Why your business needs Real

Why your business needs Real Time Accounting

Businesses today are operating in a different and much fasterpaced world compared to only five years ago. The need to properly manage cash flow, to understand profitability, and to plan ahead from a tax standpoint are absolutely critical...

@polarisbook

Joe Serrone, Accountant, Polaris

Tax & Accounting

Joe Serrone is an Accountant, Tax Strategist and, Xero Certified Advisor with Polaris Tax & Accounting, a progressive Accounting Firm offering real time cloud accounting and proactive tax services to small businesses across the United States.

Xero, with the use of Bank

Feeds and Bank Rules can help streamline the process of updating financials on a daily basis, in this article we explore some of the major benefits of updating accounting information in Real Time and how you can use Xero, and various add-on Apps to provide you with a real time understanding of your business finances.

Managing cash flow

Keeping an eye on everyday costs is critical for your business survival, understanding if you have sufficient cash to meet payroll or make an important purchase throughout the month is vital for your business success. Without updating financial records on a daily basis, you cannot understand the true cash flow in your business and as a result, you are making financial decision without an understanding how these decisions will impact your overall business cash situation. In Xero, the century old Cash Flow Statement is called the Cash Summary Report, and provides a much clearer and comprehensive view of the inflows and outflows of cash than QuickBooks does. In fact, our clients find that Xero’s Cash Summary Report is much easier to read and analyze compared to its

QuickBooks counterpart. Float is a great Xero add-on App that we often suggest to our clients. Not only does Float seamlessly connect with Xero, but most importantly Float provides a powerful projection of the business cash flow. Being able to predict with accuracy what your cash will look like thirty, sixty or even ninety days out is extremely important for businesses that are very sensitive to cash flow in order to meet their short-term obligations.

Understand profitability

Many entrepreneurs look at the Profit & Loss Report very closely in order to understand how their business is performing, including their sales trends, what expenses they incurred, and how these affect their bottom line. The Profit & Loss Report benefits greatly from daily accounting updates because it allows you to see at any point during the month how the business is progressing, and even providing great comparison opportunities with prior months in order to see if you are doing better or worse. Xero has a very powerful Profit & Loss Report that allows full customization of the report as well a great ability to compare current financials with historical performance. Fathom is another great Xero addon App for reporting purposes that

we highly suggest to our clients. Fathom seamlessly connects with Xero and provides a wealth of visual reports that help bring raw and boring financials to life with stunning graphical representation of the business performance.

Maximizing the accountant’s role

With real time accounting, we as accountants become better advisors to our clients, we can provide advice for our clients based on fresh and updated information, and in many cases even spot and avoid issues early on rather than wait until they snowball into huge problems for our business clients. Here is one example: by updating one of our client’s accounting records on a daily basis we noticed and proactively flagged a series of suspicious transactions that were fraudulent in nature. This reduced our client risk exposure to additional fraudulent activities and possibly prevented their identity from being compromised. With Xero, updating financials on a daily basis is easy, efficient, and allows both accountants and clients to see real time updated business information.

Plan ahead for tax season

One of the biggest challenges and stressors for most entrepreneurs is properly preparing for tax season before 15th April. It is not uncommon for us to meet with business owners that lament of being blindsided with huge tax bills because of not having received proactive tax advice during the year. In order not only to prepare for tax season before 15th April but most of all to find ways to save money on your tax bill, you need a plan and be able to work with your accountant to proactively implement tax-saving strategies during the year. In order to do that you need real time accounting information that is continuously updated. With financial records that are only updated on a monthly, or even worse on a quarterly basis, you simply do not have the critical information you need in order to implement proactive tax saving ideas before the end of the year.

Real time accounting is crucial for your business for many different reasons, not only to help you understand how your business is performing, and managing cash flow, but also to help you reduce your tax liability and avoid the dreaded tax surprise. With Xero and the use of various add-on Apps you can easily have updated financial information that will allow you to make the best business decisions, and help your accountant better collaborate and real proactive tax and advisory services to your growing business.

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