Accountancy firms, much like any other business entity, are not immune to the financial challenges that arise, especially during economic downturns. However, they possess a unique set of tools and insights that can serve as a lifeline during turbulent financial times. When we talk about "tools" here, we're not referring to calculators and spreadsheets; we mean the invaluable expertise and knowledge of the accountants who run these firms. Of course, we jest, as not all accountants are tools, though some might have you thinking otherwise!

Accountants, by nature of their profession, should have a good grasp of business principles since they are the guiding lights for their clients in financial matters. Yet, paradoxically, some of the most brilliant minds in accounting are among the worst businesspeople when it comes to managing their own firms.

So, if you're an accountant, here's the crucial question: Do you understand how to run a business effectively, considering that you assist your clients in doing exactly that?

In this journey through the world of accountancy, we delve into the financial strategies and practices that can help you steer your firm through turbulent waters. It all begins with a rigorous assessment of your firm's current financial standing, a step you should take periodically to stay ahead of any potential challenges. For some, this evaluation might be a daily ritual, especially when starting with limited working capital, but as you gain confidence and stability, you can transition to weekly or monthly assessments.

The choice of accounting software is a vital consideration, and legacy systems may sometimes dictate your options. In our case, QuickBooks Online has been a reliable ally, tailored to our unique practices. Admittedly, transitioning to a different platform like Xero could be a Herculean task at this point.

Yet, beyond the software, what truly matters are the actions we take, the three pillars of our financial management philosophy:

1. Daily Reconciliation: This practice ensures we always have a finger on our approximate cash position.

2. Bi-weekly Debtors Follow-up: Keeping cash flowing in through timely debtor management.

3. Monthly Report Pack Review: A formal evaluation of cash flows, allowing us to strategize effectively.

While the first two practices are self-explanatory, the monthly report pack often raises questions. Our report pack, automatically generated by QuickBooks on the second business day of each month, comprises critical insights:

YTD Cash P&L Comparisons: Tracking our financial performance compared to the previous year, both in dollar terms and percentages.

Invoices Raised Year to Date: A snapshot of our invoicing activity.

Current Debtor List: Monitoring the status of outstanding payments, with less than 1% of this year's invoices currently overdue.

Balance Sheet: Providing a comprehensive overview of our financial position.

Statement of Cashflow: Shedding light on the movement of cash within the business.

To keep myself accountable, I accompany this report pack with a personal note that serves as a reminder to take action:

"Hey Future Kane, Attached are the management reports for Active Outsourcing. You should look at these and make strategic decisions. Don't be a tool and ignore these. From Historic Kane."

While there are undoubtedly other advanced reporting tools and metrics available, my focus remains on these reports, which have consistently served us well throughout our journey, including our days at Accountancy Online.

So why the relentless emphasis on cash management? The answer is simple, but I'll delve deeper into it next time.

I'm Kane Munro, and if you'd like to explore more aspects of my accountancy journey or have specific topics you'd like me to cover, feel free to reach out via DM, email, or drop a comment wherever you've encountered this video. I'm always eager to connect and share insights into the fascinating world of accountancy.

#Accountancy #FinancialManagement #CashFlowManagement #BusinessInsights #Outsourcing #SMSFOutsourcing #KaneMunro