In a piece last week for Forbes, writer Tom Taulli interviewed Rob Nixon, who is the co-founder and CEO of Panalitix, a firm that helps accountants run their businesses. Nixon offered advice, from an accounting perspective, for entrepreneurs who are at the helm of fast-growing businesses.
Unfortunately, there aren’t many shortcuts, if any at all, with accounting. It’s one of the practices for which entrepreneurs must be familiar (or, if the entrepreneurs themselves aren’t familiar enough, they at least have to put someone who they deeply trust to be in charge of this business area.) Nixon’s tips, however, do reveal ways that business owners can at least streamline their accounting practices to make the tracking a lot more seamless.
For example, Nixon suggests using cloud-based accounting software so that the data you’re researching is current and up to date and not, as Nixon puts it, “redundant.”
Additionally, cloud-based accounting software also come equipped with the use of dashboards that give you an at-a-glance overview of certain metrics. As for which metrics you can see, well, that’s up to you. “A key advantage of a cloud accounting system is automated dashboards, which can be tailored to your business,” writes Taulli.
An automated dashboard will also help you see which clients are more profitable than others and, as most entrepreneurs know, profitability is always the thing to watch and to keep a close eye on.
But profitability isn’t a zero-sum game. It’s essential to look at the small parts that make up the larger whole. To that end, Nixon touts the importance of surveying your revenue breakdown as an entrepreneur. Says Nixon:
“You can multiply the customer count by the transaction frequency and then by the average price per transaction,” he said. “A 10% improvement in each of the three areas yields a 33.1% improvement in revenue. You can find the source numbers by dividing the number of invoices into revenue and than the number of invoices into the customer count. Real-time accounting systems can give you this data of exactly what your average invoice value is and the frequency of purchasing. Once you understand the numbers, you can set some goals and apply tactics to improve the numbers. What you can measure, you can manage.”