I have spoken many times about the advantages of real-time, cloud accounting solutions like Xero (in my opinion the best option for small business owners in the UK). Today’s tools for measuring, interrogating and using business data are so far advanced from those available just a few years ago, but the philosophy of looking forward is as old as any strategy in business.
Learn from the past and find success in the future
Looking at how you performed previously is critical to what you do next. You can repeat and strengthen the action that created momentum and success, and you can examine, improve or change any mistakes and failed actions. The problem, in accounting, has historically been that you are restricted to figures that are years old and quite often irrelevant to the current day. The very lessons that you are looking to learn from come far too late to be of any use.
Today, there is no excuse for any business owner not knowing what is going on in their business finances ‘today’. You can access real-time profit and loss, monthly management accounts, up to date tax liabilities and variance analysis at the touch of a button. Knowledge gives you access to power and the power to access that knowledge is yours…
Would you drive home in reverse?
Cars are designed to be driven forward. The front windscreen is bigger than the rear, the seats face the front, there are more forward gears than reverse, the steering wheel, pedals and control panel are positioned in front of the driver, and there are mirrors appropriately placed for a quick glance back. Your business is just the same. You should be driving forward.
Before starting out on the journey you can take the time to check the route, fuel up, plan stops, set a destination and make sure you’ve checked the vehicle – but you drive forward. Along the way you might check behind you in the mirrors, look out of the side windows, slow down or speed up; but you always move forward in real-time. You cannot get to where you want to be by looking at last year’s journey – too much will have changed around you by then.
If your business has an in-house accounts team then the least that you should expect (providing you use Xero) is a monthly variance analysis. For our customers, we have up to 20 different accounting ratios that we analyse to help our customers move forward. At the beginning of the year, each client can set out their goals and then track their performance month-to-month to measure their progress. Those occasional looks in the mirror give them everything that they need to know to keep moving safely ahead.
Which direction are you headed in?
In my own business, I am very clear that its purpose is to create an income for my family and me. It is there to pay my mortgage and household bills, enable me to have holidays and the things I enjoy, and it lets me put a little aside to help secure my family’s future. I am fortunate enough to be able to help my team achieve their own similar lifestyle goals along the way and relish the positive effect that I have on my client’s lives; but essentially, I have my own targets to achieve.
My advice to any business owner would be to get a similar forward vision for themselves. Then set about checking each and every day, in real time, how well their business is delivering that vision. Cloud accounting (Xero in particular) gives you the power to do that.