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Looking for VCs? You'll Need On-Target Cash Flow Forecasting

One of the major questions Venture Capitalists want to know is: "Will your company make money in the future? And how much?"

This, of course, requires effective cash flow forecasting, which requires accurate bookkeeping and accounting records. Wait, what?

If you're like many business owners with revenue from $1 million up to about $50 million, you may have been through several bookkeepers in your firm. Maybe they weren't the most reliable. Maybe they just weren't that good at their job. Maybe they spent more time at the water cooler than crunching numbers. Or maybe they even stole from the company. (No one likes to think about it, but it does happen.)

If you're looking for a professional bookkeeper to get your records in order before you pursue investors, consider the solutions we offer at OSI. We hire only U.S.-based bookkeepers, trained and tested in QuickBooks, who work from home on a secure system. Your bookkeeper, assigned to your company, is available during your normal business hours via phone, fax, email or instant messenger, so you can reach them with questions quickly and easily.

How can this help you secure investors? We'll be honest. A good professional bookkeeper isn't a crystal ball that will tell you exactly how successful your company will be one, five or 10 years from now. But with the easy-to-read records and reports generated at the click of a mouse by our professional bookkeepers, you'll find cash flow forecasting is easier than ever.

When you're confident about the financial status of your company and the accuracy of your cash flow forecasting, it's easy to convey that confidence to potential investors. Smart investors want to put their cash into companies they can believe in—with the positive cash flow forecasting to back up those beliefs.

How a Return on Investment Analysis Can Help You Decide If You Need VCs

Has your business reached the point where you need angel investors or Venture Capitalists to help it grow? A return on investment analysis can provide the answer—if you know what to look for—with a mere glimpse at your financial records.

Return on Investment Analysis help you determine and predict the possible outcome of various corporate investments, whether it's:

  • office equipment, vehicles, machines or other assets
  • marketing programs
  • training or recruiting programs
  • real estate
  • stock portfolios
  • the infusion of venture capital to help your company grow

A return on investment analysis is a handy tool, especially if you're considering angel investors for your company. What sort of programs or investments would you use the venture capital for? And what sort of ROI would it show to your company and to your VCs?

 

In order to generate an accurate return on investment analysis, your bookkeeping records must be in good order. As the old computer programming saying goes, "Garbage In, Garbage Out." Accurate figures on past investments and future projections will help you or your bookkeeping staff generate the most accurate return on investment analysis to help you make the decision on whether using angel investors is the best choice for your company right now.

Bookkeeping a Mess? 
OSI's staff of highly-trained, U.S.-based bookkeepers can help. Whether it's taking over the day-to-day and monthly management of your office bookkeeping and accounting functions, or going back to clean up some of your past bookkeeping records, the bookkeeper assigned to your company is available during office hours to answer all your questions, generate reports, and perform every function an in-house bookkeeper would perform—at a fraction of the price and with less hassle. Call us today to find out how affordable accurate bookkeeping can be.

Accurate Bookkeeping Makes Expense Management Easy

Expenses off the wall at your medium-size business? Just came back from a trade show and nearly had a heart attack when your bookkeeper asked you to sign off on the Amex bill payment? Wondering where all your money goes each month, and how to reign it in to increase your ROI?

To quote an old self-improvement adage, "You can't improve what you don't measure." That's where accurate bookkeeping comes in if you're concerned about expense management. That means being able to predict your monthly expenses with some sort of accuracy—not wondering how you're going to pay a surprise bill at the end of the month.

At AccountingDepartment.com, we understand. And we're here to help.

Expense Management—and Much More
AccountingDepartment.com provides virtual daily, monthly and tax-time bookkeeping and accounting services to keep your business running smoothly. Because your bookkeeping services are outsourced to qualified, U.S.-based, work-at-home bookkeepers, our staff doesn't care about internal office politics, whose expense reports are larger (or smaller) or, quite frankly, what your company is spending its money on. All they care about is providing you with accurate financial reporting to help you with your monthly and annual expense management. Our staff doesn't make judgments or recommendations—our bookkeepers just provide you with the accurate data you need to make your own decisions about your company and about expense management.

How Accurate Is Financial Forecasting?

Financial forecasting is used by many businesses as a predictor for the company's future sales and growth—typically for the next year. Financial forecasting uses your internal accounting and sales data, along with external market conditions (such as how well your competitors are doing) and other economic indicators (inflation, the job market, consumer spending), to derive a "best guess" for a company's future.

Financial forecasting can be used to:

  • determine if your firm should seek venture capital
  • help convince venture capitalists to invest in your company
  • determine if your company is on-target with its financial goals and growth for the immediate future
  • determine if you need to cut spending at all

Financial forecasting often has two weak links that can affect the accuracy of the forecast: Predicting future sales and inaccurate bookkeeping from past years.

 

It can be challenging to predict future sales, although with the right data, even a "best guess" can come out fairly accurate. A professional bookkeeper can help you collect this data.

If your historical data and bookkeeping from the past few years is a mess, there's little chance any financial forecast will be accurate. That's where a professional bookkeeper, like the trained, experienced pros at AccountingDepartment.com, can help. We can help you balance your books and get your records in order so your next financial forecast is, well, right on the money.

What Can You Learn from Your Monthly Financial Report?

Are you so bogged down in the day-to-day affairs of running your business that you don't take time to glimpse at each monthly financial report? You're not alone.

If you're a small-to-medium size business owner with revenue over $1 million, you have a lot on your plate. You may have started your business to follow your passion—whether that's landscaping, law, manufacturing, marketing or any other field—but now it seems your business is running you, instead.

You may let each monthly financial report pile on your desk, just another sheet of paper to be taken care of "someday." But there's a lot to be learned from a monthly financial report—even if you just glimpse at it.

A monthly financial report tracks all your business' income and spending for the month, making it easy to see where you stand at a glance. This will help you with your company's financial management, growth strategies, goal-setting, and more.

When you work with a professional, virtual bookkeeper at OSI, the emphasis is always on the people, process and procedures that will keep your firm's financial records running smoothly and always up to date. Your bookkeeper will work with you to develop best practices and procedures that work best for your business, so you always have the financial information you need, when you need it.

Our bookkeeping services are hosted by us, in the cloud, but owned by you. You always have access to on-time monthly financial reports, and more, with just a few clicks.

When you hire AccountingDepartment.com business services to handle your day-to-day bookkeeping and provide you with your monthly financial reports, you'll be able to spot and strategize based on trends in your company—not just react to situations as they arise.

Business Cash Management for Startups

If you're a start-up firm predicting revenue of more than $1 million in the first year, one of your biggest challenges might be business cash management. You launched your company (presumably) because you have a passion for what you do—whether that's practicing medicine or selling products online through an ecommerce store, or any other field you can imagine. In addition to a passion for your industry, you probably have some pretty good business sense, and a knack for hiring people that complement your strengths—employees to do what you can't (or don't want to) do.

But does that knack for hiring the best people for the job extend to your bookkeeping department? It's hard (and can be expensive) to find high-quality, well-trained in-house bookkeepers to assist with monthly financial reports, business cash management and all the other things you need a qualified bookkeeper for. Why not get your bookkeeper services off on the right foot from the start?

That's where AccountingDepartment.com comes in. We go through the hiring and training process to select only the best, highly-qualified, U.S.-based bookkeepers—so that you don't have to. To be hired by AccountingDepartment.com, a bookkeeper must pass a complex, four-hour Accounting and QuickBooks test and also demonstrate adherence to bookkeeping best practices as outlined in our Client Procedures Manual, which is then tailored to each individual business to give our customers—business owners like you—exactly what they need.

The Right Bookkeepers Can Help When You Seek Venture Capital Funding

Looking for venture capital funding for your business? The first step is to discover if you need VC funding—and what you need it for. You'll want to work with your bookkeeping team to create a return on investment analysis so you have solid figures to bring to potential VCs along with your business plan.

Here are some questions to ask yourself before going for venture capital funding for your business:

  • Venture capital funding is typically available to companies already showing a profit, who are in the next stage of growth: Are you ready for venture capital funding?
  • Have you performed an accurate return on investment analysis? Can you show a predicted ROI that will appeal to VCs?
  • How much will accepting VC money cut into your own ROI?
  • Can you think of some creative ways to grow and become profitable without venture capital funding?
  • Do you have a solid business plan to bring to potential investors?
  • Are your financial records in order so you can show potential VCs where you've been—and where you're going?

Venture Capital Funding Needs Accurate Financial Reports
If you can't demonstrate an ability to manage the money you have coming into your business, VCs won't be keen to provide you with more. The first step to securing venture capital funding is a cash flow analysis, return on investment analysis, and accurate profit and loss statements for the past few years.

 

If you need help with bookkeeping or accounting, AccountingDepartment.com can help. You'll have a dedicated bookkeeper assigned to you, who works office hours and stays in touch via phone, email or instant messenger to answer all your questions.

Call us to make a virtual bookkeeper the first step on your journey to securing venture capital funding.

What's The Difference Between Venture Capital Funding and an Angel Investor?

You've got a new business, maybe in its first year or maybe you've survived that tumultuous first year and are poised for big growth as part of your five-year plan. But you need money. The old adage, "You've got to spend money to make money," is often true. But where can a start-up business find money? Well, there are business loans, which are getting harder and harder to come by in today's economy. And then there are angel investors and venture capital funding. What's the difference? Which one is right for your business?

Angel Investors
An angel investor typically provides seed capital to new businesses. An angel investor is an individual, private investor (or a small group of people), who believe in your business and want to see it succeed. Of course they are concerned with profits and making money on their investment, but because they don't have other members of a company to answer to, they might be more likely to take risks.

Venture Capital Funding
When you enter the world of venture capital funding, you may already have a year or so under your belt and are ready to grow your business. Venture capitalists are larger, for-profit corporations. When you accept venture capital funding, the organization will want to place one of their VCs on your board of directors, and will want a say in the operation of the business to make sure the money they've given is being spent wisely.

It may be easier to obtain funding from an angel investor—especially for a start-up—but a VC may be able to provide more funds to grow your business.

One thing all three of these investors—banks, VCs and angel investors—require is accurate financial records. In order to show potential investors where you expect to be going, you have to show them where you've been. Whether you need daily bookkeeping services or full-scale bookkeeping and accounting for your medium size business, AccountingDepartment.com can help. Call us and we'll help you get ready for the next stage of growth in your start-up business venture.

Starting a Big Business on a Shoestring Budget? Save Money with Virtual Bookkeeping

When you're first launching a larger business it may be hard to get seed capital. Venture capital funding, angel investors, and business loans are three ways to do it. But you also want to find ways to keep expenses as low as possible.

For a larger business, certain expenses are hard to avoid: office space, office equipment, in some cases inventory, payroll, taxes, licenses and communications equipment. When you're looking for early stage capital, take all these expenses into account, as they can negatively impact your cash flow—especially until your sales and marketing efforts start paying off and you make money.

This article for software development professionals offers some good advice for business startups of any type: "Spend little." "Get ramen profitable." (That is to say, cut your expenses to the bare minimum until you begin showing profits at this level.) This is also good advice if you're looking for an extra infusion of cash to grow your business. If you can do a lot with a little, it shows VCs that you'll spend their money wisely, too. That's just one reason business cash management is so important for startups.

One easy way to cut business startup expenses is by outsourcing certain jobs. You can save money on a professional bookkeeper with a virtual bookkeeping service like OSI.

What Is Financial Modeling?

Financial modeling is the domain of venture capitalist and investment bankers, primarily. In fact, many business owners may not have heard the term—if they did, it may sound like something they don't have to worry about.

You may never need to concern yourself with financial modeling at all as a business owner. Or will you?

If you're looking for early stage capital for your larger or professional business, you may need to know a bit about financial modeling—what information investment bankers look for and how to organize your books to provide potential venture capitalists with the information to decide whether or not your business is a good financial risk.

In general, financial modeling falls into three categories:

  • corporate finance models
  • risk management models
  • structured finance models

Each of these uses spreadsheet modeling to analyze cash flow, profit-and-loss, and monthly financial reports. The important thing to know as a business owner is that accurate financial data is the key to accurate financial modeling.

 

If you're like many startup businesses, you may have handled bookkeeping yourself at first, and then moved on to an in-house bookkeeper and perhaps you're now at the stage where you have a whole bookkeeping and accounting department. But are they doing the job you need?

When it comes time to solicit for early stage capital from investors, are your records in the order they need to be in? Can you generate spreadsheets to show profit-and-loss, cash flow, ROI and other important data with just a few keystrokes—from any computer or smartphone in the world?

These are just some of the benefits of hiring a virtual bookkeeper who manages all your records on a secure, hosted server via Software as a Service. Everything you need is available from anywhere, at anytime.

If you feel bookkeeping in your company could be handled better, contact AccountingDepartment.com to find out more about our virtual bookkeepers before you pursue venture capital funding.

What to Do About Negative Cash Flow

Do your cash flow statements reflect a negative cash flow? This may not be reason to worry. If you responded, "What cash flow statements?" that's more reason to worry—and possibly a very good reason to call AccountingDepartment.com to learn more about our virtual bookkeeping services.

Defining Cash Flow Statements
First, let's look at exactly what a cash flow statement is. This type of financial report is related to profit and loss or balance sheets as well as net income statements. A cash flow statement records the amount of cash and cash equivalents entering and leaving a company—but not income (or expenses) on credit. 
This statement gives investors one picture of how a company is running, where cash for the business is coming from, and how that cash is being spent. It can paint a fairly accurate—if not complete—picture of a company's financial health.

Negative Cash Flow? No Worries.
There are certain situations where a negative cash flow may not be a bad thing. For instance, let's say you just invested in new factory equipment that will streamline operations and permit you to produce goods less expensively in the long run. You may see a temporary negative cash flow, but that's actually a positive indicator that your business is in a growth stage.

Perhaps you're a retailer who just invested in this year's bestselling holiday item. Until those products sell, you'll show negative cash flow, while your overall assets may have increased. If you're looking for investors, showing negative cash flow due to rapid growth is not bad. Investors should consider your past cash flow statements, as well, to see if negative cash flow is a temporary condition caused by rapid growth or a downward trend in your business.

Like all financial statements and reports, an accurate cash flow statement begins with accurate bookkeeping and intuitive software that lets you generate the reports quickly and easily. That's where AccountingDepartment.com comes in.

If you need help with cash flow statements or any other aspect of your monthly or daily bookkeeping and accounting for your business, contact us today.

How Online Bookkeepers Can Help with Expense Management

A good online bookkeeping service can help your growing business with expense management in more ways than one. First, online or virtual bookkeepers save you money over hiring an in-house bookkeeper or staffing an entire accounting department. You'll save on:

  • Office overhead
  • Benefits
  • Unemployment insurance
  • Intangibles such as bonuses, perks, etc.

Also, because turnover is so low at OSI—because we treat our work-at-home employees well and give them the tools they need to do their job—you won't have to deal with bringing a new bookkeeper up to speed every month or every week. You won't have to spend time hiring and training new personnel. That can save your company thousands in time, human resources, and real dollars.

 

Your online bookkeeping service and accounting department will also help you with expense management by providing reports that show you exactly how much you're spending—and what you're spending it on.

Whether you use accrual based account (which we recommend at OSI) or cash-based accounting, you'll see exactly what's going on, what's coming in, and when. Only by keeping track of your finances in easy-to-read, easy-to-access reports can you make decisions about where to cut costs and where to invest.

Financial forecasting, ROI modeling, P&L statements, and cash flow analyses are just a few of the tools the bookkeeper and financial controllers at AccountingDepartment.com use to help you get a better handle on your business and make expense management easier.

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