Tech-Savvy Accounting

The Importance of a Tech-Savvy Accounting Firm

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Many businesses are catching on to the upsides of working with a tech-savvy accounting firm. 

In fact, an astonishing 78% of business owners say they would prefer to work with a tech-savvy accountant. Why? 

Tech-savvy accounting firms, like NOVAA, offer a variety of benefits traditional firms cannot provide. They bring efficiency, accuracy, and smoother processes to your financial systems through in-depth knowledge of third-party applications and financial tools. 

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With a tech-savvy accountant, your business will be in the right position to reach its financial goals. 

How’s that? 

Below we will answer a few questions about tech-savvy accounting firms and explain how your business will benefit from one. 

What Does a Tech-Savvy Accounting Firm Look Like?

As the name implies, a tech-savvy accounting firm uses the most up-to-date technology to leverage your financial systems and help your business reach its goals. 

There are plenty of tools and third-party applications that can be used to improve your financial system and a tech-savvy accountant will have a pulse on the best choice for your business. 

They’ll also learn and implement the tools so you don’t have to take the time to do so. 

While many tech-savvy accountants have a set of tools they prefer, they are eager to find and learn the next best thing to help move your business forward. 

Their pulse on technology extends far beyond financial management, as well. They have the ability to compile data across all areas of your business, including: 

  • Customer Relation Management (CRM)
  • Point of Sales Systems (POS)
  • Sales and Marketing Systems 

With a culmination of all of this data and their financial expertise, you’ll have everything you need to make the right decisions. 

Overall, a tech-savvy accounting firm, like NOVAA, can be a propeller for your business to help it reach its financial goals. 

What are the Benefits of Working with a Tech-Savvy Accounting Firm?

As opposed to a traditional firm, you’ll notice tech-savvy firms look more towards the future, prioritize efficiency, and ease your financial management role. 

Let’s dive into the specific benefits of working with a tech-savvy accounting firm.

A Tech Stack Built for Your Business

Automation is the key to building a financial system centered around technology. However, the tools you choose and how those tools work together is the deciding factor between whether or not your automation helps your business achieve its goals. 

One of the first things a tech-savvy accountant will do to improve your financial system is build a tech stack. A tech stack is a combination of all of the automation tools that work together to electronically manage your finances. 

This includes everything, like: 

A well-built tech stack can completely eliminate manual work, produce up-to-date data, and simplify your day-to-day management responsibilities.

Efficiency 

With your new tech stack and tech-savvy accountant, you’ll see noticeable improvements in efficiency. 

As mentioned, there will be little to no manual work required to manage your finances. All of your data will be up-to-date and accessible from anywhere which allows your accountant to work quickly, generate reports, spot trends, and so much more with just a few clicks of a button. 

Fewer Errors

To no one’s fault, manual work is prone to errors. At the very least, these errors are time-consuming and their worst are very costly.  

Fewer (to almost zero) errors are a byproduct of working with a tech-savvy accountant. Again, automation is the key to this benefit. 

Applications can transfer one data entry to multiple platforms seamlessly. There is no looking up information and duplicating records to gain a better grasp of your numbers. Everything is calculated for you. 

This also means your accountant can dig deeper into your numbers without guessing if the data is accurate. 

Accessibility 

Working with automated tools also leads to improved accessibility, not just for your accountant but also for you. 

While your tech-savvy accountant will obviously have access to your tools, so will you. This means you can access your accounts from anywhere to gain insight into your numbers. 

Sharing files, emails, and lost papers become a thing of the past. All of the financial information you and your accountant need to manage your finances and run your business will be available 24/7, from everywhere.

Future-Focused Strategies

With the benefits of efficiency, accuracy, and accessibility your accountant will have everything they need to focus on the future. 

They will be able to compile data to create strategies that will move your business forward. This also includes a detailed budget and forecasts. 

Together, you’ll be able to use these to create future-focused strategies. 

Easier Collaboration

The automated tools your tech-savvy accountant implements will lead to improved collaboration between your internal and external teams. 

All of your data and documents will be centralized and there will be no need for emailing back and forth or checking to see if the information is up-to-date before moving forward. You and your accountant can have confidence in the accuracy of your data and your workflow processes will improve. 

You will both always be on the same page. 

Less Work For You

Less work for you is a benefit of working with any accountant, not just a tech-savvy one. 

However, when your accountant is tech-savvy, your systems will be automated (as we mentioned) and you will not be required to manually update data or send information to your accountant. 

They will have everything they need and will: 

  • Create reports
  • Build a budget
  • Create forecasts
  • Meet deadlines
  • Spot negative trends and suggest improvements
  • Create short and long-term strategies for meeting your goals

All of the financial management tasks that take your time and brain power will go to your tech-savvy accountant. 

Improve Security 

When you or your accountant rely on manual management, security becomes a huge risk. Files can get lost, deleted, accessed by unauthorized viewers, or corrupted. All of these can be costly for your business and lead to plenty of issues down the road.

With technology infused into your financial system, your work will automatically be saved and stored. Only the people you’ve allowed permission will have access and your information will be safe. 

Additionally, these tools are often heavily encrypted so the potential for hacking is near impossible. 

With the help of a tech-savvy accountant, you can rest easy knowing your essential information is safe and secure. 

Searching for a Tech-Savvy Accounting Firm?

Technology has allowed accountants to do their job better, and in doing so, provide better services to their clients. 

Partnering with a tech-savvy accounting firm is one of the best ways to position your business for long-term success.

At NOVAA, we pride ourselves on being a tech-savvy accounting firm. We take time to learn your business and then get to work finding ways to improve your finances through efficiency, accuracy, and smoother processes.

We start with building a tech stack and then begin suggesting and implementing strategies – based on your historical data and our experience – that focus on helping your business reach its goals. 

If you’re looking for a tech-savvy accounting firm, contact NOVAA today! We’d love to help your business every step of the way!

strategic financial partner

What Does a Strategic Financial Partner Look Like?

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A strategic financial partner plans to put an emphasis on growth and long-term vision within your finance functions. It’s a way of building systems and processes that focus on the future. 

For many entrepreneurs, focusing on strategic financial planning leads to a successful business. However, because it requires a lot of strategizing and a strong understanding of your finances, many turns to a strategic financial partner for help. 

Strategic financial partners, like NOVAA, help build, carry out, and maintain the finance functions that enable strategic financial planning.

Let’s take a closer look at what your business can expect when you work with NOVAA as your strategic financial partner. 

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Data-Driven Decision Making 

Every business collects data with the intention of using it to help them grow. However, many times, these intentions fall flat. They either: 

  • Don’t collect the right data,
  • Collect the right data but don’t have the time to use it properly,
  • Collect the right data but don’t know how to leverage it. 

A strategic financial partner will ensure your company is tracking the right metrics and using them to produce decisions that drive growth. 

At NOVAA, we do this by tracking essential KPIs and analyzing reports. From there we will pinpoint areas of improvement and opportunity. With that information, we will suggest ways to make adjustments and get back on track. 

With the help of data and guidance from a strategic financial partner, you’ll ensure your choices are aligned with your goals and are future-focused. 

Financial Processes Built for Growth

A common roadblock for many businesses is outgrowing their accounting system. As their business gains traction, they either:

  • Need to switch from manual to automated processes

OR

  • Their financial processes and third-party applications can no longer keep up with the growth. 

This is another area where having a strategic financial partner will be beneficial.

At NOVAA we ensure our clients’ financial systems are built for now and later. As you grow, the systems and processes we help you build will adapt to your business. 

We will pinpoint third-party applications that will work best with existing systems and we will guide you through the implementation process for those tools. We will also ensure you’re entire financial system integrates smoothly so you can maximize efficiency and continue to grow.

In-Depth Financial Analysis

Every aspect of your financial system works together to produce vital information. 

A financial analysis compiles that information to give you the full story of your business. When done correctly, it will give you the information you need to form educated choices and review previous successes. 

An in-depth financial analysis will:

  • Include an evaluation of trends, internally and externally
  • Help build a financial system that works for your business 
  • Focus on long-term planning and strategizing
  • Serve as a tool for determining how and where your business should invest

At NOVAA, we know what information is essential and can compile it into easy-to-understand reports that will help you make the right business decisions. 

Detailed Budgeting and Forecasting 

A large portion of your financial success boils down to accurately creating and utilizing your budget and forecasts. 

Your budget is a detailed outline of your revenue and expenses and when you stick to it closely, it will keep your spending on track.

Your forecasts show you where your business is headed financially and present a potential risk. You can build a variety of forecasts based on different financial situations, however, one of the most important forecasts is the one built around your budget. This will show you where your business will end up financially as long as you stick to the budget. 

As your strategic financial partner, we, NOVAA, will work with you to create a realistic and goal-focused budget. From there, we’ll create forecasts for a variety of situations so you can always be prepared for what’s ahead. 

Experts Dedicated to Your Finances 

One of the primary benefits of working with a strategic financial partner is having an expert dedicated to your finances. 

They have the time and resources to truly understand your business without a personal connection. This means they’ll be able to clearly make decisions on facts and data rather than hunches or emotions. 

And while you may have a good understanding of your finances, you likely didn’t start your business to sharpen your financial management skills. This is why many business owners choose to work with a strategic financial partner. They ensure everything is getting done properly and your business is being built for the future. 

Consider working with NOVAA as your strategic financial partner. We will immerse ourselves in your numbers and dedicate ourselves to ensuring financial success for your business. This way, you can spend more time doing what you do best, running your business. 
Contact us today to learn more about how we can service your business! And don’t forget to follow and like us on Facebook, Instagram, and LinkedIn!

5 Cash Flow Metrics to Prioritize and Track in Your Startup

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Managing cash flow can be a challenge for small businesses. Many factors come into play and if you don’t have a strategy or system in place, you’ll start to see your cash flow trend in the wrong direction. 

At NOVAA, we advise all of our clients to prioritize cash flow metrics as a primary step in cash flow management. 

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When you fully understand what metrics affect your cash flow, you can leverage these numbers to strengthen it and your business as a whole.

While this is not an all-inclusive list of the metrics that can be used to improve your cash flow, these are five of the most important cash flow metrics we, NOVAA, suggest prioritizing in your startup:

1. Operating Cash Flow (or Cash Flow From Operations)

Operating cash flow (or cash flow from operations) is a measure of the amount of cash generated by a company from normal, core business activities. A positive operating cash flow is the first step toward a successful business. 

Typically, this is the first metric found on your cash flow statement. The metric indicates whether or not you are generating a strong enough cash flow to grow. 

You can calculate operating cash flow in two ways: direct and indirect.

The direct method is the difference between revenue (inflows) and operating expenses (outflows). Below is the formula using the direct method:

Total Revenue – Operating Expenses = Operating Cash Flow

The indirect method factors in non-cash accounts. Below is the formula using the indirect method.

Operating Income + Depreciation – Taxes + Change in Working Capital = Operating Cash Flow

No matter which method you use, your operating cash flow is found on the cash flow statement, along with cash flow from investing activities and cash flow from financing activities. Cash flow from financing and investing factor in the other business activities included in measuring your overall cash flow.

2. Accounts Receivable Turnover

Accounts receivable turnover is a metric that measures the rate your company collects debt from your customers. 

Ideally, you want to have a high turnover rate. This would mean you are collecting debt quickly. A low rate would indicate that customers are not paying in a timely manner, whether it be from:

  • Overly flexible payment terms
  • Delivery problems
  • Unhappy customers 

When you prioritize and track this metric, you can see changes over time, which could point to cash flow problems before they become a larger issue. 

3. Working Capital

Working capital is a metric that indicates your business’s:

  • Liquidity
  • Operational efficiency
  • Short-term financial health 

The numbers you need (current assets and current liabilities) to calculate your working capital are found on the balance sheet. Essentially, your working capital is your current assets less your current liabilities. 

If your business has a large working capital, you have the ability to move into additional investment opportunities and grow. If your current liabilities outweigh your current assets, your business is at risk of failure. 

Working capital can be thought of as a more current indicator of your ability to pay liabilities while cash flow is more of a long-term view. They both work together to provide an overall idea of the financial health of your business. 

4. Forecast Variance

Forecast variance is a comparison of your projected numbers to your actuals. When you measure your variance, you can spot areas where you are off track from where you were expecting to be and make adjustments. 

Some areas where tracking forecast variance in relation to cash flow may be helpful include:

  • Sales (actuals vs forecast)
  • Expenses (budget vs actuals)

5. Return on Equity

Return on equity is an ROI metric that measures the shareholder’s return from your business on their investment. 

Over time, your return on equity should increase. This would indicate that you are wisely using your investors’ money (working capital). If you aren’t using your money to invest wisely, it can lead to a low return on equity, which is a turn-off for future investors. 

Your return on equity can be used to appeal to investors (if needed) and measure how well you are managing your cash flow. 

Need Help Tracking the Right Cash Flow Metrics?

Cash flow is the lifeblood of every business. It measures cash inflows and outflows and is a strong indicator of your business’s short-term and long-term financial health. If your cash flow struggles, your business will struggle as well. 

While tracking metrics like the ones covered above will provide you with some of the numbers you need for proper cash flow management, outsourcing your accounting to an expert will bring you the greatest return. 

At NOVAA, we will ensure you are tracking and prioritizing all of the right cash flow metrics so your business can continue to grow. Contact us today to learn more about how we can help! 

Accounting for Entrepreneurs: How to Stay in Control Year-Round

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For entrepreneurs, staying in control of your accounting year-round is more than an additional task to add to your plate, it’s a necessity. 

Your business relies on you understanding where it stands, financially, at all times. To gain that understanding, you have to know how to leverage automation, stick to your budget, mine value from your numbers, and stay on top of your regular tasks. 

The good news is, with the help of an outsourced accountant, this is easy. However, if you plan to stay in control of your accounting year-round on your own, you may need some extra guidance.

Here are some tips to help you out!

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Rely on Automation

If you are still working with manual processes, it’s time to make the transition to automation. Automated systems and processes can be applied to nearly every aspect of your accounting including: 

  • Bookkeeping
  • Managing accounts receivable
  • Keeping track of payroll
  • Inventory management
  • Bill paying

Not only does automation add efficiency to your business, but it also keeps you organized without you having to perform daily upkeep. With organized processes, accessible from anywhere, you can generate reports and analyze data whenever you need them. This is essential for day-to-day and long-term decision-making. 

With automation, you’ll have a strong pulse on accurate, up-to-date information all year round. 

If you are struggling with finding automation tools that work best for your business, consider reaching out to the experts here at NOVAA. We can provide you with guidance for building a tech stack that drives success. 

Stick to Your Budget

Your budget sets the groundwork for your spending throughout the year. It plans out all of your expenses so, naturally, to get the most benefit from it you have to keep your spending in line with your budget.

When you don’t follow your budget closely, you risk overspending, misallocation of funds, and cash flow problems, all of which can cause major issues for your business in the long run.  

Consider comparing your budget to actuals on a monthly basis. This will tell you how close you are sticking to your budget and point out any areas where you may be missing the mark. It’s a great way to stay on top of your spending and ensure you are setting your business up for success throughout the year. 

Realize Accounting is More Than Compliance

Many entrepreneurs miss the mark when it comes to accounting. They assume its primary purpose is to meet tax compliance, and while having accurate numbers is essential when filing taxes, accounting is much more than that. 

Your numbers are full of valuable information and tell the full story of your business. If you are simply keeping up the books to meet tax guidelines, you don’t truly understand the full potential of your accounting. 

For example, if you look at your statement of cash flows just to see how much money is in the bank, you’re missing the bigger picture. This report can also indicate accounts receivable problems, failure to make investments with extra funds, or the need for a better bill-paying strategy.

As you aim to stay in control of your business finances year-round, you have to make sure you are leveraging your accounting properly. If you struggle in this area, it may be time to outsource your accounting to an experienced professional. At NOVAA, we will help you see the big picture so you can get the most out of your numbers.

Create Daily, Weekly, Monthly, and Annual Checklists

One of the best ways to stay in control of your accounting throughout the year is to ensure you have a solid strategy for managing your accounting. Setting daily, weekly, monthly, and annual checklists will help you stay on top of your regularly occurring tasks – and remember, automation can help limit some of this work, as well. 

Daily Checklist

When building your daily checklist, consider including tasks like: 

  • Recording transactions,
  • Reconciling accounts,
  • Recording expenses.

Staying on top of these daily will save you time in the long run. 

Weekly Checklist

When building your weekly checklist, consider including tasks like invoicing and managing payroll. 

Weekly invoicing can help you avoid cash flow problems and having a routine for payroll keeps you from being in a crunch when the due date rolls around.

Monthly Checklist

When building your monthly checklist, consider including tasks like: 

  • Paying bills,
  • Reviewing your budget vs. actuals,
  • Reviewing other reports, like your cash flow statement.

The majority of your monthly tasks are meant to keep you in check with your short- and long-term goals. This gives you the opportunity to catch problems before they get out of hand and make timely adjustments. 

Annual Checklist

When building your annual checklist, consider including tasks like: 

  • Building a tax plan,
  • Building a new budget,
  • Collecting year-end financial statements.

This is a great way to regroup and get ready for the year ahead. Remember, one of the keys to being in control of your accounting throughout the year is being prepared. 

Work with an Experienced Accountant 

As you work to gain better control over your accounting year-round be sure to remember:

  • Automation can make it easier.
  • Sticking to your budget will help you stay on track with your spending.
  • Accounting is more than just compliance.
  • Creating checklists helps you stay on task and working towards your goals. 

If you find yourself lacking the control you need to properly manage your business, consider working with an experienced accountant. 
Our team of experts can be an extension of yours to build an accounting system that keeps you in control. Contact us today to learn more!

What Outsourced CFOs Provide for CEOs

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Outsourced CFOs work as an extension of your team to manage the business’s finances, provide strategic direction, and promote growth. 

While they have their own set of important tasks, they also work closely with the CEO to provide the financial insight needed to make decisions, large and small. 

As the business grows, their professional dependence on each other grows as well. Here are some of the areas in which an outsourced CFO will benefit a CEO. 

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Metrics Management

One of the primary tasks of a CFO is collecting relevant data and analyzing the performance of that data. 

While most businesses track standard reporting KPIs (Key Performance Indicators), like gross profit, budget variance, and customer acquisition cost, they also need to track metrics that are specific to their own unique needs. 

Outsourced CFOs create tracking strategies to ensure your business collects and relays the information it needs to make strong decisions moving forward.  

Along with managing the standard and unique KPIs previously mentioned, CFOs are also responsible for managing cash flow. A healthy cash flow is an indication of a healthy business, so proper management and reporting are vital.

Once the data is collected and reports have been made, outsourced CFOs present the information to the CEO in an easy-to-understand format. Together, they will strategize to create a plan to get the numbers to match the goals and needs of the business. 

Financial Planning and Budgeting

For a business to grow, it has to spend time preparing for the future and in most cases, this can be done through financial planning and budgeting. These tools use a combination of previous data and forecasts to develop strategies for how and when money should be allocated to reach business goals. 

Financial planning and budgeting require a combined effort from the CFO and the CEO. While the CEO knows where money needs to be allocated and is much more fluent with the overarching goals of the business, the CFO knows how to manage that money to produce the financial results that help the business reach its goals.  

Once the tools are created, the CEO will spend their time implementing the financial plans and budget, while the outsourced CFO keeps a close eye on the metrics, measure progress, and suggest changes where needed. 

Systems and Processes Management and Upkeep

Building the financial processes your business needs requires plenty of planning and attention to detail. What may start as shifting from manual processes to automation (or simply improving previously automated processes) may lead to the need to build out a perfectly integrated tech stack. 

This can be a tricky process and more times than not, it’s something a CEO doesn’t have time for. However, a CFO, working closely with the CEO to define goals and strategies, can take the time to do the necessary building and implementation of these processes. 

They understand the technology and systems and can select third-party applications that work well with what you currently have in place, smoothing out the integration process and building a high-performing tech stack.

Strategizing Long-Term Growth Plans

CEOs are responsible for creating long-term strategies that further the business. Some examples of these strategies include: 

  • Product development and pricing
  • Adding a new branch
  • Planning a rate to hire employees
  • Etc. 

However, before implementing these strategies there are plenty of financial aspects to take into account. This is why it’s essential the CEO and outsourced CFO work closely together.

While the CEO brings the ideas and methods for implementing long-term strategies, the CFO works on the financial aspects like market analysis, pricing analysis, studying growth rates, economic impacts, and more. Working together helps to create the most sound strategies to forward your business. 

Decision Making

In addition to long-term strategizing, CEOs are also responsible for making day-to-day decisions. While it may seem like the short-term decisions don’t carry as much weight in the moment, they absolutely play a role in the overall success of the business. 

There are almost always financial implications associated with these daily decisions and a CFO is responsible for providing guidance in this area. 

They also play an essential role in determining if the short-term decisions being made align with goals and the long-term plans for the business. 

Outsourced CFOs Partner with CEOs to Enhance Business

As the outsourced CFO works to manage metrics, create growth-focused financial plans and a budget, select and manage the upkeep of systems and processes, strategize long-term plans, and aid in decision making, it’s essential to work closely with the CEO. 

While an outsourced CFO is not in the office, their relationship with the CEO still requires the same levels of trust and communication. Together, their skills will go hand and hand to improve the business as a whole.  

For more information about how outsourced CFOs and CEOs work together to create a thriving business, visit: https://www.novaa.ca/

How Outsourcing CFO Services Leads to Growth

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Growth is the goal, and in this day and age, outsourced CFO services are a one-way ticket for businesses to reach their growth goals.

As the world around changes, updates, and digitally integrates, you’ll find yourself falling behind if you try to keep up on your own. 

This is where an outsourced CFO can help. They are well-versed in financial planning and know what it takes to build a sustainable accounting system, a strong cash flow, and budgets and forecasts that keep your business needs and goals in mind.

Here’s how:

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Outsourced CFO Services Means a Sustainable Accounting System

Your system needs to be able to grow with you. If growth leads to strain, that’s a sure sign your system isn’t able to sustain growth.

To ensure your system can grow with you, you need processes that will suit your needs now and in the future. This includes a tech stack with easy-to-use tools. Your system will be organized and efficient to track progress and make adjustments quickly.

Outsourced CFOs are experienced in building systems meant for business growth. They have time you may not to evaluate your business landscape and develop a financial system that helps you meet your current and growth goals.

Cash Flow Management

Cash flow is your business’s lifeblood. It measures the flow of money in and out of it. There’s no disputing; you should track it and always be looking for ways to increase it.

Excellent cash flow changes everything. When you manage cash flow, you understand the real cost of day-to-day operations and can use that knowledge to streamline and take advantage of growth opportunities.

Cash management includes:

  • Finding out how much cash you have on hand
  • How much money you will need in the future
  • Evaluating the cost-benefit for technology and other investments
  • Pinpointing asset changes as they occur (or anticipating them)
  • Knowing your liabilities
  • Keeping your cash flow under control
  • Timely invoicing
  • Timely payments

Outsourced CFOs know what it takes to improve cash flow, can monitor it closely, and make adjustments to improve when needed. 

Outsourcing financial services gives even smaller businesses access to expertise, analysis, and resources they might not otherwise think they can afford.

And sadly, they may feel this way because of poor cash flow management that an Outsourced CFO can fix. This is a massive financial failure you can avoid.

Budgeting and Forecasting

Overspending is often where businesses fail. 

Take customer acquisition costs as an example. They just expect it to be worth it down the line. But if they’re not also spending to increase customer lifetime value, this spending never pays off.

A budget is essential to keeping spending on track, so you’re spending in the right places and ensuring what you’ve allocated works together across the budget to achieve goals.

Budgets also go hand in hand with cash flow management. You can make easier purchasing decisions with a budget because you already know how much you’ll spend on that line item. 

Sticking to a budget ensures you are not overspending in one area, leaving other areas underfunded.

Your budget should be time-bound, whether that’s quarterly or annually, and it should account for:

  • Every source of revenue
  • Every possible expenditure

Your budget should be realistic while allowing you to operate within your means and manage unexpected revenues and expenses. A reasonable budget can also help you identify opportunities and forecast what you’ll need in the future, like having money for those technology investments you know you need to grow.

Forecasting lets you see where your business is headed and serves as a guide to building a better budget, meaning this all works full circle. With forecasting, you are looking forward rather than backward. 

You can predict where things are going and use this understanding to implement data-driven strategies to confidently move towards your goals.

Outsourced CFO services keep your business moving toward growth and realizing it.

KPI Development and Monitoring

Tracking the right KPIs is essential for a growing business. The data your KPIs generate benefits your financial reporting process and are key to giving you a big picture view of how your business is doing.

With consistent monitoring and analysis, you can quickly make adjustments to get back on track when your numbers are off.

Relying on data is also a long-term strategy in that you can use it as a tool for making better business decisions.

An outsourced CFO can help present opportunities within your data that could add value to your financial strategy.

You can rest easy knowing your outsourced CFO is spending the time you don’t have, getting to know your numbers and monitoring the progress of your financial goals.

Outsourced CFO Services Could Be the Right Move for You

As your business grows, you need your financial system to grow with you. You need someone who can manage and maximize your cash flow, guide you toward the right business decisions, and help you move your business build a strategic financial plan.

Hiring a full-time experienced CFO may not be in the cards, and that’s where NOVAA steps in.

NOVAA’s technology forward, cloud-based outsourced CFO services will help you get a handle on cash flow, create a budget and system that works, and take advantage of the opportunities to grow your businesses. Book an appointment today.

10 Reporting KPIs Your Business Needs to Track

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Reporting Key Performance Indicators (KPIs) measure performance over a period of time. They provide important information for nearly every aspect of your business.

Generally, KPIs are tracked across five major categories:

  • Sales
  • Marketing
  • Financial
  • Customer Relations
  • Employee Success

When you track the right KPIs, you can use the information to make changes to these categories and that will result in major improvements in your business.

For guidance, here are 10 reporting KPIs your business needs to track.  

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10 Reporting KPIs Your Business Needs to Track

1. Cash Flow

Cash flow is arguably one of the most important KPIs a business can track. It is a measure of the money moving in and out of your business.

Tracking cash flow allows you to see how much cash you have to pay for day-to-day operations, pinpoint changes in assets, liabilities, and equity accounts, and create forecasts. 

More often than not, a healthy cash flow results in a healthy business.

2. Customer Acquisition Cost

Bringing new customers on board can be costly. Customer acquisition cost is a measure of how much you are spending to acquire a new customer and is a great indicator of the success of your marketing. 

A low customer acquisition cost means you are efficient in gaining new customers, however, a high number may mean you need to adjust your marketing strategy.

3. Customer Lifetime Value 

Customer lifetime value is an estimate of the total revenue you can expect from a single customer throughout their relationship with your business. Ideally, your customers will work with you for an extended period of time and produce large amounts of revenue.

Typically, business owners will rely on customer acquisition cost and customer lifetime value to work hand in hand to determine how long it will take to be profitable from each new customer. 

4. Gross Profit

Revenue minus direct costs, or costs of goods sold, leaves you with your gross profit. It is essential to have a gross profit because if you don’t, it means you are losing money as you produce your products. 

When it comes to turning materials into finished products, efficiency is key, and gross profit measures that for you. It is also helpful for setting prices and determining profit potential. 

5. Budget Variance 

Comparing your budget to your actual spending and noting the difference is known as budget variance. 

In a perfect world, you wouldn’t need to track this metric because your actuals would always match your budget. However, that is rarely the case, so instead shoot for a budget variance as low as possible. Sticking to your budget will help you do this. 

6. Churn Rate

To help measure the performance of your team, you need to track churn rate. Churn rate measures the rate at which customers are ending their relationship with your business. 

A low churn rate is ideal because it means you are retaining customers well. Inversely, a high churn rate means you are losing customers quickly and therefore losing revenue.

7. Accounts Receivable Ratio

The accounts receivable ratio provides the average amount of time it takes for a customer to pay you what they owe. 

A low ratio indicates your customers are paying in a timely manner. If your accounts receivable ratio is high you need to implement a strategy to collect payments more quickly. Otherwise, your cash flow will suffer. 

8. Revenue

Revenue is a metric every business already tracks, so including it on this list seems a little obvious. 

However, not only does tracking revenue give you insight into how well your sales team is performing and provide a clear indicator of the success of your marketing and advertising efforts, but it also shows growth over time and is used in measuring a variety of other KPIs like: 

  • Profit margin
  • Gross profit
  • Revenue per employee
  • Average customer revenue 

9. Revenue Per Employee

Revenue per employee is as simple as it sounds. It’s your total revenue divided by your total number of employees. 

While it’s a good metric to know, it isn’t overly helpful on its own. However, when it’s compared to other businesses in your industry, it can provide valuable insight into how successful and efficient your employees are. 

10. Cost Per Hire

From a human resource perspective, cost per hire is an essential metric. It takes into account recruiting and onboarding expenses. 

As your business grows, hiring will become more and more common. So understanding the cost of each hire will aid in forecasting cash flows. When this KPI is matched with revenue per employee you can determine how long it will take before a new employee will start generating profit. 

Want to Ensure You are Tracking the Right Metrics? 

As your business continues to grow, reporting KPIs will play a greater role in your success. 

They provide valuable insight into your financial state and, when tracked and applied correctly, help you make better decisions to drive your business forwards. 

To ensure you are using KPIs to their full potential, consider working with an experienced accounting partner, like Novaa. We are experts in helping businesses track the right KPIs and will help you utilize the results to create success. 

We work as an extension of your team to customize your KPIs and ensure you are collecting the right information to grow your business. 

Contact us today to learn how we can help your business! 

SaaS Startup Financial Fails and How to Avoid Them

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Over the last decade, software-as-a-service (SaaS) has exploded as companies have flocked to subscription and cloud-based services for their software needs. While the growth of the SaaS market has lowered barriers to entry, it has also created opportunities for entry. This presents a double-edged sword: the SaaS sector provides you the opportunity of founding a lucrative company but it also poses the threat of that company failing. Failures are all too common in the industry and you can’t afford to make mistakes that can sink your company. Here are a few of the most frequent financial fails that SaaS startups commit.

5 SaaS Startup Fails You Can Avoid  

1. Cash Flow

When launching a product, you want to make a splash. But making a splash comes at a cost, which can include overspending on branding, marketing, offices, and other expenses. These types of overspends lead to cash flow problems for SaaS startups. The biggest splash you can make is with a good product. As a result, your money is best spent on product development and design until you have a viable product. 

Beyond this early phase, managing cash flow is important so that you don’t run out of money. This requires sound accounting practices and planning, including adequately forecasting cash flow needs for each stage of growth. Keeping track of costs should be straightforward and accurate. But projecting sales is where companies can be inaccurate and fail to bring in the revenue necessary to keep operations running. Make sure to maintain accurate financial projections.

2. Having More Churn Than Growth

In a subscription-based industry, churn rate is a key metric: it is the attrition rate or the number of customers you are losing. In SaaS, this means customers who either cancel or do not renew their subscription. Churn will be inevitable no matter how good your product is – customer wants and needs change over time and you can’t always respond to them. But when churn is higher than growth, your company is failing. 

Plan for some churn and don’t underestimate it. But focus on keeping your churn rate low by improving your product(s) and services(s) to retain as many customers as you can. You can also assess your pricing model and the competitive market to make sure you’re not overcharging.

3. Your Product Isn’t Market Ready When you Go to Market

Building a successful SaaS company involves having a viable and workable product that has a market. Basically, there must be a market need and your product must address that need. Even if you have a great pricing structure your product can be sunk by poor user experience, technical issues, lack of customer support and documentation if your product has a learning curve, and so on. If you try to book demos or close deals for products that aren’t quite ready, you can expect low adoption rates, high customer acquisition costs, and high churn rates. 

The old adage that you never get a second chance to make a first impression stands. The customers who don’t adopt or are part of the churn may not come back even after you’ve worked out the glitches, given that SaaS is a competitive space and they will have moved on to your competitors. Ultimately, you need to do product testing, fix bugs, and make sure you have an intuitive and user-friendly product before you go to market.

4. Not Having the Right Pricing Structure

Pricing is one of the first things that customers will look at, which means it has a major impact on your viability. Despite this, SaaS companies spend surprisingly little time considering their pricing structure. Pricing is difficult to establish given you need to navigate your customers’ need for an affordable price and your need to generate revenue. Put differently, if you undercharge you’ll have happy customers but won’t turn a profit and will likely go bankrupt; if you overcharge, you’ll have a price structure that would make you profitable but there are no customers willing to pay the price. 

Obviously, there are no set rules to navigate this problem and it will depend on the product you have to offer, competing products, and the existing market. But the point is you need to devote time and effort to develop a reasonable pricing structure; this includes reassessing your pricing as your business grows, achieves new milestones, and moves through various phases.

5. Marketing Spend

Because marketing involves a trial and error process, overspending in initial marketing efforts is a major reason. Marketing involves knowing the market for your product, which can involve trial and error. Before you start spending on marketing efforts, you need to define your target audience, your goals, and your key performance indicators so that you aren’t blowing the budget at the start of your marketing efforts. Be sure to conduct market analysis and have a set marketing strategy before you begin. This will help you to maximize ad spend through targeted efforts, rather than the old spray and pray approach to marketing. Similarly, it is possible to underspend or not assign an adequate marketing budget when first launching. Finally, once you have your marketing up and running, you need to conduct marketing audits to see where your efforts are or are not working to better allocate your money and effort.

NOVAA’s Fractional CFO Services for SaaS Startups

Poor management is another fail for SaaS startups. Many of the above fails can be avoided simply with an experienced management team, including a CFO who can assess the financial status of your company, offer ways of improving operations, and check to see that everyone follows and tracks these improvements.

NOVAA offers experienced fractional CFO services for SaaS companies to chart out a path to growth and profitability while avoiding the common SaaS startup fails mentioned above. For our fractional CFO clients, we have a 10 step growth strategy that plots out the full development of your company. Using the latest analytics software, we sit down with you to look at Key Performance Indicators (KPIs) and historical data in relation to your business goals and industry standards to see if you’re accomplishing the necessary goals to become a profitable company. We also evaluate the effectiveness of KPIs as your business grows and continuously analyze them to implement necessary changes in your business operations and evaluation metrics. We also conduct cash flow planning for 6 or 9-month periods at a time so that you can keep your company operating or plan financing rounds and loans to fill in the gaps for any shortfalls. Finally, we conduct quarterly audits to see whether your company is meeting its goals, as well as discovering where goals or operations need to be tweaked.

For more information on our CFO services and how we can help your SaaS startup, book a consultation.

Top 3 Financial Considerations for Acquisition

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The goal for most startups is acquisition. Being acquired shows that your company has a successful product and your hard work and long hours have paid off. But there’s a lot of work to be done for the acquisition to be successfully executed. As you’ll know from funding rounds, investors do their due diligence to see if there are any deal breakers in your books. With acquisitions, that due diligence is more extensive because the investor is buying 100% of your company. Ultimately, they require information to show that your company is profitable and therefore worth acquiring. 

Getting through the acquisition process requires financial statements, realistic projections and compliance with tax and other regulations. Without these, your acquisition could fall through or the prospective buyer might offer a lower valuation. To avoid these problems, you need experienced accountants to help you through the process. Ultimately, accountants provide the information to backup the viability and profitability of your business. Here are three key areas that an accounting firm can help with during the acquisition process.

1. Providing Accurate Financial Statements

As investors did during funding rounds, potential buyers want a full financial accounting of your business. Accountants provide financial statements with this information, including: 

  • Assets
  • Recurring monthly and annual revenue
  • Your tax status, including compliance and any liabilities owing
  • Historical growth
  • Cash flow
  • Potential cash injections
  • Growth projections for the future 

Beyond this, accountants create reports for the board on any performance indicators that they require. What’s important here is that you have experienced accountants to provide accurate statements and attainable financial projections. Failing to account for cash shortfalls or providing unrealistic projections can undercut your sale.

2. Determining Your Valuation

Financial statements are important in and of themselves – they show whether or not your company is profitable and, therefore, whether it’s worth acquiring. But they’re also necessary for valuation purposes. Figuring out your valuation involves assessing a number of factors:

KPIs

You need to know your key performance indicators, including historical and projected growth and sales, and the basic financial status of your company, including cash flow. Again, these numbers need to be accurate and realistic. If you want to value your company at $100 million, you need to be able to show figures that can back this up, including growth over your company’s lifetime, increases in annual and monthly recurring revenues, and the prospects for continued growth into the future.

Competition

You need to know the market for competitors and how you stack up in terms of growth and other performance indicators.

Historical Financial Information

You need to know your valuation during previous funding rounds as well as growth since that time.

Buyer’s Background

You need to know your buyer’s background and why they are looking to acquire you. If they are an equity firm investing for financial reasons, the valuation process may be more formulaic based on assets, debts, and other financial figures. If they are acquiring you for strategic purposes, the valuation may be higher and more negotiable, as the company is interested in your product or technologies because they have a synergy with the acquirer’s existing business.

During acquisition, accountants are constantly guiding CEOs and founders on when and where they should be positioning themselves in terms of valuation, including supplying them with the financial statements and projections to back up their position during negotiations. Particularly if this is the first time you’ve gone through an acquisition, it’s necessary to have experienced professionals helping you through the valuation and negotiation process.

3. Staying Compliant

Tax Compliance is the main arena of accountants during the acquisition process. First and foremost, you want to be able to show prospective buyers that you have stayed compliant and they won’t be liable for any tax issues. Beyond this, because share structures and ownership change, compliance issues become more complicated. 

While things are more streamlined if you are an entirely Canadian company being acquired by another Canadian company, more complications arise if the company acquiring you is based in the US or elsewhere. In the former case, the company retains its Canadian Controlled Private Corporation (CCPC) status. But in the latter case, that status changes. With the different statuses come different tax rates and considerations. Similarly, different rules apply to different statuses for claiming the Scientific Research and Experimental Development Tax Incentive (SR&ED). 

Finally, you’ll need to complete “deemed year end” taxes. Even if your acquisition closes on March 31st, you’ll need to file a tax return for the 3 months of the year you owned the company. Executing these aspects of the acquisition and remaining compliant through the process involves utilizing accounting experts who know the ins and outs of the tax regulations you are under.

Acquisitions with NOVAA

More often than not, acquisition is the outcome that companies are looking for – a realization of the dream that your company started with. Given the complexity of acquisition, realizing this dream requires the help of experienced professionals who have been through the process and can help you navigate it, avoiding any deal breakers or disappointments in valuation.

NOVAA is a technology-forward accounting company that uses advanced financial tools to help you realize your company’s goals. We have years of accounting experience and an established record with acquisitions, including for technology companies. We view ourselves as part of your team and can answer the due diligence potential buyers will demand of your company during acquisition, whether it’s financial statements, valuation, or compliance.

For more information on how NOVAA can use its experience and track record to help you realize your acquisition goals, book a consultation.

SaaS Profitability

SaaS Profitability: Determining a Break-Even Point for SaaS Startups

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One of the first benchmarks for any business is reaching its break-even point. The break-even point is when you’re in a no profit, no loss situation. But you’ll encounter many obstacles on your road to break-even, particularly in competitive industries like software-as-a-service (SaaS). SaaS companies often face a long road to get to break-even. This can be achieved if you focus on three basic factors necessary to get you to SaaS profitability.  

Estimating Costs and Revenue

Finding your break-even point requires estimating your costs and revenues. When making financial estimates, you need to be accurate as underestimating costs or overestimating revenues can lead to shortfalls.

Costs will, of course, depend on the specifics of your business. But here are some basics to start with:

  • Rent
  • Utilities
  • Payroll
  • Infrastructure, including: hosting; website design, development and maintenance; marketing

Figuring out the individual costs for each of these and adding them up gives you your basic costs.

Next, you’ll need to determine your pricing structure. Obviously, the structure will vary depending on industry and you’ll need to consider standards and competitors in your SaaS sector. In doing so, you also need to strike a balance between what will make you money and will not dissuade your potential customers from subscribing.

Finally, estimate your revenue. This will be based on projected monthly recurring revenue, or sometimes annual recurring revenue, and the rate of acquiring new customers. Once again, you need to be accurate and reasonable here. If you project a certain amount of revenue based on an estimated client base, this has to be realistic and you have to have a plan to acquire that many customers – all while also accounting for the costs of doing so.

Keeping an Eye on Churn Rate

When you are starting out, your customer base should experience growth well above your churn rate. But as your customer growth increases, your churn rate will do the same. The problem arises when your customer acquisition and churn rates are equal – that is, when you’re losing as many existing customers as you are acquiring new ones. The good news is that you have time to account for this, as there is a bit of a lag as the churn rate gets closer to the rate of customer acquisition.

The immediate thing to consider is whether you need to re-evaluate your pricing model. If it’s too high, it could be driving clients away. Of course, pricing isn’t the only cause of churn. You need to analyze other elements of customer satisfaction, including customer service, satisfaction with your product, etc. On the flip side, you should consider whether you are being active enough in trying to acquire new customers. This involves putting more revenue into advertising, marketing and sales.   

Understanding Customer Acquisition Cost

The problem with trying to acquire new customers is that it can come at a cost. This is why it’s important to consider your customer acquisition cost (CAC) – the amount of money you put into marketing, advertising, sales, and other avenues to acquire leads and convert them to customers. Calculating this is important. Customer acquisition can look great on its own but if your churn rate and CAC are high, you aren’t getting close to your break-even point let alone making a profit, which can deter investors. Ultimately, you need to calculate your CAC and the lifetime customer value (LTV).

While a textbook response might suggest that your LTV to CAC ratio should be higher than 3:1, this isn’t always the case at every stage of your growth process. In fact, your initial CAC costs may be extremely high, but this can be worth it if you are trying to establish your brand by acquiring high value customers so that others will follow. Netting a customer who can directly or indirectly influence others to become customers may be extremely expensive on its own, but the cost of the single customer is worth the extra customers who come along because of name recognition. Likewise, you need to consider other factors, like the total value and duration of the contract. While in some SaaS fields, contracts may be relatively small (e.g. $50 per month for basic software) in others they could be significantly higher value and duration (e.g. $50,000 per year for cybersecurity software). Higher value and duration can often justify a higher CAC.

NOVAA’s Fractional CFO Services for Forecasting SaaS Startup Profitability

SaaS companies often try to reach break-even or hit profitability on their own and only seek professional advice when they struggle. This can involve processes of trial and error around estimating costs and revenues, pricing, and monitoring important analytics such as churn rates and customer acquisition costs. Accurately forecasting your company’s road to break-even, and analyzing your performance along the way, requires experienced professionals in the Chief Financial Officer (CFO) role.

NOVAA offers fractional CFO services for SaaS companies at all levels, from startups to established companies in the field. Our goal is to help you not only break-even but turn into a profitable SaaS company. In this role, we view ourselves as part of your team, taking a hands-on approach in working with you to accurately forecast expected costs and revenue months or years into the future. To do this, we utilize advanced business intelligence software to provide accurate metrics to help you determine what is and isn’t working. This begins with assessing your pricing model, in relation to your margins and industry standards. 

But pricing models aren’t the only thing that can help your company. We also analyze other key performance indicators and projections, including churn rates and CAC, with an emphasis on isolating variances and why they occur, as well as seeing your performance indicators in relation to other companies in the industry. These can help to assess your overall operation to see what other costs can be brought down to aid in your growth to break-even and profitability.

For more information on NOVAA’s fractional CFO services or how to determine the break-even point for your SaaS company, book a consultation.