Outgrowing your finance function is a normal part of the growth of a business. When you start out, you make do with an accountancy firm who file the required returns, whilst someone else keeps the day to day books as best as they can before the accountant swoops in and tidies things up at year end.
As the business scales, your finance function requirements become more complex and the risk of getting it wrong increases. You have suppliers that need paying, customers that need to to pay you on time, and you need to have a clear view of profitability and cashflow across multiple parts of the business.
In-house or Outsource?
Trying to solve the problem with people who are not qualified to do the job, or who lack the industry experience leads to more frustration, and you end up falling further behind.
Bringing someone qualified and experienced in-house is expensive. They probably won’t understand the latest technology and they might spend half their time twiddling their thumbs because there is not enough work for them to do.
Most accountancy firms don’t provide a finance function, they provide a compliance function. They exist to keep you legal – managing your statutory obligations and advising on tax savings.
Xero is not enough
Xero is a fantastic tool. It provides accountants and bookkeepers with remote access to an accounting system so that they can work on processing data and compiling reports form anywhere in the world with an internet connection. Features like its live bank feeds and expense capture through Receipt Bank have massively streamlined the data collection process. Repeating invoices reduce the reliance on people to do robotic work, automatic email reminders create a consistent credit control system and funding applications can be done in minutes, again all remotely.
You can run payroll, file your VAT returns, prepare your management accounts and budget, all within Xero.
But to think that technology ever completely solves the problem would be naive and and will lead to frustration as you watch your finance function fall further and further behind.
Panoramic Accounting
Panoramic Accounting is a complete shift in the way that accounting is managed in a business. It achieves accurate and timely financial data throughout the accounting year so that year end becomes simple. More importantly, it gives live visibility of what’s happening in your business and where you need to take action.
Imagine being made aware every time spend on a supplier has changed – either up or down. Imagine being alerted to a discrepancy in the VAT being claimed/not claimed from a particular supplier. Imagine being told that office costs have spiked in a particular period.
If you spent all your life trawling through all hundreds or thousands of transactions in your accounting system, you MIGHT spot some of these things, if you’re extremely diligent and have the time!
Panoramic Accounting does the work of hundreds of hours of human time in seco
nds by looking for the patterns, discrepancies and warning signs in your accounts and brings them right to the surface ready to be addressed.
As well as cleaning up your accounting data, Panoramic Accounting informs you of your upcoming tax bills so you never miss a VAT, PAYE, Corporation Tax or Personal Tax payment (that’s a lot of tax payments isn’t it!). It will also help you to make sure you have enough cash aside to meet those payments without losing sleep over it.
You’ll also be alerted to any issues with debtors or creditors. Have you got debts owed to you that are long overdue and need to be escalated? Are you in danger of letting down suppliers? Sometimes it’s just a clean up exercise because something has been recorded incorrectly.
Automatic Bank Feeds
Back to Xero – Bank feeds are an amazing innovation. Not so long ago you’d need to wait until your bank statements arrive in the post at the end of the month to update your accounts with transactions in and out. Online banking changed that by allowing you to see transactions live but you’d still have to re-type them into your accounting system.
Now with bank feeds, the transactions appear in your accounting system automatically and machine learning kicks in by remembering the patterns and suggesting how transactions should be coded. But all of this is relying on the bank feeds working in the first place. As amazing as this technology is, it isn’t flawless. There are many factors affecting the stability of the bank feed. The bank could change their code or their API. A small shift in how their technology works can throw out the feed. Feeds can drop completely as a result or arguably worse, appear to be working but some transactions are missing, leading to a false picture.
Panoramic Accounting highlights issues with bank feeds so you can be 100% sure that what you’re seeing is the true financial position of your business.
Another important element of Panoramic Accounting is a review of your directors loan account position. Are you in credit or debt to the company? By how much? And what can you do about it? What are your earnings to date from salary and dividends and should you put more into your pension?
When you drive a car you don’t want to wait until you arrive at your destination to find out that you were driving above the speed limit, taking the long route and low on fuel. They are all things that are under your control and you can do something very simple about all of them, but only if you know about it.
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Your Financial Dashboard
Panoramic Accounting is your financial dashboard alerting you to the weaknesses in your accounting system and your Cashflow. It takes away the guesswork and puts you in control of your numbers so that you can make better decisions on your finances.
Here’s an example of the difference that Panoramic Accounting made to a client of MAP:
- Bank feeds weren’t set up properly. The current account used the Yodlee feed which is slow and often drops out. We set up a direct feed to create reliable daily updates. The reserve account and credit card didn’t have feeds at all. We set those up as live feeds so that all transactions could be reconcile across all accounts. They now have a live view of Cashflow.
- Invoices were being created manually, even those that were for consistent monthly retainers. We set up auto-repeating invoices so that the invoice only needed to be set up once and it would automatically repeat every month with the right description, amount and account & VAT code. This saved the account managers time and reduced human error risk.
- Fixed assets weren’t being registered which meant that they couldn’t couldn’t run a report of all the equipment, computers, furniture etc owned by the business. As a result, they didn’t know whether the figure on the balance sheet was accurate.
- They received surprise tax demands from HMRC. They would often be unaware of upcoming tax payments due until HMRC sent them a letter. They spent large amount of time with their accountant and HMRC trying to understand and current their liabilities.
- Purchase invoices were being re-keyed into their accounting system for every transaction. We implemented a process involving Receipt Bank to reduce human input and streamline accurate purchase invoice capture.
- Their expenses system was manual, requiring each employee to hand an expense form to the financial controller at month end. We implemented the Xero Touch mobile app and trained the staff to submit expense claims on the go.
- They weren’t tracking the revenue generated on each of their services/products. We set up service lines in Xero so that they could easily code transactions to the relevant service/product and run reports to track progress.
- They didn’t have a system for credit control, meaning it was reliant on the financial controller to chase for payment after invoices had become overdue. We implemented a system for credit control including technology to automatically send email reminders to any customers that had failed to settle an invoice on time.
- They weren’t reporting profitability of each department in the business so they don’t know where the profit leaks an opportunities existed. They now have automated and insightful departmental reports every month.
- Transactions were being posted to the wrong account code, meaning they couldn’t make sense of their spending patterns because the data wasn’t consistent. Their data is now being reliably posted to the correct codes consistently, giving them patterns that they can analyse to make cost savings and ask further questions.
- They weren’t claiming all of the VAT they should have been on their expenses, meaning they were paying more VAT than they should have. They are now alerted to any signs that VAT is being missed so they recover it quickly and only pay what they need to.
- They had a bloated P&L with overhead categories for everything, making it very difficult to digest and analyse the information. They now have a summarised, insightful P&L that makes analyses fast and effective so they. Can make quick and informed decisions.
Technology + Professionals
With the technology that’s now available to work with Xero, you can access the kind of information that was previously available only to big companies with expensive ERP systems.
Combine that technology with professionals who know how to make the best use of it and ask the right questions and your agency becomes much more profitable and predictable.
To get a panoramic view of your finances, arrange a discovery call and we’ll arrange a time to meet.
