to understand the differences between accrual and cash accounting. 

Can a business use cash basis accounting and still be GAAP compliant?

Cash basis accounting is not GAAP-compliant.  GAAP (Generally Accepted Accounting Principles)  is a set of standards and guidelines for financial reporting that are widely recognized and accepted as the authoritative standard for financial reporting in the United States.

Cash basis accounting is a simplified method of accounting that only recognizes transactions when cash is received or disbursed. While cash basis accounting is simpler and easier to use, it does not provide as much information about the financial performance and position of a business as accrual accounting.

A business using cash basis accounting must still follow certain principles and guidelines, such as ensuring that transactions are recorded accurately and in a timely manner, and providing accurate financial statements that reflect the financial position of the business.

For most businesses, especially those with complex financial operations, accrual accounting is the preferred method of accounting as it provides a more complete and accurate picture of the financial performance and position of the business. 

While it is possible for a business to use cash basis accounting, the limitations of cash basis accounting may result in less accurate and less informative financial statements, and most businesses may find accrual accounting to be a better choice for their financial reporting needs.

GAAP accounting principlesWhat are the principles of GAAP accounting? 

  1. Historical cost principle: Assets and liabilities are recorded at their original cost.
  2. Full disclosure principle: All relevant and material information should be disclosed in the financial statements.
  3. Matching principle: Expenses should be matched with revenues in the period in which they were incurred.
  4. Revenue recognition principle: Revenue should be recognized when earned, regardless of when payment is received.
  5. Objectivity principle: Financial statements should be based on objective evidence.
  6. Consistency principle: Companies should use the same accounting methods from one period to the next.
  7. Conservatism principle: In case of uncertainty, the financial statement should reflect the worst-case scenario.
  8. Materiality principle: Only information that is significant enough to affect the decisions of users should be included in the financial statements.
  9. Fair presentation principle: Financial statements should be presented in a way that is not misleading.
  10. Cost-benefit principle: The benefits of providing information should outweigh the costs.

What steps should a business take to transition from cash basis to accrual basis accounting?

Transitioning from cash basis to accrual basis accounting can be a significant change for a business, but it can also provide greater insight into the financial performance and position of the company. 

Here are the steps a business should take to make the transition:

Assess your current accounting system: Review the current accounting system to determine what changes need to be made in order to transition to accrual accounting. This may involve upgrading the accounting software, hiring additional staff, or contracting with an outsourced accounting firm.

Train staff: All staff members involved in the accounting process should be trained on the new accounting methods and procedures. This will ensure that everyone is using the same methods and that the transition goes smoothly.

Implement new processes: Establish new SOPs for recording and tracking financial transactions under accrual accounting. This may include tracking accounts payable and accounts receivable and inventory differently now that you’re using an accrual method.

Review financial statements: Ensure that your financial statements are accurate and reflect the financial position of the company under accrual accounting. If necessary, make adjustments to the financial statements to ensure that they are accurate.

Monitor results: Monitor the results of the transition to accrual accounting and make any necessary adjustments. This may involve modifying procedures or making changes to the accounting software, having more regular leadership meetings to align on the meaning of financial reports, or bringing in a fractional CFO business advisor to help guide the leadership in their understanding of the numbers.

Seek professional guidance: Consider seeking the guidance of an outsourced accounting firm to ensure that the transition is successful and that the financial statements are accurate, relevant, and delivered in a timely fashion.

Transitioning from cash basis to accrual basis accounting can be a complex process, but it can provide infinitely greater insight into the financial performance and position of your company. By following the steps outlined above, a business can make the transition smoothly and effectively.

 Call our expert outsourced accounting consultants today to see how we can help your business be efficient, effective and make smart decisions. 

 

The decision of whether to outsource your accounting or keep it in-house is an important one whatever the size of your business.  Did you know that most business owners rank their accountant as the #1 most important job to their success? 

Accountants are entrusted with company financials and are responsible for sharing accurate and timely financial data with the leadership team to ensure that the decisions that are being made about the future of the company are based in reality, not just a “gut feel”. For those businesses that are in high-growth mode, those pivoting industry, reducing workforce size, or preparing for an acquisition, the need for accurate financial data and accounting services can jump to a high priority overnight.

At Signature Analytics, we want to make sure you have all the data you need to make the right decision for YOUR business.  Let’s discuss the differences between and benefits of outsourced accounting services vs. in-house accounting hires.

There are pros and cons to both outsourcing and hiring in-house staff for accounting functions. Here’s a look at some of the key considerations.

The Pros of Outsourced Accounting Services:

Businesses today are increasingly turning to outsourced accounting leaders to help turn around a struggling business and/or enhance profitability for many different reasons.

Current revenue performance may be declining or stagnant quarter-over-quarter and year-over-year, signaling a dire situation if not addressed.

Current accounting technology and processes may not be driving desired results.

Disruptive market and/or industry competitors have changed the “rules of the game” and there is no CFO-level business advisory role in the company to conduct in-depth forecasting and scenario planning in this new environment. 

The historically hands-on business owner or CEO no longer has the time or expertise to oversee critical changes in the accounting function.

From strategic direction to process changes to accounting team management. Bringing in an outsourced accounting partner can free the owner or CEO to concentrate on other aspects of the business, including providing visionary oversight of the larger organization.

Outsourced accounting teams bring an external perspective to add market-based clarity to the accounting department. With an outsourced accounting team, the business can gain essential expertise to strategically expand market influence.

Based on a strong track record of success in a variety of markets, an outsourced accounting partner can develop and implement new strategies and processes and introduce effective technologies that can update and upgrade the way you do business. An Outsourced CFO business advisor can make the tough decisions necessary to increase efficiency, control costs, and better align resources.

Outsourced accounting can save business owners money

Hiring an outsourced accounting team is more affordable than hiring an entire in-house accounting team. Hiring in-house incurs expensive overhead costs including costs regarding hiring and onboarding, PTO, health insurance, retirement, vacation, workers’ compensation, sick days, and more.

Outsourced accounting can save business owners time and increase profitability and operational efficiency

When you bring in an outsourced team, they’re ready to go.  You save time on training, and while there are time commitments to every outsourced relationship, mentoring, training, onboarding, and managing are removed from the hiring company’s to-do list. 

An outsourced accounting team will have experience in many industries and may be able to provide efficient ways of addressing old problems.  The fresh eyes of an outsourced team may call to light operational gaps or unseen drains on your profitability that can be addressed immediately. 

Outsourced accounting increases access to greater skills and resources

When you hire an in-house accountant, you usually hire a single individual. When you outsource, you have access to an entire accounting team and their expertise. Your day-to-day accounting process from accounts payable and accounts receivable to month-end close and everything in between is handled by professionals with years of experience providing accurate relevant and timely numbers to businesses across industries. If you need a controller, we have controllers, if you need an accounting manager, that can also be accommodated.  You’re not stuck with one person’s limited experience or skill-set. 

Outsourced Accounting can reduce the likelihood of fraud

Research from Price Waterhouse Coopers PwC states that in 2022 46% of surveyed organizations reported experiencing fraud, corruption or other economic crimes in the last 24 months.

Moreover, private companies and small businesses were most often victims. Up to 42% of them fell victim to fraud, with median losses of $164,000. Claims of this size are quick to shut the doors of most small, and even mid-sized businesses.

But why does internal fraud occur more frequently with in-house accountants? Small businesses typically don’t have the same checks and balances in place that large enterprises do.

Small businesses falter when it comes to internal controls. Moreover, with just one person responsible, there is no room for correction.

The Cons of Outsourcing Your Accounting 

With all the benefits that can be realized by outsourcing your company’s accounting team, why would a small to mid-sized business not want to implement this likely competitive advantage? Here are some possible reasons:

The business owner or leadership team wants to maintain full internal control amongst current staff (perhaps for a family-run business) – even if that means sacrificing potential benefits noted above.

  • Aspects of the business operation might be deemed confidential or sensitive to a level that rules out bringing in a fractional resource.
  • Current leaders want to remain “hands on” in running day-to-day company operations, even if they have little time to address the big-picture strategic direction.
  • Although outsourcing pricing is usually custom based on company needs, and includes a value proposition designed for near- and long-term ROI, the business might not be able to financially engage the services of a fractional Outsourced Accounting firm in the short-term.
  • The current company culture is in a fragile state and it is feared (rightly or wrongly) that bringing in an external resource will cause unwanted ripples.

Outsourcing is growing in popularity. Hiring an outsourced accounting service provider means your accounting team is not on-site 9 – 5 Monday through Friday… Then again, post-COVID, that model is fading away. 

Accounting isn’t the only function that business owners are outsourcing. 

In today’s ever-expanding “gig economy,” outsourcing entry-level tasks and job roles has become commonplace. But a growing number of organizations are exploring and adopting outsourcing for higher-level functions, too. Small to mid-sized organizations are increasingly outsourcing their non-essential functions – from marketing to IT to HR and of course, accounting – and finding success with this new paradigm.

Many aspects of your business can be outsourced. For example:

  • Outsourced Marketing Services
  • Outsourced Sales Teams
  • Outsourced IT Management
  • Outsourced Customer service (offshore, or onshore)
  • Outsourced Admins or Personal Assistants
  • Outsourced Shipping and Logistics Management

More and more businesses choose to outsource functions within their business to free up their own time, to unburden their existing staff, and access greater levels of experience so the leadership team can focus on what they do best: running their business. 

Outsourced vs. In-House: What Option is Best for My Business?

At the end of the day, the decision between outsourced and in-house accounting is up to you as a business owner. It depends on you, your specific accounting needs, and your budget.

It’s more likely for large corporations to have their own accounting departments. Why? Because they have tight structures and very traditional internal controls.  For more flexible businesses with modern business structures, outsourcing becomes a much more scalable model.  For businesses that are getting aligned with the new world of work in which skill overrides geography and resources and flexibility are more important than strict control, the outsourced model is a veritable no-brainer. 

The Bottom Line

Any business needs to weigh outsourcing’s advantages and disadvantages before taking that plunge. Nonetheless, the reasons for outsourcing can often outweigh the reasons against it. Certainly, for many businesses, having access to accurate financial data, accurate reporting, and scalable finance and accounting leadership can be the difference between long-term success and poor business decisions. 

At Signature Analytics, we support our clients’ day-to-day accounting functions, including:

  • Invoicing
  • AR management
  • Bill processing
  • AP management
  • Forecasting
  • Reporting
  • Monthly close
  • And more…

Ready to get started with outsourcing your day to day accounting services? Talk to an expert today. 

How technology & outsourcing can fill the void

The accounting profession in the United States is experiencing a significant decline, with a shortage of accountants and CPAs becoming a major concern. This shortage is compounded by the increasing number of accountants leaving their jobs at both corporations and audit firms*, as well as the declining number of accounting graduates.

According to the AICPA, the number of college graduates earning a bachelor’s or master’s degree in accounting has dropped by 4% since the onset of the COVID-19 pandemic. And the number of graduates sitting for the Uniform CPA Examination has dropped from 50,000 candidates in 2010 to 32,000 in 2021.

In addition to this, the baby boomers’ retirement is further exacerbating the situation, leaving fewer professionals to tackle more work that is increasingly complex. This combination of factors has created a perfect storm for the accounting profession, which is struggling to keep up with demand.

The SEC has expressed strong concerns about the shortage of accounting professionals, warning that it could lead to serious financial reporting deficiencies across U.S. businesses, both big and small. The shrinking accounting profession is becoming a critical issue that needs to be addressed, as it poses a significant risk to the financial stability of the country. Fortunately, with outsourced solutions and the improved accounting software and technology available, business owners have options beyond the traditional hiring of in-house staff to fill their accounting needs.

Outsourcing and Technology: A Perfect Match

Cloud-based accounting software allows accountants to access financial data from anywhere, making it easier for outsourced providers to work with clients remotely. This technology also allows for real-time financial reporting, which can help companies make more informed business decisions.

One solution to overcome the shortage of accounting professionals is to hire an outsourced accounting company that can implement technologies and software to streamline a business’s internal processes. In this regard, Signature Analytics provides a comprehensive solution that goes beyond project-based tax help.

Signature Analytics offers outsourced accounting solutions that include a Financial Intelligence Team specializing in putting the right people on an account, implementing the right technology to streamline processes, and generating accurate, relevant, and timely reporting. By leveraging technology and their team’s expertise, Signature Analytics can provide businesses with a cost-effective solution that improves efficiency and accuracy while freeing up time for internal staff to focus on other critical business activities.

With their expertise in various accounting areas, Signature Analytics can help businesses streamline their bookkeeping, monthly close, and financial reporting processes, leading to improved efficiency, cost savings, and higher profit margins. By leveraging their technology and expertise, businesses can overcome the challenges posed by the shrinking accounting profession while staying competitive in their respective industries.

Overall, hiring an outsourced accounting company like Signature Analytics can provide businesses with a comprehensive solution to overcome the challenges posed by the shortage of accounting professionals. By implementing the right technology and software and leveraging their team’s expertise, Signature Analytics can help businesses streamline their accounting processes, reduce costs, and improve their profit margins.

Top Accounting & Finance Technologies in 2023

Rippling: Rippling is the first way for businesses to manage all of their HR, IT, and Finance — payroll, benefits, expenses, corporate cards, computers, apps, and more — in one unified workforce platform.

Quickbooks: QuickBooks by Intuit is a well-known accounting software designed to help small to medium-sized businesses manage their finances. This easy-to-use software streamlines business tasks by offering templates for spreadsheets, invoices, and financial reports.

Ramp: Next-generation finance tools – from corporate cards and expense management, to bill payments and accounting integrations – designed to save businesses time and money with every click.

Netsuite: Netsuite is a cloud-based ERP software that includes accounting features. It is designed for medium-sized and large businesses and offers features such as financial management, inventory management, and order management.

Fathom: Fathom is a cloud-based financial analysis and management software that helps businesses to analyze and monitor their financial performance, create financial reports, and make data-driven decisions.

Bill: a leader in financial automation software for small and midsize businesses (SMBs). Hundreds of thousands of businesses trust BILL solutions to manage financial workflows, including payables, receivables, and spend and expense management.

Tipalti: Tipalti is a cloud-based payment automation software that helps businesses to manage and automate their accounts payable and payment processing operations.

Salesforce: Salesforce is a cloud-based customer relationship management (CRM) software that allows businesses to manage customer data, track sales leads, and create marketing campaigns.

Emburse: Emburse is the global leader in spend optimization with expense, travel management, purchasing and accounts payable, and payments solutions.

Stripe: Stripe is a cloud-based payment processing software that allows businesses to accept payments online, manage subscriptions, and run financial reports.

Asana: A project management tool. Asana helps teams orchestrate their work, from small projects to strategic initiatives.

The Upshot

In conclusion, the shortage of accounting professionals in the United States is a pressing issue that is being exacerbated by various factors such as declining numbers of accounting graduates, accountants leaving their jobs, and the retirement of baby boomers. However, businesses have options to fill this void through technology and outsourcing solutions.

Cloud-based accounting software, such as QuickBooks, Netsuite, and Fathom, allows for remote access to financial data and real-time reporting, making it easier for outsourced providers to work with clients efficiently. Outsourcing companies like Signature Analytics offer comprehensive solutions that combine the right technology with their team’s expertise to streamline businesses’ internal processes and generate accurate and timely financial reporting.

In addition to outsourcing, there are various accounting and finance technologies available, such as Rippling, Ramp, Bill, Tipalti, Salesforce, Emburse, Stripe, and Asana, that can help businesses manage their finances, automate processes, and optimize spend. These technologies can improve efficiency, reduce costs, and increase profit margins for businesses facing the challenges of the shrinking accounting profession.

In conclusion, by leveraging technology and outsourcing solutions, businesses can overcome the shortage of accounting professionals and stay competitive in their respective industries. The right combination of technology and outsourcing can fill the void and ensure that businesses have the necessary accounting support to thrive in today’s complex financial landscape.

 

As a business owner, it’s essential to maximize your profitability. However, it’s easy to lose sight of the key financial metrics amidst the daily operations of growing your business. Achieving optimal profitability requires you to devote extensive time and effort to analyze financial metrics, and reports. Without proper reporting and analysis, you may have to rely on a bookkeeper or intuition alone, which could lead to missed opportunities for growth and profitability.

So as a business owner, how can you know how profitable your business really is? Let’s start with some key financial metrics business owners should consider for making informed decisions and how to use these metrics in a profitability analysis. Then, we will discuss common reasons for not seeing profit despite showing it on P&L statements, as well as ways to improve profitability with the help of an outsourced accounting team.

Key Metrics to Determine Profitability

Profitability analysis is a crucial component for any business endeavor as it provides critical insights into the financial health and performance of an organization. Here are some key profitability metrics that business owners can use to evaluate their company’s performance:

Gross profit margin: This is the percentage of revenue that remains after subtracting the cost of goods sold. It helps determine the amount of profit a company generates from its sales.

Net profit margin: This ratio measures the percentage of revenue that remains after deducting all expenses, including taxes and interest. This metric reflects the overall profitability of a business.

Return on investment (ROI): This metric evaluates how effectively a company uses its capital to generate profits. It is calculated by dividing the net profit by the total investment.

Let’s discuss how business owners can use these metrics to conduct a profitability analysis.

How Would a Business Owner Conduct a Step-by-step Profitability Analysis?

A business owner can conduct a profitability analysis by following these steps:

  1. Gather financial information: Collect all relevant financial statements, including balance sheets, income statements, and cash flow statements.
  2. Define profitability metrics: Identify the key profitability metrics that are relevant to the business, such as gross profit margin, net profit margin, and return on investment.
  3. Calculate profitability metrics: Use financial information to calculate the relevant profitability metrics and compare the results to industry standards and past performance.
  4. Analyze costs: Analyze the cost structure of the business and identify areas where costs can be reduced or eliminated.
  5. Evaluate pricing strategy: Assess the effectiveness of the current pricing strategy and determine if adjustments are necessary to increase profitability.
  6. Assess revenue streams: Evaluate the different revenue streams and the profitability of each individual revenue stream and identify opportunities for growth.
  7. Review operations: Conduct a thorough review of the business operations and identify areas where improvements can be made to increase efficiency and reduce costs.
  8. Make recommendations: Based on the findings from the profitability analysis, make recommendations for improving the financial performance of the business.
  9. Implement changes: Implement the recommended changes and monitor the results to ensure that the desired improvements in profitability are achieved.

By conducting a profitability analysis, a business owner can gain a better understanding of the financial health of the business and take action to improve profitability.

Why Some Business Owners Aren’t Seeing Profits in the form of Cash Despite Showing Profits on P&L Statements

Running a business is challenging, and profitability is one of the most crucial aspects of any successful enterprise. However, some business owners find themselves struggling despite showing profits on their P&L statements. In particular, manufacturing businesses are susceptible to this issue. Although they might be profitable on paper, they can still be strapped for cash.

In this section, we’ll explore some of the reasons why business owners may not be seeing profits, even if their P&L statements say otherwise.

Too Much Inventory

Cash can be sitting on shelves in the form of inventory, impacting the timing of cash out versus cash in. This can significantly affect a business’s cash flow, especially in the manufacturing industry where there are costs up front to produce a product, but you can’t collect until you sell it. 

Lines of Credit or Financing 

When businesses face a shortage of cash flow due to inventory or manufacturing, they may turn to lines of credit or financing to cover their expenses. While this may seem like a viable solution, it can also lead to further problems. Lines of credit and financing often come with high interest rates and fees, which can add up and eat away at profits. 

Bad Data

Inaccurate financial data can contribute to why some business owners may not see profits. Missing transactions or errors in financial reporting can lead to a skewed view of the company’s financial health. It may be difficult to detect such errors without proper checks and balances in place. 

No Confidence in Accounts Receivable & Accounting Receivable Processes 

Business owners should regularly review their AR aging to ensure they are collecting payments on time and efficiently. In addition, they need to be aware of any outstanding payables and ensure that they are not paying for the same expense twice. This can happen when a payment is made using a credit card, but accounting also enters the expense in AP, resulting in duplicate payments. 

Questions Business Owners Can Ask Themselves to Improve Profitability

By reflecting on these questions and identifying areas for improvement, business owners can take steps to ensure the financial health of their enterprise.

Do You Have a Defined Monthly Close and Reporting Process?

Having a defined monthly close and reporting process is crucial for accurate financial reporting. Without a structured process, it becomes challenging to ensure that all financial transactions have been accounted for and that the reported numbers are reliable. 

Supporting schedules are additional documents or reports that provide more detailed information about the financial transactions that have been recorded. These schedules are used to double-check the accuracy of the reported numbers in the financial statements. 

By comparing the supporting schedules to the financial statements, any discrepancies or errors can be identified and corrected. This process ensures that the reported financial information is transparent and reliable, which is essential for making informed decisions.

By implementing a defined monthly close and reporting process, businesses can improve their financial accuracy and make better-informed decisions.

Are You Using Technology to Support Your Processes?

In today’s digital age, technology plays a critical role in business operations. From accounting software to project management tools, technology can help automate and streamline processes, improving efficiency and reducing costs. By leveraging the right technology solutions, businesses can gain a competitive advantage and improve profitability.

Do You Have Checks and Balances? 

Checks and balances are vital for businesses to maintain financial integrity and prevent fraud. For example, separating duties between employees who handle financial transactions can reduce the risk of fraud. Additionally, implementing periodic analyses and reviews can help detect and prevent financial errors or discrepancies.

Do You Have the Right Reporting in Place to Gain a Comprehensive Understanding of Your Business?

To make informed decisions and improve profitability, business owners need to have accurate and up-to-date financial reporting. This includes regular financial statements, budgeting and forecasting reports, and key performance indicators (KPIs) to monitor business performance. By having access to the right information, business owners can make informed decisions and take proactive steps to improve profitability.

Are You Prepared For Bonuses and Unexpected Business Expenses?

Business owners should always be prepared for unexpected expenses and bonuses. Having a solid financial plan in place that accounts for unexpected expenses and bonuses can help ensure the business remains profitable and financially stable. This can involve setting aside reserves specifically for unexpected expenses and bonuses, and regularly reviewing financial reports to ensure that the business is on track to meet its goals. 

Does Someone on Your Accounting Team Help You See the Whole Picture? 

Running a business can be a busy and demanding task. Business owners are often focused on growth, serving clients, and managing employees, leaving little time for other tasks. That’s why having someone on the accounting team who has the complete picture and can provide insights is important. 

 

How Could Hiring an Outsourced Accounting Team Improve Profitability?

Hiring an outsourced accounting team can improve profitability in several ways:

Improved accuracy: An outsourced accounting team has the expertise and resources to ensure that financial records are accurate and up-to-date. This can help to reduce errors, minimize the risk of fraud, and ensure that tax obligations are met.

Increased efficiency: An outsourced accounting team can automate many manual processes, reducing the time and effort required to manage financial operations. This can free up time for business owners to focus on core business activities, leading to increased efficiency.

Lower costs: Outsourced accounting services are often more cost-effective than hiring an in-house accounting team. Business owners can avoid the costs associated with recruiting, training, and compensating employees, while still benefiting from the expertise of a professional accounting team.

Enhanced financial analysis: An outsourced accounting team can provide business owners with more sophisticated financial analysis and reporting, including real-time financial dashboards, cash flow projections, and cost-benefit analysis. This information can help business owners make more informed decisions and improve profitability.

Scalability: An outsourced accounting team can be scaled up or down as the needs of the business change, allowing business owners to adjust their spending as necessary.

By outsourcing accounting functions, business owners can benefit from the expertise and resources of a professional accounting team, improving their financial management capabilities and ultimately contributing to increased profitability.

About Signature Analytics

Signature Analytics is the Smart Choice for business owners. With the support of our expert accounting and CFO Business Advisory services, your business can get to the

next level of profitability and operational efficiency.

Our assessments provide a deep dive into your existing accounting structures and processes and help us customize the right solution for your business. With those

insights, we then bring in the right outsourced team to get you the Accurate, Relevant, and Timely financials you need to run your business successfully. Contact our team of experts to learn more. Then, read on to learn more about the Six Best Practices for Financial Reporting and Analysis.

How to Map Your Accounting Team to Your Nonprofit vs For Profit Business Structure

Aligning the accounting team involves identifying the key accounting activities necessary to support your business model and then allocating resources to those areas. Financial and regulatory requirements vary between for-profit and nonprofit organizations. In this blog, we will delve deeper into how to align your accounting team with your business model, including an examination of the distinct characteristics of for-profit and nonprofit business models, their accounting structure, and reporting requirements.

For-profit businesses generally operate with the primary goal of generating profits for their owners or shareholders, while nonprofits are organized for a specific social cause or mission, and do not have owners who expect to earn a financial return on their investment. As a result, nonprofits often have a different revenue model and source of funding compared to for-profits.  Let’s dive into the distinctive characteristics of each business model and explore how those differences impact best accounting practices.

What Is the Ideal Accounting Structure for a For-Profit Business Model?

The ideal accounting team and structure for a for-profit business model will depend on the size and complexity of the business. However, in general, a good accounting team and structure should have the following key roles and responsibilities:

Chief Financial Officer (CFO): This is the head of the Finance and Accounting Department and is responsible for overseeing all financial activities of the business. The CFO should have a strong background in accounting, finance, and business management.

Controller: The controller oversees the day-to-day accounting operations and reports to the CFO. They are responsible for maintaining the integrity of the company’s accounting records, including managing the month-end close process, preparing financial statements, and ensuring compliance with accounting regulations.

Accounting Manager: The accounting manager reports to the Controller and oversees staff who are responsible for managing the accounts payable and receivable, recording financial transactions, reconciling accounts, and preparing financial reports.

Staff Accountants: Staff accountants are responsible for recording financial transactions, reconciling accounts, and preparing financial reports.

Tax Specialist: The tax specialist should have expertise in tax laws and regulations and be responsible for preparing and filing tax returns, managing tax audits, and providing tax advice to the business. For most small and midsized companies, this function is outsourced to their Tax CPA

Financial Analyst: The financial analyst is responsible for analyzing financial data to help the business make informed decisions, such as forecasting future revenue, assessing the profitability of different projects, and analyzing financial trends.

The Ideal Reporting Structure for a For-Profit Business 

The Ideal Reporting Structure for a For-Profit Business refers to the process of organizing and presenting financial information in a clear and accurate manner to support informed decision-making by stakeholders. For a service-based business, for example, it is important to track revenue by source, credits used to arrive at net revenue, and the cost of services provided.

Additionally, different profit centers, service lines, and geographic locations may require separate tracking for more effective financial management. Overhead costs, such as sales and marketing, general operations, rent, and administration, must be taken into account when determining sales, general, and administrative costs.

By properly tracking these expenses and revenue sources, a service-based business can ensure accurate financial reporting and decision-making. Ultimately, the ideal reporting structure for a for-profit business should support the overall accounting team structure and ensure compliance with financial reporting requirements.

Optimizing Accounting and Reporting Structures for Nonprofit Organizations

Nonprofit organizations can have business models that resemble for-profit businesses, such as generating revenue through fee-for-service programs or selling products. However, unlike for-profit businesses, the revenue generated is used to further the nonprofit’s mission rather than to provide financial returns to owners or shareholders. For example, the Girl Scouts of America’s $800 million in annual cookie sales helps fund their programs and activities. 

What Is the Ideal Accounting Structure for a Nonprofit Organization?

The ideal accounting team for a nonprofit could include the following positions:

 

Chief Financial Officer (CFO): This senior executive is responsible for overall financial strategy and management, including financial planning and analysis, treasury, and risk management.

Fundraising Director*: The fundraising director is responsible for developing and implementing a comprehensive fundraising strategy that includes major gifts, planned giving, corporate sponsorships, and grant applications. 

Grants Manager*: This person is responsible for managing the organization’s grant applications, reporting, and compliance with grant requirements.

Donor Relations Manager*: This person is responsible for managing the organization’s relationships with donors, including receipting, acknowledgment, and stewardship of gifts.

Controller: The controller oversees the day-to-day accounting operations and reports to the CFO. They are responsible for maintaining the integrity of the organization’s accounting records, including managing the month-end close process, preparing financial statements, and ensuring compliance with accounting regulations.

Staff Accountant: This person is responsible for maintaining the organization’s general ledger, including recording transactions and preparing financial statements.

Bookkeeper: This person is responsible for performing routine accounting tasks, such as data entry and reconciliation of bank statements.

*These special roles are not always on the accounting team – they collaborate with the accounting team to ensure that grants are accounted for correctly

What is the Ideal Reporting Structure for a Nonprofit Organization?

The ideal reporting structure for a nonprofit organization is structured more around programs and their associated costs, as opposed to operational running expenses. In nonprofit accounting, any cost associated with a program is directly associated with how it contributes to fulfilling the organization’s mission, rather than generating profits.

An accounting ledger is a key component of a nonprofit organization’s accounting system and serves as the primary source of information for financial statements. The accounting ledger records all financial transactions, such as donations, grants, program expenses, fundraising expenses, and other financial activities of the nonprofit.

Nonprofits have different financial objectives compared to for-profit organizations, as their primary goal is to fulfill their mission rather than generate profits. Therefore, their accounting ledgers are structured differently to account for different types of financial transactions. 

How Can Outsourced Accounting Teams Support Businesses Who Want to Align Their Accounting Team to Their Business Model?

Outsourced accounting teams can support businesses in aligning their accounting team to their business model by providing specialized expertise, resources, and technology that may not be available in-house. Some of the ways in which outsourced accounting teams can support businesses include:

Customization: Outsourced accounting teams can provide customized services to match the specific needs of the business, including the creation of a tailored accounting team structure that aligns with the business’s goals and objectives.

Scalability: Outsourced accounting teams can scale up or down as needed, providing the business with the resources it needs when it needs them, without the need for a long-term commitment or investment in new hires.

Access to technology: Outsourced accounting teams often have access to the latest accounting software and technology, enabling them to provide efficient and accurate services to the business.

Expertise: Outsourced accounting teams often have a deep pool of specialized expertise, including certified public accountants (CPAs) and other financial professionals, who can provide guidance and support on complex accounting and financial issues.

Cost savings: Outsourced accounting teams can provide cost savings compared to hiring in-house staff, as the business does not need to invest in salaries, benefits, and other employment-related expenses.

About Signature Analytics

By working with an outsourced accounting team, businesses can focus on their core activities, knowing that their financial operations are being handled efficiently and effectively, freeing up their own internal resources to focus on driving growth and profitability.

Signature Analytics is the Smart Choice for both nonprofit and for-profit organizations. Why? Our assessments provide a deep dive into your existing accounting structures and processes and help us customize the right solution for your business. With those insights, we then bring in the right outsourced team to get you the Accurate, Relevant, and Timely financials you need to run your business successfully.

Contact our team of experts to learn more. Then, read on to learn more about How Outsourced Accounting Supports Non-Profit Annual Audits.

The economic downturn is here, and with it comes the possibility of a recession. While it’s impossible to predict exactly what the future holds, it’s important for businesses to take steps to weather-proof their operations in order to prepare for the worst. While there’s no one-size-fits-all approach, there are certain steps that business owners can take to ensure their business is resilient should a recession occur. In this article, we’ll explore some of the most important steps that businesses can take to weather-proof their operations and processes to have a stronger base to support their success in the face of economic uncertainty.

 

“It all has to tie back to a budget and then to the cash flows of your business. When you are clear on that, it gives you the confidence to operate effectively, and understand the impact of different scenarios.”

-Jason Kruger, Founder Signature Analytics

The Signature Analytics team tackles the possibility of a recession

As business owners ourselves, we sat down to talk through some strategies and tactics that business owners can take to reduce costs, make smart and strategic moves, and, weather-proof their businesses in these times of economic fluctuations. Here are some excerpts from our conversation (edited for fluidity and context).

For many businesses the ill effects of COVID have receded, freight costs are coming back down to a manageable level, and the costs of raw materials are also coming back down. With these reductions in costs, there are choices to be made. You can keep those increased margins knowing that times may get leaner in the fairly near future, or you can pass those cost-cuts on to your customers in hopes of driving more business and increasing revenues.  Each of these strategies has its merits, you really have to dig into your numbers to make the call that’s right for your business and your industry.

To make that call and many others we dig into here you’ll have to have accurate financial reporting – it’s what we do best so it’s where we think all smart business decisions start.

 

“Business owners need to really invest in scenario planning, what happens if revenue is 10% below what we think? It can happen. You have to understand your variable versus your fixed cost. I suggest you take a long look at ways to reduce some of your fixed costs.”

-Pete Heald, CEO Signature Analytics

Compensation costs are holding steady

There’s one area where costs are not coming down, nor will they anytime soon, and those are compensation costs.  The minimum wage keeps rising and the unemployment rate is still at historic lows despite the flurry of cuts at the largest tech giants.  No one is taking a pay cut just because the world has opened back up and supply chains are moving again.  If your business is hiring new people right now and you’ve adopted a hybrid or remote work model, there are some interesting decisions to be made in terms of where you source your people and how you compensate them.

Here in Southern CA, the unemployment rate is 2.5% and if you’re hiring a brand new college  grad, you’re paying a premium in many industries. If however, you are open to remote employees, it opens things up quite a bit. It means you can hire anywhere which can bring big changes to comp structures and benefits structures.

As you’re looking at your margins and spending across the board, don’t forget to take the time to audit those employee benefits.  You want to be sure that the benefits you offer are doing the job they’re meant to do: attract and retain great people.   

When we audited our work environment and employee benefits we discovered that the majority of our staff preferred to work remotely.  That opened up the option of reducing our real estate costs while providing a hybrid remote-first work environment that works for us, for our margins, for our culture, and for our clients.

Re-examine your debt and get a good banker

Another area in which business owners can take action to reduce costs and prepare for the possibility of interest rates continuing to go up is by re-examining their loans. If you don’t have a good relationship with your banker, build one.  A banker should be your ally.  If you do have challenging quarters (or years) having a banker on your side is beyond helpful.

Take a look at any variable-rate loans your business has and see if you can refinance at a fixed rate.  Some SBA loans which started with very low-interest rates (around 5.75%) are already up to 10.5% and could go as high as 12% in 2023. Consider the term of that fixed rate however, ask “where do I think rates will be in 2 or 3 years?”

The key to a good banking relationship for your business is communication.  A good banker will be a resource throughout the life of your business if you are transparent with them and share your financial reporting. The truth is: they’re going to find out if you’re having financial troubles.  It is better to share your financial statements with them early and help them be an advocate for you. Your banker will have resources and insights to share. If you keep your banker in the dark it creates concern about what else might be going on that you aren’t sharing with the bank. That concern could create an adversarial relationship that neither of you wants.

 

John Harelson at Endeavor Business Bank says:

I care about every one of our clients and I hope they think of me as a resource and an ally. When business owners come to me with financial challenges I’m eager to help. Depending on the issue they are facing, I can provide introductions to trusted connections for a wide variety of business challenges too.  I have introduced organizational change consultants, HR, legal services, or, in the case of Signature Analytics, great financial management, and outsourced accounting.  I want all our banking clients to do well. It’s why I do what I do.

 

Most loans have financial statement reporting requirements as well as metrics and behaviors built into the loan covenants.  Those requirements are very important to your banking relationship. Always know what metrics and behaviors need to be met, reporting any violations as soon as possible will help ease the concerns of your bank that you are on top of it. Bring a partner like Signature Analytics in so your accounting department isn’t racing against the clock and get those financial statements and compliance data to the bank on time.

How can nonprofits prepare for a recession?

We’ve been working with the Trevor Project and a number of larger nonprofits for years.  When NFPs are doing financial scenario planning in a down economy, they have to plan for the likelihood that fundraising may decrease. 2023 fundraising may not be at the same levels as 2022.

The challenge for many nonprofits is that just when people are tightening their belts and less likely to give, that’s when their services are needed the most. Saving money on operational costs is essential. Outsourcing non-core functions – HR, Accounting, and Marketing can be a way to reduce those operational costs.  Outsourcing can provide on-demand expertise and increase efficiencies at a flexible cost that will be able to scale up and down.

Risks that outsourcing can address (mini-case stories)

Scaling up (or down) based on immediate needs:

We just started working with a company that had a part-time controller for years. That one person couldn’t scale up when they had a huge influx of business and that was just the time they didn’t have time to onboard new employees. Outsourcing with a reputable partner means they can scale up (and down) quickly based on immediate needs. For this client: we came in and got all the systems and processes in place, set up their day-to-day accounting and provided those services, and stepped in in that controller role to keep the finances running at full speed even as their business grew at a rapid pace.

Losing a key person:

With unemployment so low, recruiters are pulling staff from one company to another with regularity. Having an outsourced solution protects you if you lose a key person.  Without someone to fill in and without clearly documented SOPs you can find yourself running blind. That person that left might have been doing invoicing and processing payroll, key functions that take time to teach. It’s easy to put too much reliance on one person especially if you are running lean.  The loss of a key accounting person can mean that a business can’t collect its invoices in a timely manner which puts real stress on a business.

We’ve recently stepped in and filled a leadership role in a prominent NFP while also providing accounting help in the day-to-day side of their financial operations.

Our Partner Satpal Nagpal at GHJ shared some insights with us about the value of reliable financials for both nonprofits and for-profit companies.

These are excerpts from our conversation:

These are uncertain economic times. There are conflicting signals of a recession, will it be mild, or deep? When we see external uncertainties like this we feel it is even more important to control those things that are controllable. You don’t want to layer on an element of uncertainty in your decision-making because of unreliable financials. Making sure you have a solid foundation you can trust with accurate reporting, reliable bookkeeping, and accounting services will provide you with the right data to make predictions you can trust.

Because of the level of uncertainty out there in the financial landscape, businesses should be engaging in scenario planning for whatever comes their way. What will you adjust if the recession is mild vs deep, where will you cut back or what levels will you manipulate? These scenarios must be built on the backbone of good financials. And an audit of your financial statements can set you up to make better business decisions.

The fact is, in a tight fiscal environment, lenders and other financial institutions look at businesses’ financials with a sharper eye, and you don’t want to be caught off guard. For example: Nonprofits received funding from a lot of sources over the last 3 years [due to the pandemic and other factors]. As that money came in, the criteria for how it was to be spent and what oversight was going to be put in place was unclear.  In my opinion, that’s about to change. And when it does, having a good process of internal financial controls and compliance will make the process of audits and compliance much more straightforward.

Making sure your business records are up to date and working with a strong team like GHJ to provide audits ensures that everything is in order when the regulators request information.

What business owners and nonprofits may not realize is that you can’t go into an audit unprepared. Audit preparation is a process that takes time and collaboration.

At GHJ, we build collaborative relationships to provide information to our clients, whether it’s benchmarking or best practices, or critical information on internal controls.  That’s where our collaboration with Signature Analytics makes us very successful. That relationship provides business owners with a strong and reliable financial foundation and the audits to prove that their accounting andn finance departments are being managed with impeccable accuracy.

Maybe the most important piece of advice is to challenge your assumptions.

All the cost-controls and auditing we’ve been talking about has to tie back to your strategic budget for it to be implemented in a smart way.  To weather-proof your business for a recession the number one step is to make sure you have really solid financials.  Start with scenario planning, look at your debt, analyze what is variable vs fixed, and think about that business banking relationship.  If you’re in a good place, take out a Line of Credit now. If you have one, extend it.  If you wait until times are tough you may no longer qualify for the level of funding you qualify for now. Don’t assume your SBA rates are the only good rates out there, different lenders have different risk profiles.

Challenge your own rates and prices. Have you increased your rates to keep up? The narrative right now is that we all have to accept the rising cost of goods & services.  But with a potential recession, the opportunity to increase prices may be coming to an end – if a recession hits, that opportunity to raise prices will be lost.  So get clear on your margins, overhead, utilization rates, and cost controls and increase your prices now.

Places you may be inefficient and can make smarter business decisions:

  • Look at your tech stack and make sure the technology you contracted to use years ago is still the best.  Maybe you can move to a new system for less – you know you’re not getting those deals from year one anymore.
  • Audit your real estate needs. We did.  We realized our staff wanted to be remote – or hybrid and we chose to meet that need for our staff and at the same time reduce major overhead costs in our real estate expenditure.
  • Challenge your assumptions about compensation and benefits. The right comp structures will attract the best people who align with your company culture.
  • Audit your income statements
  • Clean up your aging AR
  • Examine those loans, and make sure you’ve got the best rates.
  • Look at the various investments you are making in your business – re-allocating certain funds in down economies can be a wise move (just don’t get reactive!)
  • Check employee utilization rates and org structures for inefficiencies.

All of these discussions have to come back to your strategic budget, and good financials.  For us, that’s at the heart of good business decisions.  It’s why we do what we do.  We help business owners make smart business decisions. 

If you have a topic you’d like us to do a deep dive on: send us a message, we’d love to hear from you.

The regulations a nonprofit organization must adhere to can be daunting.  Even the most robust accounting department is intimidated by the looming specter of an audit.  In the world of nonprofits, where keeping operational costs low is a priority in service of the greater good, and accounting departments are often running very lean, audits can be extremely taxing on an internal accounting department. 

At Signature Analytics, we pride ourselves on the work we do supporting midsized and larger non-profit organizations across the country.  We have deep expertise in the financial statement preparation necessary for nonprofits to successfully pass their annual audit. 

There are a number of situations in which outsourced services and their inherent flexibility can be of particular service.  For example, if your nonprofit has had a sudden influx of donations, if your organization has grown rapidly, or if you have lost key people, or had to scale down quickly, access to flexible outsourced accounting services with an expertise in the world of nonprofits might be the right solution for your organization. 

There are major areas of vulnerability for a nonprofit including 

  • Outdated technology which leads to manual and time-consuming processes
  • Lack of internal controls that can cause discrepancies in financial statements 
  • No single source of truth for financial data
  • Vacant finance and accounting leadership roles

Passing an annual audit is essential to the longevity of your mission and to the impact you can create.  At Signature Analytics, we are dedicated to supporting nonprofits as they navigate upgrades to their technology and improvements to their financial management because we know that with better financial management, your mission can thrive.  

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What are the requirements for a nonprofit to pass its annual financial statement audit? 

In order to pass their annual financial statement audit, a nonprofit must provide evidence that their financial statements are accurate and meet the standards set forth by Generally Accepted Accounting Principles (GAAP). This includes providing a full and complete set of financial statements, including a statement of financial position (balance sheet), statement of activities (income statement), statement of cash flows, statement of changes in net assets, and statement of functional expenses. The nonprofit must also provide supporting documentation, including general ledger accounts, contracts, bank statements, and other records. Additionally, the nonprofit must be able to demonstrate that they have internal controls in place to properly mitigate risk and that they are in compliance with all applicable laws and regulations.

What are the challenges nonprofits face in preparing for their annual financial statement audits?

Nonprofits face a variety of challenges in preparing for their annual financial statement audits. These include: ensuring they have accurate financial records that are prepared in accordance with Generally Accepted Accounting Principles (GAAP), collecting and organizing the necessary supporting documentation, and having the necessary internal controls in place to properly mitigate risk and ensure compliance with all applicable laws and regulations. Additionally, nonprofits must ensure that they are able to provide evidence to support the accuracy of their financial statements and adequately address any discrepancies or irregularities that may be found during the audit process. Finally, nonprofits must ensure that they have the necessary resources and personnel available to conduct the audit in an accurate and timely manner.

Nonprofits are often understaffed in an attempt to keep administrative costs low for their 990 reporting.  This can lead to high stress or burnout. On top of the constraints of staffing, technology is notoriously lagging in nonprofits making processes time-consuming and manual. Under these circumstances, it is not surprising that accounting staff struggle to meet the expectations of an increasingly sophisticated and demanding Board of Directors. 

Audits can strain an internal accounting department by requesting specific reporting and 990 preparation expertise.  Using an outsourced partner can help by improving internal controls, standardizing and documenting processes and recommending technologies to improve manual processes. 

Who can prepare financial statements for a nonprofit financial statement audit?

A CPA has to audit the financials for a nonprofit financial statement audit however, that CPA cannot prepare the statements being audited as that would be a conflict of interest.  The financial statements including the Statement of Activities, Statement of Financial Position, and all related financial reporting must be prepared by a separate entity and presented to the auditing CPA for their review. Often, nonprofits think they can take on this task of financial statement preparation but do not realize the intense scrutiny that their financials undergo in the audit process. 

What are some of the requested amendments that Financial Statement Audits return?

  1. Unrecorded Liabilities: Auditors may identify unrecorded liabilities that should be recognized in the financial statements.
  2. Unrecorded Assets: Auditors may identify unrecorded assets that should be recognized in the financial statements.
  3. Off-Balance Sheet Obligations: Auditors may identify potential off-balance sheet obligations that should be disclosed.
  4. Improper Accounting Treatment: Auditors may identify improper accounting treatments and suggest appropriate changes.
  5. Misclassification of Expenses: Auditors may identify misclassifications of expenses, suggesting changes to ensure accuracy.
  6. Unsupported Transactions: Auditors may identify unsupported transactions, suggesting appropriate support documentation.
  7. Uncorrected Errors: Auditors may identify errors that have not been corrected, suggesting changes to ensure accuracy.

What are the consequences of failing a financial statement audit?

The consequences of a failed financial statement audit for a nonprofit can be serious. It could lead to a loss of funding or donations, increased scrutiny from regulators, or even criminal charges. It could also lead to a loss of public trust and confidence, which could be difficult to regain. Additionally, the organization’s reputation may suffer, leading to fewer volunteers and donors. Lastly, it could lead to the organization being unable to obtain financing or loans or losing its 501c3 status

Watchdog organizations keep careful tabs on the results of annual audits and report the results.  The advantage to this is that when you pass your audit and get excellent reports those reports are published, helping guide donors to your nonprofit. 

What updates or new requirements must Nonprofits comply with in 2023?

New Pronouncement requirements from FASB are a constant source of accounting department stress.  The requirements can easily creep up on a nonprofit.  Many NFP accounting teams don’t know how to implement these requirements but they are a required part of GAAP.  One example is ASC 842 for Leases:

 

FASB ASC Topic 842, Leases is a new accounting standard that requires organizations to recognize leases on their balance sheets. This means that nonprofit accounting departments will need to identify all leases they have entered into and determine whether they meet the definition of a lease under the new standard. If they do, the nonprofit must record the lease liability and right-of-use asset on their balance sheet, and also disclose additional information in their financial statements. This will impact how nonprofits report on their financial statements and require additional processes and controls to ensure proper tracking and reporting of leases. Nonprofit accounting departments will need to ensure they have the proper systems and processes in place to comply with the new standard and accurately report their lease obligations.

There are several other FASB (Financial Accounting Standards Board) Pronouncements that have specific (and often challenging) requirements for nonprofits. Some of the key pronouncements include:

FASB ASU 2020-07, Not-for-Profit Entities (Topic 958): Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets. The Update is expected to increase transparency around contributed nonfinancial assets (also known as “gifts-in-kind”) received by not-for-profit (NFP) organizations, including transparency on how those assets are used and how they are valued. These amendments should be applied on a retrospective basis and are effective for annual periods beginning after June 15, 2021, and interim periods with annual periods beginning after June 15, 2022. 

FASB ASU 2016-14, Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities: This pronouncement provides guidance on how nonprofit organizations should present their financial statements, including new reporting requirements related to net asset classifications, liquidity, functional expenses, and investment returns.

FASB ASU 2018-08, Not-for-Profit Entities (Topic 958): Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made: This standard provides updated guidance on how nonprofits should account for contributions they receive and contributions they make. It clarifies the definition of a contribution, provides guidance on how to distinguish between contributions and exchange transactions, and provides additional guidance on how to account for conditional contributions.

FASB ASU 2014-09, Revenue from Contracts with Customers (Topic 606): This standard outlines the requirements for how nonprofits should recognize revenue from contracts with customers. It establishes a five-step process for revenue recognition, including identifying the contract, identifying the performance obligations, determining the transaction price, allocating the transaction price, and recognizing revenue as the performance obligations are fulfilled. NFPs regularly make errors implementing ASC 606. For example, many NFPs record grant revenue when the cash is received instead of upon award.

FASB ASU 2016-02, Leases (Topic 842): This standard, as mentioned above, requires organizations to recognize leases on their balance sheets. Nonprofits are required to comply with this standard just like any other organization.

These pronouncements all have significant impacts on nonprofit accounting departments and require careful consideration and planning to ensure compliance. Nonprofits need to understand the implications of these pronouncements on their organization. Here at Signature Analytics, we recognize the additional burden these new pronouncements place on an already stretched accounting team and we are here to help. 

How does Signature Analytics help nonprofits in audit preparation, day-to-day accounting, and beyond?

We partner with nonprofits and act as a member of the internal team.  It is our privilege to serve our nonprofit clients and support their missions by providing the kind of accurate and trustworthy reporting that gives their Boards of Directors confidence in the way the organization is being run.  Our long history with nonprofits speaks to the commitment we have and the relationships we build with our NFP partners. 

We build Standard Operating Procedures for everything we do so that you have visibility into the processes that make your accounting work. We have the depth of expertise and financial sophistication to address all levels of concerns from a savvy Board of Directors.  Our reporting is clear and precise, supporting your requirements around 990 preparation and Financial Statement Audits so you have the reliable financial information to proceed seamlessly through those requirements. We support your grant preparation, writing, and reporting by providing accurate and timely financial information. 

Because of our commitment to the success of each of our non-profit clients, we support many nonprofits beyond financial statement audits.  In fact, we regularly engage with our NFP clients for ongoing day-to-day accounting support after our initial audit help.  We take the stress out of nonprofit accounting across California and across the US. 

If your nonprofit is falling behind on audits, if your Board is requesting a level of reporting that is causing your in-house accounting staff to be burned out or over-stressed, if you need accurate financials to make smart decisions… Please reach out.  We are here to support your mission with reliable outsourced accounting support.

Financial reporting is an essential process for businesses of all sizes. By tracking, analyzing, and reporting a business’ results, the key stakeholders can make smart decisions about how to manage their business, including allocating resources and managing cash flow. 

“Financial Reporting” is a broad term that encompasses a number of different types of documents, including a company’s financial statements. To put it simply, all financial statements are considered financial reports, but not all financial reports are financial statements.

In this article, we will delve into the best practices for financial reporting and analysis, and how companies can shift from a reactive to a proactive approach. Additionally, we will explore the crucial role of budgeting and strategic planning in achieving financial success and staying on track with business goals.

 

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What is Financial Reporting and Analysis?

Financial reporting and analysis is the practice of gathering and evaluating financial data to assess a business’ performance. This process provides insight into a company’s revenue, expenses, assets, liabilities, and equity. Financial reports offer a comprehensive view of a business’ financial health, enabling decision-makers to address the health and progress of the business.

What Does Financial Reporting Include?

Financial reporting typically includes:

Monthly, Quarterly, and Annual Reports, which include the income statement, balance sheet, and cash flow statement. These financial reports provide an overview of an organization’s financial performance over a specified timeframe. 

A/R and A/P Reports, which contain data about invoicing and accounts payable including aging (how long you are taking to collect revenue or pay vendors).  These reports can include metrics and KPIs.

Periodic Analysis. It is important to do periodic deep dives into your operations.  This may include inventory audits, gross margin and/or gross profit analysis (by market, product, service line, etc.), compensation analysis, headcount analysis, or utilization analysis. 

Let’s take a look at how business owners can improve their financial reporting process.

The Best Practices For Financial Reporting and Analysis 

1.Know The Financial Reports That Are Essential to Your Business

For many business owners, it can be overwhelming to know which financial reports to focus on. Additional volume of reporting does not equal improved understanding.  Getting a 50-page financial report does little to help a busy executive understand their business.  So, let’s break down the most important financial reports that every business owner or CEO should be aware of, and how they can help you make smarter decisions for your company’s growth and success.

The five most important and commonly referenced financial reports are:

  • Income statement
  • Balance sheet
  • Statement of cash flows
  • AR aging report 
  • Budget vs actual

Income Statement

An income statement, also known as a profit and loss statement, is a financial document that summarizes a company’s revenue, expenses, and profits over a specific period of time. The income statement is used to measure a company’s financial performance.

Balance Sheet

A balance sheet is a financial statement that provides a snapshot of a company’s financial position at a specific point in time. It lists the company’s assets, liabilities, and equity and shows how these elements are related to each other: Assets = Liabilities + Equity. The balance sheet is used to assess the company’s financial strength and stability, as well as its ability to pay debts and meet obligations.

Statement of Cash Flows

A statement of cash flows is a financial statement that provides information about a company’s cash inflows and outflows over a specific period of time, typically a month or a quarter. The statement of cash flows is used to understand how a company is generating and using cash, which is critical for its short-term liquidity and financial stability.

AR Aging Report

An aging report, also known as an accounts receivable aging report, is a financial document that shows how long it takes for a company to collect payment from its customers. The aging report categorizes the company’s accounts receivable into different aging buckets, such as 0-30 days, 31-60 days, 61-90 days, and over 90 days, and provides a summary of the amount of money the company is owed in each category.

The aging report is used to manage the accounts receivable process and to assess the risk of bad debt. By analyzing the aging report, a company can identify which customers are paying on time and which ones are falling behind, allowing it to take appropriate action to improve cash flow and reduce the risk of bad debt.

Budget vs Actual 

Budget versus actual reporting, also known as budget variance analysis, is a financial management tool that compares a company’s actual financial performance to its budgeted or planned performance. The objective of budget versus actual reporting is to identify variances or differences between actual results and budgeted or planned results and to analyze the causes of these variances.

Budget versus actual reporting typically includes the following elements:

  1. Budget or planned results: This is the amount of revenue, expenses, and other financial results that the company planned to achieve during a specific period of time.
  2. Actual results: This is the actual amount of revenue, expenses, and other financial results that the company achieved during the same period of time as the budget.
  3. Variance analysis: This is the process of comparing the budgeted or planned results to the actual results to identify variances and analyze the causes of these variances. Variance analysis helps the company understand why its results were different from its expectations and provides information for making adjustments and improvements.

Budget versus actual reporting is an important management tool for monitoring the financial performance of a company and making informed decisions about budgeting, forecasting, and resource allocation. By analyzing budget variances, a company can identify trends, improve planning and budgeting processes, and make informed decisions to improve its financial results. Together, these financial reports are essential for managing the business. 

Ensuring that the data from financial reports is accurate is essential for business owners to make smart decisions about the direction of the company. If financial reports are not providing actionable insights, companies like Signature Analytics can help to determine what needs to be improved in accounting and financial reporting.

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2.Implement GAAP Accounting Principles

GAAP stands for Generally Accepted Accounting Principles. It is a set of guidelines and rules widely used as a framework for financial reporting in the United States, providing a common set of standards for entities to prepare and present their financial information in a consistent and transparent manner. These principles are established by the Financial Accounting Standards Board (FASB) and the American Institute of Certified Public Accountants (AICPA).

GAAP accounting principles include:

  1. Historical cost principle: Assets and liabilities are recorded at their original cost.
  2. Full disclosure principle: All relevant and material information should be disclosed in the financial statements.
  3. Matching principle: Expenses should be matched with revenues in the period in which they were incurred.
  4. Revenue recognition principle: Revenue should be recognized when earned, regardless of when payment is received.
  5. Objectivity principle: Financial statements should be based on objective evidence.
  6. Consistency principle: Companies should use the same accounting methods from one period to the next.
  7. Conservatism principle: In case of uncertainty, the financial statement should reflect the worst-case scenario.
  8. Materiality principle: Only information that is significant enough to affect the decisions of users should be included in the financial statements.
  9. Fair presentation principle: Financial statements should be presented in a way that is not misleading.
  10. Cost-benefit principle: The benefits of providing information should outweigh the costs.

By following these principles, GAAP aims to ensure that financial statements are consistent, comparable, and reliable, which can help users make smarter decisions about the financial health of a company.

The process of managing financial reports is not easy for most small and mid-size business owners – especially when it’s necessary to do it accurately on a consistent basis. If you need assistance in managing financial statements to ensure they adhere to GAAP, contact us today.

3. Follow the Four C’s of Good Data 

Another best practice for financial reporting is to ensure that the data used for reports is accurate and timely. This means that the data is correct, current, complete, and consistent (the 4 c’s). By ensuring that the data meets the 4 c’s, businesses can ensure that their financial reports are reliable, which can increase credibility and trust among stakeholders. Furthermore, errors and inaccuracies in financial reports can lead to poor decision-making and costly mistakes.  

It is essential to have a process in place to verify and validate data before it is used in financial reports. This can be accomplished by implementing a data governance framework, which includes data quality checks, data audits, and data validation. This process will help to ensure that the data is accurate, complete, and consistent, and will help to improve the overall quality of financial reporting.

Use of technology to streamline the reporting process

By using technology to streamline the financial reporting process, companies can improve the 4 c’s of their financial reporting. A company can use technology to streamline the financial reporting process in the following ways:

  1. Automate data collection and entry: Using financial management software to automate the collection and entry of financial data can reduce the risk of errors and save time.
  2. Real-time reporting: Advanced technology solutions can provide real-time financial reporting, allowing companies to make informed decisions quickly.
  3. Data visualization: Technology can help companies present financial data in a clear and visually appealing way, making it easier to understand and analyze.
  4. Cloud-based solutions: Cloud-based financial management systems allow for secure access to financial data from any location on various devises, making it easier for teams to collaborate and share information.
  5. Integration with other systems: Integrating financial reporting systems with other business systems, such as sales and purchasing systems, can provide a more comprehensive view of the company’s financial position and reduce double entry.  Again reducing the risk of errors and saving time.

Keep Processes Simple and Consistent

By reducing process complexity, businesses can improve the 4 c’s of their financial reports, which ultimately helps to make informed decisions about the financial health of the business.

Processes should be documented to ensure consistency, understanding, and efficiency. Documenting processes provides a clear and consistent understanding of how tasks are to be performed, reducing the likelihood of misunderstandings and errors. Once processes are documented, then a company can move to process improvement.

Process improvement is an important best practice for financial reporting. A complex process can lead to errors and delays, making it difficult to produce accurate and timely financial reports. To reduce process complexity, businesses can take several steps such as simplifying the data collection and analysis process. 

This can be done by reviewing the current process, identifying areas of inefficiency, and simplifying or eliminating those steps.

4. Establish Monitoring and Reporting Frequency to Ensure Accurate and Useful Financial Reports

Accounting management establishes a consistent monitoring and reporting frequency for accurate financial reporting. This includes setting regular intervals for recording financial transactions, such as daily or weekly, and for compiling and analyzing financial data, such as monthly or quarterly. By doing so, business owners can have confidence that their financial records are accurate and up to date, which in turn allows for more effective decision-making and forecasting.

Additionally, setting a regular reporting frequency helps to identify trends and patterns in financial performance, and can aid in identifying potential issues or areas for improvement. 

5. Implement Performance Analysis and Benchmarking 

Performance analysis is the process of evaluating the performance of an organization, business unit, product, etc. The goal of performance analysis is to identify areas of strength and weakness and to understand how performance can be improved. Performance analysis typically involves gathering data, analyzing the data, and presenting the results in a meaningful way.

Benchmarking, on the other hand, is the process of comparing the performance of an organization, business unit, product, etc. against standards of excellence or best practices within the industry. Benchmarking provides a way to measure performance against a standard, and to identify areas where improvements can be made. Benchmarking can be used to evaluate a variety of factors, including cost, quality, productivity, and customer satisfaction.

Performance analysis and benchmarking are often used together to provide a comprehensive view of performance and to identify areas for improvement. By comparing performance against industry standards and best practices, companies can make informed decisions about their operations and strategy, and improve their overall performance.

In addition, regular performance analysis and benchmarking allows companies to monitor their progress over time, making it easier to track their performance and identify areas where they need to improve.  This leads to increased accountability within the organization.

6. Create Clear Summaries and Explanations

For busy company leaders, it is important that the financial reports that are received provide valuable insights that aid in decision-making. Creating clear summaries and financial analysis is essential for financial reporting. Accounting and financial leadership should present the most important data in a simple and direct way, using clear and concise language, providing summaries at the start of the report, and using charts, tables, and graphs to present key data.

It is also important for accounting and financial leadership to explain any data or figures in the report to help company leaders understand the context and significance of the information. This way, stakeholders can understand and use the financial reports effectively, which helps in making informed decisions about the financial health of the business.

In Summary

Financial reporting and analysis is a crucial process for businesses of all sizes to track, analyze, and report their financial performance. By understanding the importance of budgeting and strategic planning, as well as the key financial reports and statements, business owners can shift from a reactive to a proactive approach and make informed decisions about managing the business. 

About Signature Analytics 

Signature Analytics is the smart choice for business owners. With the support of our outsourced accounting and CFO Business Advisory services, your business can make smarter decisions based on accurate data.

We customize the right solution for your business to get you the Accurate, Relevant, and Timely (ART) financials you need to run your business successfully. Contact our team of experts for expert accounting and financial analysis.

According to Price Waterhouse Cooper’s 2022 survey, “Outsourcing is delivering results. A large majority of customers (87%) say that today’s outsourcing delivers the benefits projected in the original business case, whether partly or completely” 

Additionally: 

“Many respondents (53%) indicated they outsource activities that they consider to be ‘core’. For example, in the finance function, this could be a move from outsourcing payroll and accounts payable towards seeking assistance with budgeting, forecasting and management reporting.”

It takes a wide variety of specialties and skills to run all types of businesses, and outsourcing some of these roles can provide a depth of expertise and breadth of experience that would be otherwise unattainable. Either unattainable because of cost concerns, or because of the tight labor market. 

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What should I expect from Outsourced CFO Services?

Saving money is not the primary benefit of hiring an outsourced CFO and accounting partner, though it is a nice side effect. Many companies who are facing financial challenges cut back on hiring higher-level finance leadership roles (like an in-house CFO) just at the time when those insights and guidance are needed the most. 

According to PwC’s 2022 Pulse Survey, “Labor costs will have the strongest impact on corporate margins in 2022. Changing processes to reduce reliance on employees, allowing permanent relocation outside of corporate offices and outsourcing are all part of the strategy to reduce costs.”

Leveraging outsourced chief financial officer (CFO) services can save your business more than you invest through the financial, operational, and strategic insights they bring to the table. As an active part of your leadership team, your outsourced CFO partner can help business owners and CEOs drive greater profitability and business growth through full service consulting firm services. They will also help you make decisions based on accurate data, future projections, and financial expertise.

In addition to the flexibility and insights an outsourced CFO solution can bring, a fresh set of eyes can illuminate areas of inefficiency that have become so much a part of the fabric of the day to day operations of an accounting department that they go unnoticed.  

The CFO’s role within an organization depends on several factors. These components may include the expectations coming from the CEO and board of directors, and may also vary depending on the industry, corporate strategic planning, and the goals of the business. A company’s size can also have a significant influence on the CFO’s role.

The Importance of Forward-Looking Financial Analysis

The foundation of any company’s accounting and financial management is to produce timely and accurate financial data for the business. The CFO oversees these accounting services and finance functions, but their true value comes from the ability to provide forward-looking financial forecasting and analysis. This analysis should be focused on driving additional profitability and increasing the company’s value.

Read More: Outsourced CFO Services – Benefits of a Part-Time CFO

Whether you have a full-time, part-time, or outsourced CFO, below are some examples of the forward-looking financial analysis you should expect from the CFO role:

Cash Management & Forecasting

Can you predict when your business will have a surplus of cash that needs to be managed or when you will have a shortage of money that requires financing?

Cash flow problems can kill businesses that might otherwise survive. Your CFO should be monitoring cash flow and analyzing cash flow projections regularly to ensure your business does not run out of cash.

If your company is struggling with cash flow issues, there may be hidden inefficiencies, accounting practices, and operational issues that can be addressed by a CFO who looks at the big picture

Budgeting & Expense Control

Does your business have a budget? Do you receive an analysis comparing prior year actual, current year actual, and current-year forecast on a regular basis?

Your CFO should own the budgeting process by incorporating input from each department for the most accurate and complete projections and financial reports. They should also be monitoring budgeted versus actual results on a quarterly or monthly basis and reforecasting accordingly.

The fresh perspective of outsourced contract CFO services can provide high-level strategic guidance to optimize revenue growth in new and exciting ways.

Read More: How CFOs Add Value To Your Business

Compensation Plan Development

Is the compensation of your employees aligned with the goals of the company?

The CFO of a company should help to structure employee compensation plans that incentivize efficiency and align with the financial projections and goals of the company.

eGuide: What Business Should Expect From Their Accounting Department

KPI Development & Analysis

Are you maximizing margins? Are profits analyzed by revenue stream? Are employees being utilized appropriately to maximize profitability?

KPIs (Key Performance Indicators) are different for every business. They should act as the company’s compass, and the CFO serves as the navigator.

Finding one source of truth and ensuring that the data driving financial statements and reporting are accurate, relevant, and timely is essential to the function of an outsourced CFO.  

It is the responsibility of the CFO to work with those in operations to help develop KPIs applicable to the company and support the analysis of those KPIs regularly. The CFO should be using the data from the KPIs to assess business performance in real-time. Making changes that directly improve KPIs can help build the future value of the company.

Read More: What Are Key Performance Indicators and Why Are They Important?

Board & Investor Communications

Are you providing valuable financial information to your Board of Directors so they can review the trends of the company’s operations and assist in making appropriate decisions? Is the information presented professionally?

Your CFO should be preparing presentations for your board members that effectively communicate the company’s financial information in an organized manner using key performance indicators. The information should illustrate trends to visualize projections so the data can help drive business decisions.

Securing Financing & Raising Capital

Do you review your banking relationships regularly? Are you confident you have access to financing on the best possible terms for your business? What are the capital needs of the company now and in the future? What is the best way to meet those needs?

Your CFO should play a key role in identifying and securing investment and financing. They should identify capital requirements before approaching financial institutions and investors to ensure you raise the appropriate amount of capital required to support your growth plans.

A successful CFO should also prepare presentations of the company’s financial information, allowing potential investors or lenders to understand the data and the company’s performance.

If your company is planning for an exit, an outsourced CFO can help you present your company’s finances to get the best possible valuation.

Tax Planning

How often are communications occurring with the company’s tax advisor to maximize all tax-related strategies?

Your CFO should maintain consistent communication with tax preparers to minimize your company’s potential tax liability.

Ongoing Analysis & Review

All of these responsibilities should be considered ongoing processes that are revisited on a regular pre-determined schedule and modified based on the most recent financial information available.

Furthermore, all of the results should be measurable to track the success of the performed analysis.

eGuide: What Business Should Expect From Their Accounting Department

Technology Streamlining or Upgrades:

Finding the most efficient tools can streamline reporting and internal processes and reduce wasted hours in your accounting department. 

What to Expect from an Outsourced CFO:

While some accounting departments worry that an outsourced CFO will come in to be a hatchet person, that is rarely the case.  To be successful, an outsourced CFO services company will work closely with the CEO or business owner and leadership team to align on goals and then share those goals with the accounting and finance service departments to make sure that the financial and accounting functions are aligned in supporting the business goals. . 

Outsourced CFOs are advocates and allies, not adversaries. The added burden of being asked to conduct an audit, or to make strategic decisions and provide finance insights to a BOD or new CEO can overwhelm an otherwise functional accounting team. When you work with a high-level finance and business advisor they can put the right processes and procedures in place to avoid overburdening the existing team.  Additionally, an outsourced CFO can see areas in which technology can help streamline processes to free accounting staff to do what they do best. 

An outsourced CFO can help the existing leadership by serving as a finance and accounting coach to the CEO providing financial expertise and future-facing guidance for the organization.

When is the best time to bring on an outsourced CFO?

The best time to try outsourcing CFO services is not in a time of crisis, or as a last-ditch attempt to right a sinking ship, but in times of growth and prosperity when there is bandwidth and enthusiasm to create better processes and the financial leadership expertise to support growth and innovation.  

However, if your business is in, or approaching, crisis mode an outsourced CFO services company may be exactly what’s needed.  They will have helped other businesses navigate crisis situations and can implement strategies for your business leveraging their experience in multiple industries.  

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A Solution That’s Right For You

If your CFO is providing forward-thinking analysis, they are providing infinite value to your company. Think about how your business has grown and changed over the past 6 months, 12 months, and 3 years.  Have you changed and elevated your financial and business model strategies to meet those changes? 

Each of the outlined goals above can help maximize profitability and value for the business, and, if managed appropriately and adequately, companies with the correct financial infrastructure can witness significant operational improvements and growth. Having this kind of efficiency will allow you to think about your business in new ways and likely uncover new possibilities for what’s next.

It takes all areas of expertise to run a business.  The role of the experienced CFO with its finance expertise and financial insights supports the CEO’s vision and the Controller’s daily operational duties.  With the Outsourced CFO and Business Advisory services at Signature Analytics, you can have high-level finance insights that scale with your company’s growth.

If your business requires any (or all) of the forward-looking financial analysis mentioned above, but you’re not in a position to hire a full-time CFO or may have a team that just needs additional support, then explore the breadth of services offered by experts at Signature Analytics.

Our highly experienced accountants can act as your entire accounting department (CFO to staff accountant). If that solution isn’t the right fit, our team can complement your internal accounting staff, to provide the ongoing accounting support, training, and forward-looking financial analysis necessary to effectively run your company, analyze operations, and guide business decisions for the long term.

Have questions about our process? Contact us today for a free consultation.

Cost Control Strategies, Cost Control Challenges

The modern business landscape has historically been more concerned with innovation and disruption than with cost control solutions. But the fact remains that to run an efficient business and to increase profits, optimize budgets, and ensure long-term financial sustainability, cost control solutions are key.

A common mistake management teams make is lumping cost controls in with machete-wielding cost-cutting initiatives. Cost-cutting initiatives and cost-control solutions are not one and the same. Effective cost control solutions are proactive and support innovation by recognizing inefficiencies and finding solutions before they drain resources. Cost-cutting initiatives are often reactive and look to remove programs, departments, or other costs because of an urgent need to reduce spending.

Cost control is, in fact, an integral part of managing any mid-sized business. As the economy continues to fluctuate, businesses must be diligent in ensuring that their spending is under control and that their finances are in order. It is important to understand how to effectively manage costs so that businesses can maximize profits and remain competitive. Additionally, by recognizing areas in which cost control solutions can be implemented more money can be made available for innovative initiatives that might have otherwise gone unrealized due to lack of dedicated funding.

The first step in a cost control initiative is to identify areas of spending that are not essential. This can be done by evaluating the budget of each department, and determining which costs are necessary and which are not. By eliminating non-essential costs, businesses can save money and focus on more productive products, services or research and development. It is important to create a strategic budget that includes all areas of business operations, department by department. A strategic budget that is regularly referenced and revised helps businesses make sure they are on track to meet revenue goals and spending metrics. 

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Common Cost Control Challenges

  1. Confusing cost control functions with day-to-day accounting: A business’ accounting department reports activities, while cost control initiatives are focused on analyzing spending, evaluating departmental performance, and actively seeking ways to be more efficient.  To make business decisions based on good data you need accurate, relevant and timely financials.
  2. Management teams lumping annual strategic budgets in with cost control findings: Cost control recommendations and findings are based on real-time numbers, whereas a strategic budget is set in advance. When a business’ budget and real-time cost control findings have discrepancies there should be a red flag that your CFO or high-level finance business advisor can dig into to find sustainable solutions. 
  3. Access to data: Financial data can come from outside vendors, and 3rd party systems as well as from internal reporting. Not all of that data will be reported the same way leaving room for misinterpretation. Having expert finance and accounting leadership can help keep the data clear and actionable. Finding a single source of truth to use to compare budget and actual is essential to making smart business decisions.
  4. Cash, accrual, and GAAP: With cash basis accounting, expenses are recorded only when cash is exchanged, which can delay the recognition of an expense. Under accrual basis accounting, expenses are recorded when goods are exchanged, regardless of when cash is exchanged, which means that the expense is recognized immediately. This can give managers a more immediate and accurate picture of the company’s financial performance and enable them to better manage costs.
  5. Scope creep: Without leadership in each department, businesses can run over budget without realizing it.  Regular audits of all departments and project performances can help cost control measures be proactive instead of reactive.

Cost control as a tool for innovation and growth

Cost Control Strategies

Collecting costs in a consolidated format allows organizations to make more accurate and informed projections, know where they can minimize costs, and identify areas of overspending. 

For businesses whose complexity requires multiple technologies, teams, and vendors, having cost control solutions is essential to staying profitable and ensuring that the data that is reported in the month-end close accurately reflects the costs of ongoing initiatives.

Look at your vendor relationships: Cost control and vendor management often go hand-in-hand to streamline contract negotiations, work to build sustainable relationships with vendors and customers/clients, and create partnerships that benefit both businesses.

Audit your technology contracts: Technology is always evolving and that contract you signed 5 years ago has likely crept up in price every year since you got the “new customer special”.  While changing technologies can be painful, it can cut unnecessary costs, lower inefficiencies in time and process, and potentially help you rethink the data and usage that the technology addresses coming up with a better solution for your business.

Evaluate your benefits: Does your team love Friday happy hour? How about the health coverage you offer? Are your employees taking advantage of your 401K matching? Think about what matters to the people for whom you provide benefits and you may find there are places to cut costs while actually offering the benefits your team wants. 

The goal of cost control is to give your company a powerful framework that’s designed to improve visibility and keep you in control of your costs so you can invest in the initiatives that drive revenue and innovation.

Cost Management vs. Cost Control

The terms “cost management” and “cost control” are used interchangeably. Both address processes from budget planning, cost estimation, financing, and funding to managing projects during execution. We think of cost controls as proactive and cost management as reactive or rather cost controls are implemented company-wide whereas cost management is geared more to specific projects or initiatives that are overseen by a project manager.

Cost Control

When talking about cost controls, business owners first establish a budget and then measure the variance between it and the actual cost. This variance analysis allows the finance, accounting, and department project managers to alert leadership to spikes and address issues before costs get out of control.

Cost Management

Cost management is an on-the-job process of tracking and reporting costs throughout a project or initiative.  Cost management will be the job of a project manager and often applies to industries with estimates, inventory, and measurable goods and expenses throughout the scope of work. Managing the costs of any engagement, whatever the industry, requires understanding utilization rates, overhead costs, and numbers behind your profitability metrics.

Creating a Culture where cost controls are rewarded

How can you create a culture where cost controls are rewarded in your company? Your greatest asset in the quest for better and more sustainable cost controls in your company might just be your employees.  But how do you incentivize people to be their own watchdogs?  There’s ample evidence for reward and game-based incentivizations for all kinds of activities.  Why not use some of those strategies to get your whole company to help create a cost control culture.

  1. Create a cost control incentive program. Offer rewards for employees who find ways to reduce costs or save money.
  1. Make cost control a priority. Make it clear that cost control is an important part of the company’s culture and that it should be taken seriously.
  1. Provide training. Educate employees on cost control and how to identify potential cost savings opportunities.
  1. Hold regular meetings to discuss cost control. Make cost control a regular discussion topic during team meetings or other company gatherings.
  1. Recognize and reward cost control successes. Publicly recognize employees who have successfully identified and implemented cost savings initiatives.
  1. Create a cost control policy. Establish a company wide policy on cost control and ensure that all employees understand and adhere to it.
  2. Gamify your cost controls. Grant weekly power-ups, badges, and rewards, create avatars on a digital or physical display to show the rest of the company who is “winning” in the game of cost controls. If it’s fun, you’ll get more buy-in.