Anytime you hear someone from the other room say, “Woops” you are just left to imagine in horror what actually went wrong.
Sometimes having the occasional “woops” isn’t really a big deal. But in a business, any woops can be a frightening, and several small ones can add up into a real problem.
As we were researching the environment of small and solo law firms, we did several interviews. Some were face to face in the law offices, many were over the phone and some were through email exchanges.
In one of our face to face interviews we sat in the firm with an attorney and his long-time assistant. This attorney knew his time-keeping, billing and bookkeeping solution wasn’t the best, but was sort of proud of the way he had patched it together over the years. (His assistant was all ears at the idea of something new!)
The attorney pulled out several manila folders. The folders were packed with invoices, receipts and a host of other pieces of paperwork that seemed to have no organization.
As he flipped through the folders explaining how his firm managed everything, something caught the eye of this experienced attorney.
He looked at his assistant. Then back to the paper.
“Looks like we never got paid for this,” he said calmly.
“How much was it for?” the assistant asked.
“And how old is it.”
“Well this is from November…so…6 months?”
Cash is King
One of our mentors here at Kahuna Accounting is financial guru Philip Campbell, the author of Never Run Out of Cash.
Campbell has been advising and performing CFO functions for small and large businesses for decades and his biggest tip for any entrepreneur is to know exactly what is happening with the cash.
“It’s absolutely critical that you know what your current cash balance is. You should be able to put your hands on this number whenever you need it,” Campbell says.
The reason why he’s so adamant about knowing about cash is pretty simple. Without cash, there is no business.
Cash is what keeps everything alive. And there is a major difference between having someone agree to pay you and actually seeing the cash come into your bank.
People aren’t purposely trying not to pay you (hopefully), but many times will forget and need a reminder. What do you have in place to make sure you know who still owes you?
How can you contact them to make sure you are paid what you are owed?
Maybe you’ve thrown together your own system for tracking receivables, but how do you know if anything is slipping through the cracks like the example above?
The Dashboard Check
With the right accounting system, in this example Xero, you can see at a glance on your dashboard the “Money coming in” which is the money you are owed.
It looks like this:
When you see “Overdue Invoices” You can click and find out who owes you and what it’s for. If you are integrating Xero with Clio, Freshbooks or your billing system, your invoices will come right into this module of the dashboard.
When you click to see what invoices still need to be paid you are taken to this screen:
Now you can see who owes you money, and how long ago you had sent them an invoice. You can then decide if it’s been too long, now you can send them a reminder.
You can even do that out of Xero by clicking on the company and having an automatically generated email ready to send.
Sealing the Cracks
You need to get paid. And with all the different hats you are wearing, it’s very easy to miss out on payments because you aren’t able to keep up with all the administration and organization.
In the most practical sense, a better system will help you seal up the cracks and fix problems that are slowly hurting you – some of which you are aware of – and some of which you’ve probably never realized are happening.
When technology integrates and professionals are around to see if anything looks funny, you have a much greater chance of being sure nothing is being missed.
It may seem like a small fix, but $600 that should have been paid 6 months ago can make a big difference.
And who knows how many other “woopses” are out there.
This is an excerpt from Kahuna Accounting’s free whitepaper, Supercharge and Simplify Your Back Office