With the ever increasing pressure on businesses to be more lean and more competitive within the market, the ability to know how you are doing is more important than ever. Thus, real-time accounting comes into play to an even greater extent. What was once a finger in the air approximation of your finances, profit and loss and stock values, is now a vital part of your day-to-day business workflow.
You need to be able to (on an almost daily basis), keep track of every single transaction in and out of your business, and identify areas which are doing well and those that require you to make some changes. This ensures you can make the decisions that are needed, when they are needed. And to do this, you need up-to-date accurate financial information.
In today’s business, time is money. How often do you use your management accounts information to help you manage your business on a day-to-day basis? Is it that you’re not getting the information fast enough to be of use? Or is the data not as accurate as you need it to be?
Real-time accounting gives you the information you need, when you need it, as soon as a transaction is complete. Whether it is a sale or a purchase, you have access to your profit and loss, balance sheet, sales reports and more. With this detail, you can be more proactive rather than reactive to your business needs.
Profit and loss and the state of play
The Income Statement or Profit and Loss is the main area where you will see the benefits of real-time accounting. At the click of a button (day or night), you are able to see how you are doing and what your overall profitability is like. You can compare it to previous periods, check different channels and compare how each are doing against one another. From that, you can make the choices that will drive your business in the right direction.
There is no waiting for your accounts to be compiled at month end as real-time accounting has it all there, 24 hours a day, just waiting to be accessed when needed. Whether you need information for a new investor or you need to see your Bank Manager the next day, you will always have accurate up-to-date information to hand, when needed. This means no more lengthy waits for your accountant to pull together an up-to-date figure that is out of date before you’ve walked out of the door.
You not only gain advantages on the Income Statement, but also on your Balance Sheet. You have accurate stock valuations with no need to deal with open and closing stock journals. Each time you buy new goods and the stock is received, your inventory and stock levels are automatically accounted for. This means you know how much you have left outstanding on goods received but not invoiced, or how much you have paid out but have yet to receive the goods for. And this is what you can see on your Balance Sheet at a glance.
Each time you sell, your stock is reduced and your Income Statement is updated showing the real-time margins and profit on your orders. In a business where every penny counts, this helps you see where savings can be made or where (and if) you can charge more or cut prices to help beat the competition.
What's working, what's not?
When using a system which accounts for all of your channels and integrates them into the one system, whether it is BigCommerce, Magento, Shopify, eBay, Amazon or POS, you can quickly and easily see which channels are working for you and which are not.
A common mistake made by multichannel retailers is thinking that a channel is performing better than it really is. You may feel that eBay is performing well because you are receiving lots of orders, but is that really the case? It could be that, in reality, you are making very little or no profit once you take into account all of the costs involved. In reality, you should perhaps be raising prices or even looking to move to another channel.
By filtering and comparing the information within one system, using the real-time accounting data for each separate sales channel against the costs to source goods, you can keep track of your margins to identify areas to improve, and channels to expand or remove as needed. If you need to add other costs to your product cost prices, such as landed costs (e.g. shipping, insurance, duty, storage etc), then the accuracy for margins and profit per item takes you to a new level.
Without using accurate, timely and up-to-date information, you run the risk of making bad decisions that can lead to an unprofitable business and in extreme cases, going bust. While intuition can take you a long way, it is no substitute for accurate up-to-date data that can be looked at and compared to on a regular basis, helping you to not only survive, but prosper and grow. The retail industry has been and is still being confronted with unprecedented change. Being agile and acting on intelligence about your business will keep you competitive and one step ahead of your competition in the market.
“Accuracy is a huge advantage for us, by having all our retail information stored centrally, there is less room for error. The real-time accounting is a big bonus, it means no more paper ledgers or spreadsheets which is great news. We no longer have to repeat manual activities saving us time and having to do monotonous tasks. We can see an overview of the business by just logging into Brightpearl, allowing us to evaluate the business much more efficiently.” - Jonathan Partridge, Director, David Shuttle.
So, keeping an eye on everyday costs to the business, and having accurate up-to-date information via real-time accounting will help you to identify those areas of pain, but also those areas that will grow. You can quickly react, reorganize and restructure, aiding your future expansion plans, whilst boosting profitability and growth in your business. real-time accounting will give you peace of mind and confidence that anytime, day or night, you’ll have a true up-to-date reflection on your business accounts.