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CASE STUDY – WEB DESIGN BUSINESS – GROWTH & PROFIT BACK ON TRACK

Steve’s website design business having started from pretty much nothing had grown rapidly. In next to no time the business was turning over £200,000. Just to keep up with the rapid growth the team had been expanded from 1 to 5.

On the face of it, everything looked great.

 

BUT there was a problem…

The truth of it was that there was no proper accounting system. Everything was done on excel spreadsheets. These were ok in the early days when there weren’t that many transactions to process.

But as the business steadily grew and the volume of transactions rose dramatically, It got to a point where the excel spreadsheets couldn’t cope. They weren’t fit for purpose for a rapidly growing business.

And it became more time consuming….

The situation was made worse by the fact that Steve did all the bookkeeping himself. He kept the spreadsheet up to date. He manually raised and sent out every sales invoice using Microsoft Word. If he had time he chased customers for payment.

It was exhausting.

And then cashflow got worse….

In next to no time Steve found himself spending more and more time in the office in the evening and at a weekend just trying to keep on top of it all.

The more the business grew the worse it got….

The business soon hit cashflow problems. The manual systems and processes were largely to blame. Sales invoices were sent to customers late. Lots of customers paid late because they were rarely reminded or chased for payment.

Left in the dark by a lack of information

Whilst Steve could sense that the business was starting to get out of control he was completely in the dark when it came to the financial side of the business. The trouble was he didn’t have any financial information about his business.

What he needed but just didn’t have was….

  • A profit & loss report which showed him the sales, costs and profit for the month.
  • A cashflow report which showed him where the cash flowing in and out of his business was coming from.
  • An up-to-date list of customers who hadn’t paid his sales invoices.

Something had to change

It felt that the business had reached a point where it couldn’t grow much more. To break through the glass ceiling Steve needed more time and cash – neither of which he had much of.

He was constantly worrying about cashflow and if there was going to be enough to pay the wages at the end of the month.

This couldn’t continue.

The two simple changes that changed everything

Every business which is serious about growing must have a modern accounting system which is fit for purpose.

The excel spreadsheets and manual processes weren’t fit for purpose and urgently needed to be replaced.

The solution was twofold.

1 Implement cloud based accounting software – XERO was chosen.

A lot of time was spent by the accountants to set it up so that XERO was tailored to Steve’s business. A well thought through and set up system maximises efficiency and effectiveness…which ultimately leads to better results.

2 Delegated all the bookkeeping to his accountants.

This released Steve from doing something he really didn’t like and didn’t have the time for.  His time could now be better spent.

He now had a lot more time to work on and not in the business.  

The changes made an instant impact

Pretty much from day 1 the new XERO accounting system started to make a noticeable difference. Within weeks, the main things which noticeably changed for the better were….

  • All ongoing work sales invoices were now automatically being raised and sent out to customers. This saved a huge amount of time.
  • All one-off project work was now always billed by linking time recording software to XERO. This increased sales and profits.
  • Increasing numbers of sales invoices were now automatically paid on time by linking direct debit software to XERO. This increased cashflow, saved time chasing customers for payment and eliminated the uncertainty about when a customer would pay.
  • Steve now had a lot more time to work on the business – to grow both sales and the profits.
  • Steve unsurprisingly now felt a lot calmer and more confident about the future, – the business was more under control and running better. He received profit & loss and cashflow reports so he could clearly see how the business was performing each month. Cashflow now was much better.

And impact over the next 12 months…

In the 12 months after implementing XERO accounting software and delegating the bookkeeping both sales and profit went up.

Sales revenue increased by 10%

Profits increased by 59%

Just by having the right accounting system and delegating the bookkeeping to the accountant meant more time to work on the business and this has truly transformed the business. 

 

 

 

Disclaimer
It is important that you take professional advice before making any decisions based on the information that you learnt here. While every effort has been made to make sure it is accurate it cannot be precisely tailored to your personal circumstances. This article is for general information only and no action should be taken, or refrained from, as a result of this information.  Professional advice should be taken based on specific circumstances in each individual case.  Whilst we endeavour to ensure that the information contained in the article is correct, no liability will be accepted by Krystal Clear Accounting which is a trading name of Kim Marlor Associates Ltd or damages of any kind arising from the contents of this communication, or for any action, inaction or decision taken as a result of using any such information.

What are Bank Feeds and how do they work?

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In short, bank feeds create a digital link between your business bank account and your accounting software, such as Xero or QuickBooks.  

This means bank transactions are automatically downloaded into the accounting software. This simple piece of automation, completely removes the need to manually input every bank receipt and payment into the accounting software. 

Having bank feeds in place, saves a HUGE amount of time bookkeeping. That’s because it completely removes the need to manually input bank transactions into the accounting software. 

Saving time bookkeeping isn’t the only benefit for the business…. 

 

 

Case Study - Web design

What are the main benefits to a business using bank feeds?

Bank feeds automate, what was previously, a time-consuming task of entering all the bank transactions into the accounting software. 

 This saves the business a HUGE amount of time (& money) spent on bookkeeping.  

With bank transactions being downloaded from the bank every day, it means it’s quicker and easier to keep the bank balance in the accounting software up-to date. 

With the accounting software up-to date, the bank is updated daily which gives you a clearer, real-time view of your business’s cash flow.  

This makes it easier for you to plan your cashflow, and take action to improve it. 

There is always the risk of errors being made when data is being manually inputted into the accounting system. It is often time-consuming to find and correct any errors. Also, if an error is large then the Profit & loss and Balance Sheet reports will be inaccurate and potentially misleading. 

 Automating the bank transaction entry previously manual process, reduces the risk of errors being made and ensures that the bookkeeping records and reports are accurate. 

How to Link Your Bank to Xero

Ensure that your bank account is set up for online banking. This feature is typically available from all major banks. 

Log into your Xero account and navigate to the banking section. Select ‘Add Bank Account’ and follow the prompts to search for your bank. 

After adding your bank account details, you’ll see an option to set up bank feeds. Click ‘Agree’ to the terms, then securely log into your online banking portal through Xero to authorize the connection. 

 

Are Bank Feeds Safe & Secure?

Yes. 

Firstly, having bank feeds in place ONLY means bank transactions are downloaded into the accounting system. They do NOT give anyone else access to the business bank account. 

 Secondly, XERO has various security measures in place to give you a piece of mind that your financial data is safe and secure: 

 

  • Encrypted Connections: Xero uses advanced encryption technology to secure the data transmission from your bank to Xero. This means your sensitive information is encrypted during transit and cannot be intercepted or read by unauthorized parties. 

 

  • Compliance and Standards: Xero adheres to high standards of data security compliance, thus ensuring that its practices meet or exceed industry security standards and regulations. 

 

  • Regular Renewals: To maintain a high level of security, XERO requires that the bank feed connection is renewed every 90 days. This process is straightforward and helps ensure that the integrity of your financial data is always protected. 

 

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KIm Marlor the MD of Krystal Clear Accounting
krystal clear accounting

In Summary

In short, having bank feeds really saves businesses time and money on their bookkeeping.  

 They automate and eliminate what is otherwise a time consuming and error prone manual process.  

 Bank feeds is just one of the ways technology can be used to help business owners improve the financial side of their business.

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