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Eva Koziel

Manager of Accounting Services

As small business owners continue to look for ways to cut costs in response to pressures from economic uncertainty such as rising interest rates, employee retention and inflation, one solution may be Accounts Payable (AP) automation. AP automation once reserved for larger companies has now found its home in many medium to small sized companies.  

Is your company still manually recording vendor invoices, printing, and mailing checks?  You will want to read our case study below to see how AP automation helped one of our clients. It may be a good fit for you too. 

Small to mid-size businesses are now able to automate AP through apps such as which also integrates with leading accounting software solutions such as QuickBooks, Sage Intacct, Xero and Netsuite.

We recently assisted a midsized client who had a dedicated employee that spent 30 hours a week manually recording vendor invoices, printing out checks, stapling checks to invoices, handing them over to owners to review and sign, mailing payments and then dealing with all the paper documents. If this does not sound exhausting enough, to add to the complexity some vendors were set up on auto pay, which required the employee to take additional steps to manage cash flow. Sound familiar? 

When we first proposed to our client, they expressed valid concerns such as security issues with electronic payments, how would handle vendors who only accept paper checks, subscription costs, etc. We scheduled a meeting with both our client and a representative where the client was able to not only view a demo, but also address their concerns and questions. Needless to say, the client was on board and eager to begin.

From there, we provided our client with a detailed timeline of events which included steps they needed to take to prepare for setup within their QBO file such as vendor cleanup, determination of approval levels, etc, scheduled integration and implementation training. This process took two weeks. has transformed the way our client processes invoices. All vendor invoices are sent to the company’s centralized inbox in, so that it goes through the automated approval process. The owner who lives out of state approves bills that are to be paid, using his mobile app!! automatically sends the team email reminders about upcoming or overdue bills and lets them pull up payment statuses and view invoices in just a few clicks. No more frantically tracking down invoices.’s two-way sync with QuickBooks Online provides a seamless integration which minimizes the need for double data entry in both systems and the risk of error that could occur. The AP employee now only spends about 2-3 hours weekly with AP, or 30 minutes a day. Allowing our client to better utilize the employee’s time on other projects. The integration took less than 1 month from the initial call to full implementation. 

If you are interested in learning more about AP automation for your company, please contact the experts at Cray Kaiser at (630) 953-4900 to schedule a consultation.

Damian Contreras

In-Charge Tax Accountant

When I was beginning my journey to become an accountant, I had the opportunity to intern at Cray Kaiser and KPMG. These internship experiences allowed me multiple opportunities when deciding on my post-graduation employment. In the first semester of my senior year, I signed and accepted an offer to join the CK team where I  currently work full-time. It is essential to take the initiative to take as many internships as possible. Taking a proactive approach allows you ample time to secure a spot, as many firms tend to fill up a year in advance.  

Working full-time at Cray Kaiser was a smooth transition. I was getting exposed to so much as an intern that I felt prepared to advance into the next step.  What was an adjustment for me was not going to school while working. Now with my extra time, I use it to focus on my career goals. One career goal for me is studying for the CPA exam.

Preparation Made Easy

If you plan to pursue the CPA exam, I recommend the Becker program. The software is easy to use, provides printed material, and is always on sale (there is usually a better sale around the holidays). They also have a fantastic planning system. You enter when you want to take the exam, and it will tell you how many hours you need to study, or you can tell Becker how many hours you can study, and it will give you a custom plan for what days to study, what to study, etc. The program makes you feel less overwhelmed when you are deciding when, what, and how long you should study.

Audit or Tax?

In any career, I think it’s important to make sure you enjoy what you are doing. In the accounting profession, everyone always asks if you are interested in audit or tax. Without experience in both fields, how does one know? Two solutions I found to this are to have internships in both areas or work at a smaller firm where you can assist in both areas.

I love working on complex tax returns and was thrilled to join the tax department. However, I still am allotted the opportunity to work with the assurance team and build on those skills too.  

One skill I have built is being a self-advocate and letting management know what areas interest me and where I would like to see my skills grow.  Remember that no one can read your mind. You will need to speak up to management to tell them the areas you find most interesting to work in. My goal is to enjoy what I do and make a difference to the organization I work for and the clients we serve. I have found at Cray Kaiser, we aren’t just tax preparers and auditors we are trusted business advisors who are going to help all the family-owned businesses we serve.

Following the Covid pandemic, the government implemented many programs to provide much needed relief to employers.  One of these included the Employer Retention Credit (ERC). This is a fully refundable tax credit that is available to both small and mid-sized businesses, even if you received the Paycheck Protection Program (PPP) Loan. 

Businesses who are eligible can claim up to $5,000 in fully refundable tax credits for each employee in 2020 and up to a $7,000 credit PER quarter for each employee in 2021. Please note that the ERC is only applicable in quarters 1, 2 and 3 for 2021. 

Can I Still Qualify for ERC?

Although we are in 2023, it’s NOT too late to qualify and claim ERC retroactively! Businesses have up to three years to conduct a lookback to determine if they qualify and if wages paid March 13, 2020 through September 30, 2021 are eligible.

How to Qualify?

For 2020, businesses with 100 or less employees can qualify if they pass one of the two tests below:


For 2021, businesses with 500 or less employees can qualify if they pass one of the two tests below:


Per IRS Aggregation Rules under section 448(c)(2) and 52(a)(b) and provisions of section 2301(d) of the CARES Act, All members of an aggregated group are treated as a single employer. In other words, if multiple businesses are controlled by common ownership, all entities are deemed single employers for ERC eligibility purposes.

How to Calculate ERC?

Once a business determines that they qualify, the next step is to calculate the ERC tax credits.  Find CK’s helpful template to assist you in calculating your credits here.

Businesses that received the PPP, will need to run additional analysis to make sure that they have enough eligible wages to benefit from both the PPP loan forgiveness while maximizing the ERC. Any eligible wages used for PPP cannot be used to calculate ERC. No double dipping!

How to Claim ERC?

To claim the ERC, a business will need to amend its federal payroll tax form 941 for the quarter in which they are looking to claim the refundable credit. The IRS is only accepting paper filings and refunds are taking around 200 days to come in the mail via paper check, as the IRS is not funding any other way. This amendment does not impact previously filed W-2s.

Important to note, unlike PPP, the ERC income is taxable in the year that the credit is claimed and not received. We do highly recommend speaking with your CPA to determine tax implications and net benefits. For any additional information or assistance with ERC, please contact Cray Kaiser, your ERC specialists at (630) 953-4900.

QuickBooks accounting software is used by more than 29 million small businesses in the U.S. If you are one of those users, there is now an easy way to customize your marketing efforts based on actual customer purchase data. 

In 2021 Intuit® QuickBooks® acquired the Mailchimp marketing platform. The integration of the popular marketing tool with QuickBooks Online gives small and mid-size businesses the ability to leverage customer sales data for customized marketing efforts using one platform.

Features of the new integration include:

Prior to this integration data was housed in two different places. Your email list sitting in Mailchimp or another marketing platform – most likely exported from QuickBooks or another CRM. And your customer purchase history and buying behavior data sitting in QuickBooks.

QuickBooks users who are willing to invest a bit of time and resources into this integration can engage in email marketing that has a greater chance of generating revenue.

Instead of blindly sending out a promotional message or monthly newsletter, you can tailor your communications based on a customer’s sales history.

Do you get coupons mailed to you from your grocery store? Not the generic weekly circulars, but self-mailers with coupons included. Those coupons are usually for items you purchase on a regular basis, right? That’s no coincidence. The grocery store is capturing data from your frequent shopper/reward account and customizing your offers based on your purchase history.

The QuickBooks/Mailchimp integration allows you to target your customers in a similar way.

If you are running a special on an Acme Widget, you can alert customers who have purchased the Widget in the past of the sale. Or alert those same customers if there is a new accessory for the Widget.

Or perhaps you want to let customers who purchased a Thingamajig three years ago that it is due for routine maintenance.

How to Get Started

  1. If you don’t already have it, get QuickBooks online. There are multiple plans to choose from ranging from Simple to Advanced. Choose a plan that fits your business needs.
  2. Sign up for Mailchimp. You can start with a free plan and upgrade as needed based on the sophistication of your marketing efforts.
  3. Connect QuickBooks to Mailchimp with just a few clicks and sync customer information.

For more information about taking advantage of the QuickBooks/Mailchimp integration, please contact Cray Kaiser today.

As it does every year, the Internal Revenue Service recently announced the inflation-adjusted 2023 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2023, the standard mileage rates for the use of a car (van, pickup or panel truck) are:

The business standard mileage rate is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs as determined by the same study. The rate for using an automobile while performing services for a charitable organization is statutorily set (it can only be changed by Congressional action) and has been 14 cents per mile for over 15 years.

Important Consideration

The 2023 rates are based on 2022 fuel costs. Given the potential for the continuation of substantially higher gas prices, it may be appropriate to consider switching to the actual expense method for 2023, or at least keep track of the actual expenses, including fuel costs, repairs, maintenance, etc., so that the option is available for 2023.  

Taxpayers always have the option of calculating the actual costs of using their vehicle for business rather than using the standard mileage rates. In addition to the possibility of higher fuel prices, the bonus depreciation and increased depreciation limitations for passenger autos that were part of the 2017 Tax Cuts and Jobs Act may make using the actual expense method worthwhile during the first year a vehicle is placed in business service.

However, the standard mileage rates cannot be used if you have used the actual method (using Sec. 179, bonus depreciation and/or MACRS depreciation) in previous years. This rule is applied on a vehicle-by-vehicle basis. In addition, the business standard mileage rate cannot be used for any vehicle used for hire or more than four vehicles simultaneously.  

Employer Reimbursement

When employers reimburse employees for business-related car expenses using the standard mileage allowance method for each substantiated employment-connected business mile, the reimbursement is tax-free if the employee substantiates to the employer the time, place, mileage and purpose of employment-connected business travel.

The Tax Cuts and Jobs Act eliminated employee business expenses as an itemized deduction, from 2018 through 2025. Therefore, employees may not take a deduction on their federal returns for those years for unreimbursed employment-related use of their autos, light trucks or vans. However, those who are self-employed are eligible to claim expenses for their personal vehicles used in their businesses.

Faster Write-offs for Heavy Sport Utility Vehicles (SUVs)

Many of today’s SUVs weigh more than 6,000 pounds and are therefore not subject to the limit rules on luxury auto depreciation. Taxpayers with these vehicles can utilize both the Section 179 expense deduction (up to a maximum of $28,900 in 2023) and the bonus depreciation (the Section 179 deduction must be applied before the bonus depreciation) to produce a sizable first-year tax deduction. However, the vehicle cannot exceed a gross unloaded vehicle weight of 14,000 pounds. Caution: Business autos are 5-year class life property. If the taxpayer subsequently disposes of the vehicle before the end of the 5-year period, as many do, a portion of the Section 179 expense deduction will be recaptured and must be added back to income (SE income for self-employed individuals). The future ramifications of deducting all or a significant portion of the vehicle’s cost using Section 179 should be considered.

Consider Bonus Depreciation

Consider using bonus depreciation as an alternative to the Section 179 deduction. Under this provision, a taxpayer can elect to claim a deduction of 100% of the cost of a new or used vehicle used for business in the first year it is placed into business service. However, the luxury auto rules impose a maximum annual deduction for depreciation, including the bonus depreciation. For example, in 2021, the maximum depreciation deduction for an auto for which bonus depreciation was claimed was $18,200. This compares to a maximum of $10,200 if bonus depreciation isn’t elected. Of course, if the vehicle is used only partly for business, then only the business-use percentage of the cost is eligible to be deducted.

After 2022, the deductible bonus depreciation percentage drops by 20 percentage points a year, until 2027 when, barring an extension by Congress, no bonus depreciation will be allowed.

Whether to claim bonus depreciation, Section 179, regular depreciation, or a combination of these methods for a business vehicle or to use the standard mileage rate instead, can be a complicated decision to make.

If you have questions about the best methods of deducting the business use of your vehicle or the documentation required, please give our office a call at (630) 953-4900.

Is Your QuickBooks company file ready for 2022? Here are three things you can do to put things in order.

The beginning of the year is always transitional. You’re trying to wrap up everything that didn’t get done during a hectic December. At the same time, you have to jump into the new year and start doing your regularly scheduled work. It can be hard to tell sometimes which year you’re working on.

Don’t forget about QuickBooks while you’re wrapping up 2021 and looking ahead to 2022. You probably don’t want to put another item on your to-do list, but any steps you take now to ready the software for the new year will pay off later. Once you start entering transactions, placing orders, and welcoming new customers, it will help tremendously to begin with a clean slate.

Here are some suggestions to help complete the work you started in 2021.

Run four critical reports.

Bills can slip through without being paid in December because there’s so much going on. This applies to both you and your customers. You need to determine what’s owed to you and what you owe. Generate these four reports in QuickBooks:

One collection method you can use in QuickBooks if you don’t want to communicate directly with overdue customers is to send statements.

Create statements for past-due customers.

You’ll have to decide how hard you want to lean on customers who are late paying their bills when it’s so early in the year. Certainly, if customers are more than 60 days late (30 days if they have sizable balances), you may want to make a phone call or at least send a personalized email asking them to fulfill their obligations.

But you can also send statements. These documents provide details of financial activity between you and your customers for a given period. Open the Customers menu and click Create Statements. Look over all the options available (see image above or below)  and select your preferences. If customers don’t respond to your statements within 10 days, then it may be time for a phone call.

Take a hard look at your inventory.

It may have been a while since you’ve done this, but it’s important to regularly check inventory – especially if you had a busy holiday season. The best way to start this is to open the Vendors menu, scroll down and hover over Vendor Activities, and click Inventory Center.

If you don’t have a lot of inventory, you could just highlight each entry under Active Inventory, Assembly on the left. The window that opens on the right side of the screen provides an enormous amount of detail about each item. If you sell a lot of different items, that will take too much time. In that case, the QuickReport can be helpful.

You can get a lot of information about individual items you sell in QuickBooks’ Inventory Center.

Tip: If you need to adjust the quantity you have on hand, click the down arrow next to Manage Transactions in the lower left and select Adjust Quantity/Value on Hand. You might consult with us if you’re running into this problem, and we can go over inventory issues with you.

Set Up Online Financial Connections

January is also a good time to be thinking about how you can better use QuickBooks in 2022. We tend to learn how to use the tools we need and not explore any further when we’re using any kind of software. QuickBooks is a robust program, make sure you are taking full advantage of what it can offer.

For example, there are two tools that can have a tremendous impact on your daily workflow, your ability to get paid faster by customers, and your understanding of where you stand financially every day.

We know you may still be catching up from the holiday break right now. But if you need Cray Kaiser’s help getting your QuickBooks in order, please reach out. We’re always available to set up a consultation.


Owning and operating a small business can be both exciting and stressful.  When it comes to financial statements, there is a lot of information at your disposal, so much so that you can easily suffer from “analysis paralysis” if you don’t understand what your financial metrics are trying to tell you or how they can be used to implement change.  

In today’s fast-paced world, it is incredibly important to not only have timely financial information to make management decisions, but to also have relevant financial information. Knowing which numbers are most important to your business, the financial ratios applicable and beneficial to your business, and how to interpret that data to make well-timed and impactful decisions is vital to your success. Below we detail 10 of the most important financial metrics and how to leverage them.

1. Understand the Industry

Nobody understands your business like you; however, it’s equally important to understand your industry. Are you staying up to date on issues, technology, regulations, etc. that impact your industry? If not, look into industry publications that have this information readily available. There are also numerous online resources for industry financial data and benchmarks, which is valuable in comparing the metrics discussed in this blog to your peers. For example, your business may have a quick ratio (see #6) of 1.00, which is technically considered “acceptable”. However, your peers may have a quick ratio of 1.20 which may be indicative that you have some adjustments to make.

2. Cash Flow

Cash flow is the most telling metric of all since cash is the lifeblood of any company. This financial metric demonstrates your cash inflows and outflows and helps identify any potential issues in your business. If you’re not keeping an eye on your cash flow you could find yourself caught by surprise when it comes to collection issues or making essential payments to vendors or paying off debt.

3. Sales to Receivables

This metric is the number of times your receivables have turned over, or collected, for a given period. The higher the number, the more times the receivables have been converted to cash during that period. Conversely, the lower the number, the less frequently accounts receivable is being collected and may suggest collection issues. As many businesses fluctuate during the year due to business seasonality, it is often best to compute this metric using average receivable balances rather than using a “snapshot” balance, which can produce misleading results.

4. Day’s Receivables

Similar to sales to receivables, day’s receivables express the average number of days that receivables are outstanding. The greater the number of days, the greater the probability of delinquencies in accounts receivable as this represents how quickly your sales are converted to cash from the date of the sale to when it hits your bank account.

5. Accounts Receivables Aging Schedule

The aging schedule within your accounting software is a standard report. This information is compiled and calculated based on the dates in which your sales/receivables are entered into the system and lays out the aging of your customer receivables in “buckets”. Typically, these buckets are “Current”, “31-60 days”, “61-90 days” and “90+ days”. This metric helps you identify not only potential collection issues, but the customer or balance that is delinquent. Further, it can also help you determine if there are any errors in your accounts receivable balance. For example, does it make sense that your customer is paying their current receivables but not the balance that is 91+ days outstanding? It might be an invoice that was overlooked or an accounting error.

6. Current Ratio and Quick Ratio

Current ratio and quick ratio are listed together because they both show your business’ ability to service its current obligations. The difference is that the current ratio considers all current assets and the quick ratio only utilizes the business’ most liquid current assets, such as cash and accounts receivable. You want both ratios to be greater than 1.00.

7. Budget Versus Actual

Have you created a budget and then compared it to your actual activity? Budgets should be created based on experiences and trends, as well as any known future occurrences (i.e. planned asset acquisitions or annual pay raises). If you compare what you’ve budgeted to what you’ve actually spent, it will give you a far better sense of whether you’re staying on track and what kind of adjustments you need to make.

8. Fixed Charge Coverage

No matter how well you are doing, there is always a chance that you will encounter an unforeseen circumstance that will drive the need to cut costs. The best way to prepare for this is to take a close look at your fixed charges and compare them to your Earnings Before Interest, Taxes, and Depreciation – known as EBITDA. This ratio shows how many times your company’s earnings can cover its fixed expenses such as leases, rent, debt, etc. This is extremely valuable in assessing whether you may be overextended, or it can help determine if any loan, lease, or contract that you sign may overextend your business. Furthermore, banks will often calculate this ratio when determining whether to lend you money.

9. Debt Service Coverage

This is similar to the fixed charge coverage, with the difference being that debt obligations are assessed with the business’ net operating income rather than EBITDA. If this ratio is greater than 1.00, the business is well equipped with profits to cover debt payments. If the coverage ratio is less than 1.00, the business has not generated sufficient income to cover its debt obligations. This ratio is particularly important because banks will often require this to be at a certain level, which may be greater than 1.00, as a condition of their loan. Expect your lender to monitor this ratio on an ongoing basis during the terms of the loan.

10. Working Capital

It’s important to know and understand your working capital not only from a financial standpoint, but also from a regulatory or compliance standpoint. Working capital assesses your business’ ability to pay its current liabilities with its current assets, which gives you an indication of your business’ short-term health. Depending on your industry, you may be required to keep a minimum working capital amount or follow any covenants outlined in your business’ loan agreement. In addition, it can also help you determine if you have too much cash on hand and/or if you’re not effectively putting your cash to work by re-investing in the business to facilitate growth (i.e. with asset acquisitions, technology upgrades, or other capital expenditures). For example, if you have approximately $1 million in current assets but only $100,000 in short-term liabilities (including short-term debt), you may have approximately $900,000 that you can re-invest in your business.

Each of these financial metrics are extremely beneficial in helping you understand the performance of your business. However, this list is not comprehensive; there are many more metrics that are vital to understand.

All businesses are different and operate in different industries and often have different objectives and external influences. If you would like to discuss these financial metrics or how Cray Kaiser can help you, please contact us today.

If you already have a budget, it’s probably been difficult for you to stick with it this year. Unless you provide products and/or services that have been in great demand since COVID-19 took hold, you’ve likely had to adjust your budget significantly.

While there are still likely to be uncertainties next year, better days are ahead! And in the meantime, you can start proactively planning for 2021 by creating a budget. Your budget will increase your awareness of all of your projected income and expenses, which may make it less likely that you’ll find yourself constantly running short on funds.

Here are 10 tips for budgeting so you can make your process more effective and realistic:

1) Use what you already know. Unless you’re launching a new business, you already have the best resource possible: a record of your past income and expenses. Use this as the basis for your projections.

2) Be aware of your sales cycle. Even if you’re not a seasonal business, you’ve probably learned that some months or quarters are better than others. Budget conservatively for the slower months.

3) Distinguish between essential and non-essential expenses. Enter your budget items for the bills and other expenses that must be covered before you add optional categories.

4) Keep it simple. Don’t budget down to the last paper clip. You risk budget burnout, and your reports will be unwieldy. Instead, think broader and expect that your exact expenses will fluctuate slightly.

5) Build in some backup funding. Just as you’re supposed to have an emergency fund in your personal life, try to create one for your business. Knowing that you have a cushion will give you peace of mind and financial protection.

6) Make your employees part of the process. Ask your staff for input in areas where they have knowledge. They may have suggestions for line items that can be eliminated or ways to get creative and save money (see #9).

7) Overestimate your expenses, a little. This can help prevent “borrowing” from one budget category to make up for a shortfall in another.

8) Consider using excess funds to pay down debt. It’s simple: debt costs you money. The sooner you pay it off, the sooner you can use those payments for non-essential items.

9) Look for areas where you can change vendors. As you’re creating your budget, think carefully about each supplier of products and services. Can you find less costly alternatives? Can you bring some of these expenses in-house?

10) Revisit your budget frequently. You should evaluate your progress at least once a month. In fact, you could even start by budgeting for only a couple of months at a time. You’ll gain a lot of knowledge about your spending and sales patterns that you can use for the future.

How QuickBooks Online Can Help You Budget

QuickBooks Online offers built-in tools to help you create a budget. To get started, click the gear icon in the upper right corner and select Budgeting under Tools. Click Add budget. At the top of the screen, give your budget a Name and select the Fiscal Year it should cover from the drop-down list by that field. Choose an Interval (monthly, quarterly, or yearly) and indicate whether you want to Pre-fill data from an existing year.

Tips for Budgeting: Use data from a previous year to create a new budget in QuickBooks Online.

The final field is labeled Subdivide by, which is optional. You can set up budgets that only include selected Customers or Classes, for example. Select the desired divider in that field, then choose who or what you want included in the next field. Click Next or Create Budget in the lower right corner (depending on whether you used pre-filled data) to open your budget template. If you subdivided the budget, you’ll see a field marked View budget for. Click the down arrow and select from the options listed there.

To create your budget, simply enter numbers in the small boxes supplied. Columns can be divided by months or quarters, and rows are labeled with budget items (Advertising, Gross Receipts, Legal & Professional Fees, etc.). When you click in a box, a small arrow appears pointing right. Click on this, and your number will automatically appear in the rest of that row’s boxes. When you’re done, click Save in the lower right. You can edit your budget at any time.

Tips for Budgeting: QuickBooks Online supplies a budget template that contains commonly used small business items.

QuickBooks Online provides two related reports: Budget Overview displays all of the data in your budget(s) and Budget vs. Actuals shows you how you’re adhering to your budget. To print these reports, select Reports from the navigation bar and then under Business Overview select the budget report you need.

We know that creating a budget can be challenging, but it’s so important – especially right now. We would be happy to look at your company’s financial situation and see how QuickBooks’ budgeting tools, and its other accounting features, can help you get a better understanding of your finances. Please feel free to reach out to our Accounting Services team today to get started and discuss additional tips for budgeting.

As your year-end reporting is being finalized, you may be asking yourself, “what can I do in 2020 to streamline my financial reporting process?” This is a common question we hear at Cray Kaiser and one worth spending a few minutes discussing.

Each month your company processes many transactions consisting of invoices, deposits and disbursements. The completeness of these transactions is confirmed once the bank and credit card accounts are reconciled. However, as you work with your accountant at year-end, many discoveries take place. As adjusting journal entries are recorded, operating results vary significantly from what was represented in your bank balance. But by taking a few extra steps each month, you can alleviate this issue by gaining consistency in financial reporting, identifying variances more efficiently and streamlining your year-end closing procedures.

Here are a few items to consider as you determine your monthly closing procedures:

1. Review of Pre-Close Financial Statements

Generating financial statements at the start of your monthly close process will allow you to identify the accounts you will need to devote additional time to for that month. The pre-close financial statements should consist of both a comparative balance sheet and income statement. By running these financial statements in comparative form by month and year, you will be able to quickly identify balances that are irregular and may need to be further analyzed.

2. Reconciliation Checklist

The pre-close balance sheet should serve as your reconciliation checklist each month. Each account represented on the balance sheet should be reviewed to determine the appropriateness of the balance held at month-end. In many cases a reconciliation, report, or supporting documentation should exist to verify the balance. For instance, adjusted balances on the bank reconciliations should agree to the balance sheet account and accounts receivable and payable aging reports should agree to the balance sheet.

Unusual transactions such as assets containing credit balances and liabilities containing debit balances should be reviewed as these could represent misposted transactions and corrections may need take place at the transaction level.

3. Utilization of Recurring Journal Entries

The use of standard recurring journal entries can assist in recognizing expenses in the proper period. For example, as invoices for insurance premiums and other prepaid expenses are posted into a balance sheet account, the period the expense relates to should be identified. This period would identify the number of months an amortization journal entry needs. Setting up the amortization as a recurring journal entry will help ensure this transaction is recorded consistently each month. You can also mark the standard journal entry to end at a specific time period, thus reducing errors on the backend once the amortization period has ended. Most accounting systems allow for standard recurring entries (memorized transactions). These entries can also be set up for items such as depreciation and accruals for expenses paid at interim dates (i.e. interest, bonuses, etc.).

4. Post-Close Financial Statement Review/Executive Summary

The end of your monthly close process should allow for a cursory review of the month-to-month variances as reported in the post-close financial statements. These variances should be supported by the reconciliations you performed, or in the case of the income statement, would allow you to drill down to understand the transactions that occurred during the month.

Each month you may discover certain extraneous transactions that occur outside the normal business cycle. These should be documented in a memorandum or executive summary that will help you in future months as you start to trend your business activity and operations.

Initiating a month-end close process such as the one listed above will provide a roadmap to assist you in understanding your business cycle, minimize year-end reporting surprises and help you make decisions throughout the year. Please contact Cray Kaiser if you would like additional assistance in setting up your monthly close process or reviewing your year-end reporting.

Successful entrepreneurs need drive, passion, the will to follow things through, and the hustler’s spirit that enables you to constantly try that new thing or relentlessly chase that next big opportunity. Not all entrepreneurs are numbers people, and that’s okay, because there are plenty of numbers people out there willing to offer support.

But whether you’re a serial entrepreneur or simply looking to grow your small business to a sustainable level, it’s crucial to have an understanding of your venture’s financial results. While small businesses don’t require the same horsepower in their accounting department—or even require an accounting department at all yet—as large companies and quickly-growing startups, it’s still integral for entrepreneurs of all calibers to have an iron grip on their financial controls, processes, and results to prevent roadblocks.

Your business financials aren’t solely about how much revenue the company has brought in stacked up against your expenses, or how many strategic maneuvers can be deployed to minimize your business tax burden. Understanding your key ratios, terminology, and the stories behind your numbers (and having the right accountants and advisors who can help you interpret them) will take you from simple compliance to long-term stabilization that allows you to grow your business.

Where Is Your Money Coming From?

And not only that, but where is it going? It can seem like operations are running smoothly because cash is regularly deposited, the bills are paid, and imminent tax filings don’t feel like a shakedown where you have to scramble to get the funds together. But while your bottom line might look good on your next attempt to raise capital, you could find yourself in hot water if it turns out that only one client constitutes most of your revenue. If that client goes out of business or otherwise decides to stop or reduce their payments, it could be significantly harder to pay back the loan you took out or demonstrate to your investor that you’re worth the investment.

Demonstrating that you can make a profit is important for raising capital, but raising capital isn’t a be-all and end-all. The time that you spend trying to qualify for loans, grants, and outside investment might be better spent getting more clients, users, views, income-producing property, or other important revenue drivers first. This could prove to be even more important than trying to keep your burn rate (cash outflow) under control. Constrained cash flow is usually why most companies fold within the first two to three years of operation, and often gets overlooked by busy entrepreneurs focusing primarily on raising funds or posting an impressive profit.

Financial Transparency is More Than Just Compliance

In your quest for capital, your focus is likely to be directed toward the numbers investors are going to pay attention to: margins, profit generated relative to the capital you already invested, and how many users you have. But in being transparent about your finances, you’re not just being compliant with the law, you’re also giving a more accurate picture of where your business currently is and where you expect it to go.

Early stage companies are more likely to get investment less from promising financials and more from showing promise with the actual product and business model, so you don’t need to worry about getting the best-looking numbers to show. Banks, on the other hand, have stricter requirements for loan repayment and will be more stringent concerning financial compliance. They will want to see a proven track record and put more emphasis on your profit than growth potential, especially if you’re not a very capital-intensive business with significant collateral such as vehicles or real estate to secure the loan.

Put Profit First

Regardless of whether you go for the more dynamic risk-taking with investor funding or the predictable repayment process with a business loan, all external capital sources will want to see proof of proper cash management even more than having stellar revenue numbers.

The ability to adequately control your cash inflows and outflows is what will help your company weather any storm. And a surefire way to make that happen is utilizing Mike Michalowicz’s “Profit First” model that changes the Revenue – Expenses = Profit expression into Sales – Profit = Expenses. While this is not an official figure to report on financial statements, it’s an excellent cash flow management mindset that helps business owners prioritize their personal and business savings so that operating expenses, expansion, taxes, and personal income are always being paid.

By “paying yourself” first, it ensures that your financial results are based on having enough cash on hand before you pay any expenses.

Any small business is required to furnish a cash flow statement to most investors and some banks, but you shouldn’t wait until you have one at the end of the month, quarter, or year. Go over your cash flow every week. In addition to expenses that could be cut or revenues that could be added or bolstered, you might have bottlenecks in your cash collection processes that could be eliminated and you hadn’t even realized it. To learn more about managing cash flow, click here.

The team at Cray Kaiser prides itself on not just being numbers people, but people people. Not only can we help you conceptualize financial results, but we can talk to you about what it means for your business and work with you to create strategies that lead to growth. Please contact us if you’d like to learn more.