Accounting is an indispensable tool for entrepreneurs to manage their business. The data provided by competent accounting service will help the company to develop and increase their income. A very interesting case that illustrates this is the entrepreneur Phil Knight, who founded Nike. As Tom Taulli says in his article on Forbes, Knight worked full-time as a Certified Public Accountant (CPA) in his early career to make ends meet.
As Taulli pointed out in his article, the knowledge that Knight got from this experience was priceless. Just try to imagine how challenging it might be to manage a fast-growing company…
But what should successful entrepreneurs take into account when it comes to accounting?
To answer this question, Taulli talked to Rob Nixon, CEO and co-founder of Panalitix, who is the key speaker at “Tomorrow’s Practice” – Kreston’s 45th Annual World Conference to be held in London this month. Rob gives us three tips about what entrepreneurs need to know about accounting.
1 – The Cloud – ‘If you are relying on ‘desktop’ accounting software,” according to Rob, “you are looking at redundant data. To get real-time data you need to switch your accounting software to the cloud. You can then access richer, more accurate data on any device.’ He also mentioned some accounting systems that are affordable such as QuickBooks and Xero.
2 – Dashboard – according to Rob, ‘you need to have a consolidated view of the main operating metrics pertinent to your business. For example, if inventory is important, then make sure you track the amounts and timing of the purchases. This can be extremely helpful in avoiding problems with your cash flows. (…) Once you understand the numbers, you can set some goals and apply tactics to improve the numbers. What you can measure, you can manage.’
3 – The whole picture – you can get more from a cloud-based accounting system. Once all your data is centralized, you can connect it to other systems and get a bigger picture of your business, which is excellent. The most information you have, the better.
Identifying key performance indicators, having real-time visibility and insight on the implications for the business is vital for any entrepreneur. Using a qualified accountant that is familiar with cloud accounting and advising growing businesses will enhance this process, giving the entrepreneur the information they need in an understandable format with the added input from their experience of working with a number of businesses.
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Thinking about the risks involved in business has become an essential part of an enterprise’s strategy. Risk management enables organisations to identify, assess, measure, treat, monitor and review its risks and objectives and is crucial in the current global economic environment,
The risk landscape for businesses can change rapidly and a robust process to minimise these risks, overseen by the Board is vital to an organisation so risks can be evaluated, managed and mitigated.
Is there any formula to identify enterprise risks? According to US accounting firm CBIZ, there are three questions that every Board should ask which could help assess the potential dangers to an organisation.
1. How is our organisation identifying risks across the enterprise?
Work on strategies to find out more about the risks within the enterprise – facilitate a brainstorming session with key stakeholders; conduct a SWOT Analysis (strength, weaknesses, opportunities and threats), use TI resources to scan for potential digital threats against your organisation and hire a third party to review your operations.
2. What emerging risks are we currently aware of?
Already in 2016, we have seen – cyber-related risks and attacks; rules and regulations in foreign markets; growth and volatility in the global economy; talent management and succession planning; and risks associated with third-party vendor relationships.
3. Does our existing reporting structure meet industry standards?
Risk reporting should be used to illustrate success, failure and opportunities to key stakeholders.
Companies who manage their risks are better prepared to face unfavorable economic scenarios and other difficulties and may also see benefits internally, such as the improvement of relationships between those in each part of the organisation.
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When a business does not achieve its expected results, it may be time to think about implementing change. In these situations, companies evaluate the statistics, the cash flow, listen to the customers and take a closer look at everything from the day to day operation of the business to its corporate culture. It is then very common to also ask when is the right time to make any ambitious changes.
Dan Cable, Professor of Organisational Behaviour at London Business School, has written an interesting article in which he considers the ideal time to change. Cable suggests that, prior to change, the following questions should be asked:
1 – How big is the change? He believes “the basis of change is small in human behavior, rather than grand organisational changes.”
2 – How might your workforce respond? This would be difficult to predict. The labour force is now more connected, informed, educated and cynical.
3 – How will you create joined-up change? It is necessary for differing perspectives of change to be aligned to avoid confusion and to be beneficial to the organisation.
4 – How will you lead change? Change can be conducted in different ways and ideas can come from different levels within the company, from the bottom up.
5 – How will you reframe change? The word “change” is not always a good one and leaders should be able to encourage their employees to face any difficulties that may arise.
6 – Which “change stories” will you share? According to Cable, successful “change stories” in other companies are always helpful to encourage and give hope in times of change.
7 – Are people central to your change strategy? If people work today, looking for a better tomorrow, organisations certainly function better.
As you can see, a leading figure is fundamental in the change process. Before thinking about change, the ideal is that companies are in a constant process of change, rather than seeing themselves forced into a process of change. Cable speaks of change as though business leaders are implementing change projects which have clearly defined conclusions. Today’s leaders are typically overseeing continuous change and success in organisations, and often leaders do not need to ask these questions. Cable is right when he speaks of change being the group activity often led from the bottom up – the leader’s role is to ensure that the culture of their organisations means constant change is embraced by all.
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The Financial Times recently reported the dispute in the courts between the UK supermarket chain Sainsbury’s and MasterCard. The Competition and Appeal Tribunal concluded that MasterCard had broken EU and UK competition laws on interchange fees, and MasterCard will have to pay the grocery chain £ 68.5 million in damages.
Sainsbury’s argued that MasterCard’s default interchange fees, charged on a per transaction basis – were anti-competitive and excessive and, according to the ruling, the card fees had harmful effects for Sainsbury’s business. As the supermarket chain is required to accept cards from all issuers, it’s impossible not to deal with card companies such as MasterCard, which currently has 2.3 billion cardholders worldwide.
The decision against MasterCard paves the way for a series of court cases from other retailers who have also been affected by interchange fees. It may lead to card companies being forced to change their policies about this issue. There will undoubtedly need to be a strengthening of the regulatory environment and a far greater transparency of charging structures.
Alternative payment technologies
Moreover, this “economic empire” of business card providers could trigger an increased demand for alternative payment technologies and MasterCard’s lawsuit loss could spur us to move towards a cashless/chequeless and even a cardless society that solely uses mobile devices for financial transactions.
Credit and debit cards have reigned over virtual payments, and with the launch of mobile payment methods such as Apple Pay, Samsung Pay, and Android Pay, along with apps, a range of options where cash and cards are becoming unnecessary has been created. All of these changes are not something about to happen, they are already happening.
So, are you prepared for the way we will make payments in the future?
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