Case Study: How I’d Use Cloud Apps to Improve my Business Today
Today, I run a subscription-based software business, however, I spent over a decade running a project-based service business. Many of the cash flow, growth and capacity struggles that I experienced then still plague project-based businesses today.
If I had the opportunity to do it again, I know now that a system to help me manage my finances is inexpensive and easy to put in place – I could have engaged my bookkeeper for help and really leveraged the equation.
Put simply, I really didn’t know what was happening in my business from a cash flow and sales perspective. I had ‘feel’ for how the business should flow, and could grasp snippets of information, but overall I couldn’t clearly see what was happening this week, this month or even where we were headed this year.
Here’s how our process generally worked:
We had numerous ‘potential’ deals in progress. Some were very early conversations around a potential project, while other deals were further into the process and reaching the proposal stage. The key ones were locked down and the job was due to start immanently. Overall however, we just hoped we had enough business to keep the cash rolling in and the doors open.
Once the jobs entered production, we had a half-assed way of tracking hours into jobs. Since the projects were nearly always a cost-assured price, the time-tracking was used to keep us on track internally. Of course, the time-tracking was only useful if it was accurate and accounted for hours wasted on non-project “tasks” (such as ping pong), but that’s another story.
Based on the contract we signed, we would be held to a specific scope and would invoice based on completing phases of the project. We quickly learned how important it was to detail the scope properly and structure the payment terms properly to make sure our cash flow was solid.
As project phases were approved, we’d make up invoices and send them out. At that time, nearly a decade ago, invoices were hand-made (digital of course but not connected to anything, just stored on a drive). A copy went to the client, we kept a copy in as a reference and a copy went to our bookkeeper.
Along with the invoices, a folder full of paper receipts would be handed off to the bookkeeper at the end of the month. All that data was entered into her desktop system, which we had no access to view, and at the end of the year all those entries would be handed off to our accountant.
On occasion we did receive some basic printed reports from the bookkeeper. We also had a standing quarterly meeting with our accountant to look at a bunch of other financial papers that were pretty much meaningless to me.
The net result of all of that paper was, at best, a snapshot of what happened weeks and months ago. Frankly, I didn’t really care. I intuitively knew where we had been, if we’d made out okay and if we were ahead of the game. Honestly, in those meetings I just had this strong sense of ‘how much this meeting is costing me’ in both money and time away from the office.
As soon as I got back to the office, fresh from a financial wake-up, I’d start digging through our paperwork to figure out what really mattered to me. I needed to know where we were headed and if we had enough sales and cash flow to get there. First up, were we in danger of a shortfall? Second, was the money there to grow our team and our business?
I was pretty much blind. I would go through our invoices and try to plot out when that money would come in. I would go by due date to start, but then ‘reality’ would set in and I’d adjust for payments that I knew would be late.
Then, I’d try to get a sense of our sales and make up a list of potentials. The problem with that list was that I really had no system in place to figure out what was likely to come in versus what wasn’t, outside of some intuition. I didn’t know when the deals we would land would likely turn into cash. And I didn’t know how landing all of these deals would affect our capacity. Would the team be sitting idle for a month? Followed by a month of overtime and apologies for late delivery?
I figured out really quick that if I needed to make our budget in 12 months, I was in trouble if the cash rolled in over 14. And the highs and lows that forced my team from idle to overworked ate up my meagre profit margin.
But what if it didn’t have to be this way? What if I could just look at our current state of our cash? I didn’t need to wait a month or longer to see where we sat? What if I could look at our potential deals and make some sense of everything?
What if I could predict with a high-level of certainty and a quick glance what our near-term cash flow would look like? What if I could forecast our sales over the year and predict the highs and lows well ahead of time so that I could adjust projects and capacity?
Well, I almost wish I was back in that service business today, because all of that is possible, inexpensive and easy to implement.
I’m going to run through a single case study of how I would set up my system for that business today.
My Dream System
Here’s what I’d like to see. When I pay bills online, those receipts are automatically dealt with so that no one needs to manually enter the expense into a system. When I get a paper receipt, I just want to snap a picture of it and recycle the paper. More than OCR, I want a system that parses the data on my restaurant receipt and then knows what to do with that info.
When I send out an invoice, I want to create it in under a minute and just click ‘Send’. I also want that invoice to be included in my bookkeeping without any extra steps.
Speaking of those bills and invoices, I want to see them all in a timeline so I can see if the cash will all flow in on schedule and keep me in the black. I also want to see further than a week or two from the present so I can manage how my cash is trending and plan my projects accordingly over this quarter and this year. Will we be able to grow? Or do we need to tighten our belts and get ready for some bumps in the road?
And, I want my bookkeeper spending time reconciling things, giving me input and meaningful data, not manually entering receipts.
The cool thing is that it’s pretty painless to set up a system like this. One that will save you a ton of time, a pile of money and give you access to yesterday’s, today’s, and most importantly, tomorrow’s data.
The First Step is into the Cloud
To gain this sort of optics in your business you’ve got to use the cloud. “The Cloud” is simply data storage and manipulation using the internet. There are a ton of significant benefits, from backups through to cost and security, but in this case I’m just focusing on one big advantage: software integrations.
Simply put, integrations means plugging different essential systems together with a few clicks so that they can send data back and forth. That means that your data is up-to-date and accurate across numerous systems without needing to update everything piece by piece.
Data entry is nearly a thing of the past too, which means you save a ton of time, a lot of money and have up-to-the-minute information at your finger tips.
One Potential Set-up
You’ll notice this section is pretty brief. That’s because it’s straight-forward and it works. There are hundreds, if not thousands, of cloud apps that can be connected in all sorts of ways, but I’m going to give you one example of how I would set up a system for my past creative business, today. These are all apps I am currently using and have experience with, although in possibly a slightly different way that matches my current business.
There are a lot of terrific products that perform a similar function, each with their strengths and weaknesses. It’s worth a little to research each. Talking to a bookkeeper or accountant versed in cloud tools can make this a much easier and faster process.
I personally use Hubdoc to deal with my business expenses. I’ve connected nearly all of my regular, recurring expenses to Hubdoc so that the invoices are automatically sent and archived every month without me taking any additional actions. Hubdoc lets me login and see nearly any bill that’s been charged to my business, clearly organized and quick to access.
For purchases that are ‘one-offs’ I can simply forward the emailed receipt to Hubdoc or, in the case of paper receipts, snap a photo in Hubdoc on my phone and it stores and organizes the information.
All of my expenses are tracked with nearly zero manual data entry.
When tax time comes around, I still need more than a simple database of expenses to maximize my accountant’s time and knowledge. My accountant also needs a record of my income and what’s been happening in my bank account to make sure my business finances are clear and correct.
There are a lot of terrific cloud-based accounting tools. Based on my own experience, I suggest industry-leading QuickBooks Online or Xero. Personally, I use QuickBooks Online and when I started with the tool for the first time, I connected Hubdoc with a few clicks, so now all of the receipts are automatically entered into my accounting software. I’ve also connected my business bank accounts and credit card so everything is entered and tracked without me lifting a finger.
Of course, all of this data has to be reconciled to make sure it’s all correct. That may be you or your bookkeeper but we’re talking minutes a month instead of hours.
So you need to send out invoices that are clear, professional and that are somehow logged in the accounting system. Well, both QuickBooks Online and Xero have you covered there as well. After a quick set up, users can send invoices directly from where they’re recorded in your revenue and ready for an accountant’s scrutiny.
This process is often viewed as a highly separate process from bookkeeping and accounting, and it really is until those in-the-works deals turn into invoices and bills. But, today’s deals are the future cash flow. When I see a business with current cash flow problems, 9 of 10 times it’s a result of a broken sales pipeline several months before.
Pipedrive software is the perfect antidote for businesses that need to close fewer, but larger sales. The system is intuitive enough for a business owner to use to keep track of potential deals, what conversations were had and need to be undertaken, how likely deals are to close, how much they will be worth and when they’re expected to close. It’s also powerful enough to be used by a sales team.
This is where Dryrun comes in. In my former business, my biggest challenge was that there was no way, outside of an error-prone spreadsheet (or maybe a whiteboard) that I could figure out how all these puzzle pieces fit together.
Did I have enough money to make payroll on Friday? To make it through the month and quarter? How are sales looking? Am I likely to make a profit this year and grow?
Most importantly, can I see all of these critical items ahead of time so that I can make better decisions, adjust as needed, and grow my business?
This is where Dryrun shines. It lets you set up a regular, recurring budget forecast to get a sense of your break-even point and forecast into the future. It helps you keep track of all of those invoices you need paid and ‘one-off’ bills you still need to pay.
Dryrun lets you move things around based on your best guess of when the money will truly come in to your account, and when you intend to actually pay those bills.
It also imports all of those potential deals so you can see how those sales will likely flow in and turn into cash over the upcoming year.
Typically, Dryrun users start with two lines on the graph. The first, ‘actual’ near-term cash flow, and a second more speculative sales forecast.
But in Dryrun, you can model out whatever you want and compare ‘what-ifs’ so that you are prepared to react to anything.
So, that’s my wish-list that’s turned into reality.
Totally worth it.