In October, I attended two different accounting conferences back-to-back – the first industry events we’ve been able to attend in the last 18 months! Meeting, networking and learning from so many great industry partners and experts was quite invigorating. Importantly, I also left the conferences excited about the continuous evolution of our industry and the opportunities it creates for System Six to continue to grow. Here are the main takeaways from Thriveal’s Deeper Weekend and Scaling New Heights.
The currency of our industry is shifting. While transactional services still underpin everything we do, clients more and more expect and need value-add advisory services. Clean books will always be the foundation of quality accounting, but the rise of cloud technology has led to endless integration possibilities, making transaction management less cumbersome than in years prior. So what does this mean for bookkeepers? We’ve got to continue to build and lean into our relationships as agnostic, trustworthy advisors. We’ve got to continue to educate ourselves on all the problems our clients are facing – not just their accounting challenges – so we can provide advisory services beyond just finance. So for System Six, in the coming months and years, we’ll be working on finding new ways to deliver value to our clients, whether through deeper financial advisory capabilities, additional support for HR management, or even technology advisory. Ultimately, we hope to continue to deepen our relationships with customers so that we may best serve them and enable their success. Building this deeper foundation of meaningful relationships rather than transactional services is the future of our industry.
Innovation is the heartbeat of the tech world. In every industry, new services, programs, apps, and vendors emerge every quarter. At these conferences, I had the opportunity to hear firsthand about the latest initiatives, features, and products heading to market. Some will provide healthy competition for some of our favorite vendors like Bill.com and Gusto, who themselves continue to improve. At the same time, others are finding success in filling niche spaces in security or uncategorized transaction automation. We will keep tabs on several vendors as they develop and expand so that we can provide the best service to our clients.
Quickbooks is Reinvesting
While Quickbooks is still our go-to cloud-accounting software, they’ve gotten flack across the industry in the past few years. Whether from the launch of QB Live, a competitor to many bookkeepers, or because of less than satisfactory customer service, the ecosystem has been frustrated with them of late. Fortunately, they are focused on doing right. They are reinvesting in their accounting partner community by overhauling their customer service, reducing wait times, and providing robust training for firms. We look forward to continuing our partnership with Quickbooks and appreciate their efforts to better serve firms like System Six.
Great Industry Ecosystem
The business world often gets a bad wrap as having a cut-throat, competitive culture, but I was pleasantly surprised otherwise. Everyone I met was friendly, encouraging, and supportive. The atmosphere was full of camaraderie and different individuals championing one another. Rather than approaching the industry with a scarcity mindset, other firm owners recognize the endless number of potential customers and the wide variety of unique services in the market to differentiate firms. I left feeling immensely appreciative of “competitors” who treated System Six more like a partner, willing to share information, resources, and encouragement. Take heart; there are fabulous firm owners leading the charge into the next iteration of cloud accounting services.
Last month, System Six founder, Jeremy Allen, was featured as the inaugural guest for Accounting Leaders Podcast. Hosted by Karbon Founder & Director Stuart McLeod, the Accounting Leaders Podcast curates the best resources in the industry through conversations with accounting’s most significant innovators.
Jeremy and Stuart talk about small-town living, from the culinary limits of the midwest to the blessing of living near family in a slower, tighter-knit community. Jeremy’s recent move from Seattle, WA to Holland, MI, opts for colder, snowier winters but relatively easy access to big cities like Chicago and idyllic towns like Traverse City. While COVID may have changed the work-home balance for many individuals, nothing radically shifted in the operations of System Six. System Six has always been a remote firm with team members across more than a dozen states. While other industries struggled with the forced pivot to cloud-based systems, virtual meetings, and communications logs, System Six carried on with business as usual.
“For the first seven years, we had to convince people why the Cloud was good, but COVID accelerated that,” says Jeremy. Remote, streamlined technologies are not just a slick option; they are essential to day-to-day business. Offering a work-from-home option for employees used to make System Six stand out among the crowd. High-class talent sought out the rare opportunity to provide quality CAS from the comfort of their homes. But the shift to at-home work for the entire industry means that System Six no longer offers something exclusive. Stuart points out that this shift, paired with the scarcity and challenge of finding and retaining talent, could pose problems for System Six’s growth in the future. Jeremy acknowledges that, in this case, company culture will probably emerge as their unique differentiator.
Growth and innovation have always been in the DNA of System Six. Jeremy founded the business with neither experience as a bookkeeper or training in accounting. What he was keenly aware of, however, was the day-to-day frustrations of navigating finances as a small business owner. Having launched several businesses before System Six, Jeremy found processes for payroll to be antiquated and lacking in technology advances of parallel industries. While accountants were helpful during tax season, they weren’t always supportive throughout the year and lacked the patience and expertise to provide holistic advisory services. Without someone “in the books” from week to week, financial records would become muddy, late, or disorganized, and only the business owner was left to clean up the mess. Amid his own frustrations birthed his most successful business.
His experience not only resonated with other small business owners but non-profits, churches, financial firms, and high-net-worth individuals. He quickly realized that managing the minutia of receipts and payroll brought immense relief. Their services were both systematic and highly “sticky.” While System Six loves innovation and technology, “slow and steady wins the race” for Jeremy Allen. Stuart asks about the future of System Six, and Jeremy shares exciting opportunities for acquisition or acquiring another business. “It’s always nice to get asked to prom,” jokes Jeremy. Entertaining invitations for mergers is flattering, but the fit has to be more than financial. For Jeremy, the highest priority will always be if a suitor is right for the employees, families, vision, and mission of System Six.
As Benjamin Franklin once said, “By failing to prepare, you are preparing to fail.” So, let’s prepare now for your future success with a strong budget.
For business owners, having a budget for the New Year is an important part of financial preparation. But for some business owners, just the thought of having to prepare a budget makes them anxious. The idea of adding another item to your to-do list might actually push you over the edge, especially this year. Or maybe you just don’t know where to start. Either way, a budget is a critical step to your success, so reach out! System Six, your current bookkeeper or your CFO can help!
The budgeting process allows business owners to think about how much they will earn and how much they will spend in the following year. It can be as detailed or as summarized as you like. The goal is that a budget will ultimately help the business owner throughout the year determine if the business is on track financially through the use of budget versus actual reporting. So you’ll know month by month when and where to make expense changes or where you may be exceeding your revenue expectations.
Where Do I Start with a Budget?
Preparing a budget may sound like an impossible task. Keep in mind that this process can be as simple as you want it to be the first year and then revised and improved upon in subsequent years.
The most effective way to build your budget is to align your data with the accounts in your financial system (i.e., QBO, Xero, Sage, etc.) and ultimately to input the budget into your system for easy reporting next year. At System Six, we are here to work with our clients and other business owners to help them through this process.
Whether you have prepared a budget before or not, one of the best places to start is by reviewing financial statements for the current and prior two years, making notes on some key pieces of information.
Do you notice any revenue trends? Are there certain months where you earn most of your revenue each year? Do you see a rather steady revenue increase each month?
Are there any atypical income sources in those years that may not recur next year?
Are your Cost of Goods typically a certain percentage of your revenue each month? Are there ever variations in certain months that need to be planned for?
Are there any atypical expenses in those years that may not recur next year?
Are there amounts you want categorized differently on your statements next year?
What’s the Point of a Budget?
Building your budget will vary some depending on your revenue model. However, in most cases, when determining your revenue budget, you will want to include realistic stretch goals. A budget needs to be achievable. There are other business growth documents you can use to evaluate and incentivize a sales team, for example, but a budget should be a realistic expectation of next year’s financial statements taking into account known external factors and changes. The expectation is that you will be able to run budget versus actual reports next year and be able to determine if your business is on track to your anticipated (budgeted) bottom line. If you are, great job! If not, you’ll be able to see where the business has gone astray and make real-time (monthly) adjustments to get back on course towards your initial plan.
How Detailed Should My Budget Be?
If this is your first time preparing a budget, our recommendation is to keep it simple! We don’t want you to feel like your budget is more trouble than it’s worth. If you are a Budgeting Pro, you can make your budget as detailed as you like. Either way, you will want to match your budget data to the Chart of Accounts inside your Financial System (i.e., QBO, Xero, etc).
You can enter your revenue to the top level called Revenue/Income or you can split it between your various sub-Revenue accounts. The same is true for all layers within your Chart of Accounts, including Cost of Goods and Expenses, being as detailed as you like or simply entering to the parent/summary/header accounts that you prefer. You can even choose to simply enter annual amounts for all accounts which will auto-split evenly across all 12 months of the year. Just a quick note that if you enter budget entries to the Summary accounts, and then next year actual expenses are entered to Sub-Accounts (more detailed), you will want to run Summarized Budget versus Actual reports in order to see the variances at the Summary level. But don’t worry, this is just fine; your budgeting efforts are still well worth the time! You may find this is all you need for several years.
At this step in the process, having reviewed both current year and prior year financial statements, it is up to you to determine next year’s annual budgeted revenue. An estimate is fine at this point based on what you know about your business. It is helpful to forecast where you think your revenue will be at the end of the current year in order to have a solid starting point for next year’s budget.
How Do I Determine Budgeted Revenue?
You may be wondering how you calculate more detailed budgeted revenue. This will differ depending on the type of business you operate.
Different Types of Businesses
Subscription or Donor/Membership-Based organizations typically track their subscribers or donors/members by level or group and price. They know how many members they anticipate for next year and what revenue that equates to.
Service or Project-Based organizations typically track their services by price. They anticipate a certain number of services for next year and what revenue that equates to.
Inventory/Product sales organizations typically track their product sales by product. They anticipate a certain number of product sales for next year and what revenue that equates to.
These calculations are made with information pulled from a Point of Sale system or Membership database, which may or may not be directly integrated with the financial system.
More Complex Business Structures
What if your financial system is set up with even more detail, such as departments, locations or class structure? All of these layers can absolutely be taken into account when creating your budget. Essentially the process is the same; you will simply repeat the process for each of these layers. In the end, when the budget is entered into your financial system for each of those layers, the summarized version of your budget will “roll up” to your master budget. It is important to note that completing a budget process to this level of detail can be quite time consuming, especially if this is new to you or if you are taking on this challenge alone without any supporting departmental staff.
Special Revenue Considerations
As revenue is estimated for next year, it is important to include potential key business changes, such as new product lines/products or expanding business areas. Conversely, it’s also important to consider the discontinuation of any business lines/products or the closure of any business areas. Other key changes might include the impact of price increases, including not only the anticipated increase, but also any customer impact as a result of those increases (i.e., cancellations, etc.).
Once you have this detailed annual budgeted revenue, the next step is to determine how to spread it out monthly for next year’s budget. If you have chosen not to calculate annual revenue in such detail, simply use the annual budgeted revenue for the business as a whole you determined above.
Monthly Revenue Modeling
Once you know what you are expecting for next year’s annual revenue, it’s important to know how to spread out that revenue each month. Depending on the type of business you operate, there are several options to choose from. Please note that if your revenue is consistent month to month, you can choose to enter your annual revenue, skipping this step altogether, allowing the system to allocate revenue evenly by month (simply dividing by 12).
Cyclical Revenue Modeling
Does your business generate most of its revenue during a specific month or quarter of the year? For example, is your business dependent on New Year’s resolutions (i.e., gym memberships, etc)? Or, is your business dependent on holiday sales (busiest from Oct-Dec)? If so, then your business would be considered cyclical, with more revenue being entered to specific months during the year. For a cyclical business, it is important to budget revenue next year by looking at the historical trends for those key months, being realistic about growth, and then allocating revenue in the other months similarly.
Does your business typically grow a certain percentage each year or each month? If so, calculate the growth percentage and see if that applies consistently throughout the year or in certain quarters. Based on what you find, this percentage growth should be applied similarly to revenue amounts for next year.
Breakeven Revenue Modeling
Would you like to budget revenue based on the minimum amount needed to cover anticipated expenses for next year? This is called Breakeven Budgeting. You can apply revenue Cyclically or Incrementally, but by lower amounts or even reducing revenue from the current year. In this model, first budget expenses, budgeting revenue last, with the goal being a $0 Net Profit/Bottom Line. The purpose of this model allows business owners to know that if they do not exceed budgeted expenses and at least meet budgeted revenue, they will not lose money at year end.
The expense side of the budget model typically uses percentage growth for key accounts. Most often, business owners will review current and prior year financial statements to gauge expense levels and increases year over year to estimate next year’s budget. Key areas to consider include:
Cost of Goods Sold: Since these are industry or even business specific, you’ll want to review these in depth to determine what to expect for next year by month.
Payroll: You’ll want to consider both cost of living increases as well as any anticipated performance increases. Keep in mind that payroll accounts can be in various places within the Chart of Accounts, depending on your layout, including Costs of Goods Sold and Admin/G&A, and may also split out owner wages separately.
Employee Benefits: Benefits can unexpectedly increase, sometimes quite a bit year over year, so it can be helpful to reach out to your broker to get an idea of your increase for next year. Be sure to include any new benefits you may be implementing next. And similar to Payroll, these costs may also be found in several places on the P&L, including Cost of Goods Sold and Admin/G&A, with owner benefits oftentimes split out separately.
Utility Increases: Although often considered a “fixed expense”, utility companies do increase their rates and utility expenses can be a large expense on the books. So taking a look at prior year increases can help determine next year’s budgeted expense.
Revenue-based taxes: Depending on your state, revenue-based taxes are typically percentage based. So for budget purposes, setting them as the same percentage (of next year’s estimated revenue) as current year is generally a safe bet, unless you expect major changes to your business model.
Other expenses: As the business owner it is important to look at the other expenses on your books, determine what percentage increases are appropriate for next year or if there is another methodology that makes more sense for estimating next year’s budgeted amount. You know your business best and are in the best position to make those estimates.
So Where Do YOU Want to Start?
Having reviewed more about what you already knew or learned something new, where do you want to start with this important step towards your 2022 success?
How Can We Help?
If you are interested in some help with this project, please click on this link and connect with us at System Six. It will take you to a short list of questionnaires to help us determine how we can best serve you in this process.
We’ve all had to pivot this year in order to keep ourselves and our communities safe. While some companies, like System Six, have been working remotely for years, we recognize that the shift to completely digital platforms and processes can be overwhelming and daunting. The good news is that there are so many great options for online tools that will have your team working cohesively in no time. We know that nothing can quite replace the collaborative vibes of your office or the chit chat around the water cooler, but hopefully these tools will help you get on the same page while you can’t be in the same space.
We use Teams (and have used Slack in the past) primarily as a means to field casual conversation and quick questions. In order for this to work to its full potential, though, you have to have strong buy-in from your team and commit to quick response times together so that it remains an effective means of communication. Teams can be used for questions and updates that can be handled quickly and easily; it’s not for asking particularly heavy questions that require your colleague to completely stop what they are doing to help. Make sure to ask specific questions and avoid ambiguity.
Karbon is our preferred tool for task management. It is a tool that is specifically built for accounting firms but we’d highly recommend a tool like this (see Teamwork, Clickup, or Asana) for keeping track of tasks. Email is not an ideal place to assign tasks because once the email has been sent there is no visibility of if/when the task got done and no way to see if the task is still in process.
With Karbon, you can automate reminders, setup workflows, and ensure that there is visibility on the scope of a project for each team member.
With a remote team or clients who span multiple time zones, it can be such a simplifier to use a scheduling service. Save yourself the endless “reply-alls” and mishaps over who is on what time zone and invest in a service like Calendly for booking appointments. Calendly updates your availability in real time so you can rest assured that you will never double book a meeting. It comes with features like custom reminder emails, cancellation notices, and calendar syncing. The free version works fine for most people though it is branded with “calendly” and you only have one meeting type as an option.
Google Drive | Easy & sharable access to information
We can’t stress enough the importance of real time editing and updating of shared documents. Avoid sending various versions back and forth with Google Docs robust variety of cloud-hosted documents and spreadsheets. We especially love the Google Sheets features for collaboration around ideas, updating contacts, and sharing live content. We’ve been able to connect Google Sheet directly with Quickbooks Online to automatically pull key financial metrics directly into various meeting agendas which has been extremely valuable when reviewing our company performance as leaders on a weekly basis. You can review our meeting agenda template here!
Fathom is a reporting app that is especially focused on turning complex financial reports into beautiful, easy to read trends, Fathom connects easily to QBO, and it presents financial information in an easy, understandable way. Fathom puts accounting info into a visual, easier to understand form that is especially helpful for anyone who may not be especially numbers-minded. Really, it is a communication tool as much as a financial tool.You want your numbers to communicate the story of what is happening in your business and be able to present this data to your key stakeholders (team members, investors, or your spouse).
Loom is a great tool to create a tutorial by sharing your screen and recording the session to send via URL. If you need to shoot off a quick explanation about how to use a feature, or want to show a client an element of a program or website, you can record a short video for them. This allows the information to be reviewed at someone’s convenience.. And if your client or colleague has to pause to go homeschool their third grader, then they can always come back to it later!
While the focus of this post is the tools we use while working remotely, the theme is communication. This is particularly essential when you aren’t just down the hall from someone, but you still need to be able to communicate quickly and clearly. We want to make sure that the tools we do use are easy to use, intuitive, secure, and allow for quick and helpful communication.
So often, meetings can seem like nothing more than necessary evils or giant rocks weighing you down, stopping you from actually getting work done. This can be especially true if you are a team leader in your organization. It can often feel like you do nothing but jump from meeting to meeting and if the scheduled ones aren’t bad enough, there are always impromptu or last minute ones that pop up as well. How in the world can you possibly find time to accomplish anything? For the past 18 months, we here at System Six have been using a meeting cadence that has alleviated most of these pitfalls – and we want to share it with you!
We created a team meeting agenda that we stick to which allows us to work through company updates and issues together as a leadership team while not detracting from the other things we are working on. It helps us keep one another accountable, and also leads to far fewer rabbit trails as we go through the meeting agenda which in turn buys us more time. This meeting agenda,pictured below, is mostly based on EOS (Entrepreneurial Operating System) and a book called Traction. We added a personal check-in sales scoreboard, client headlines, and team headlines but we give all the credit to the book and EOS model for helping us design this google sheet. (Click to see the spreadsheet up close – if you want a FREE COPY of this Leadership Meeting Agenda, just click here!)
A Look into Our Meeting Structure
We use this agenda for our Monday leadership call and the attendees represent each department of the company (Sales, Operations, Finance, Culture, Customer Service). One person is designated as the “call leader” and is responsible for running the meeting and keeping everyone on track. If we don’t designate a manager for the meeting we can easily get lost in the weeds. The overarching goal is to bring everyone in the organization into the loop on what’s happening, where our progress stands, and what needs to happen next.
For this meeting we always start with relational connection. For us it’s ten minutes, allowing us to connect on the highs and lows of life outside of work. With this knowledge we can support one another during busy seasons and it also reminds us all that we are people, not just performers.
Review your Key Performance Indicators
From there we move into our scorecard section which is five minutes of sales updates, landed contracts, goal statuses, leading and lagging indicators and operational hiccups that lead to lost revenue. This gives us space each week to get on the same page about how the business is functioning in its quantitative elements. The scorecard section usually stirs some good conversation topics that we add to our IDS section below.
Know Your Big “Rocks”
After that we go into one of the main parts of the meeting which we call Rock Review. Here we check on our large quarterly goals which we call our “big rocks” (see, rocks don’t have to weigh you down!). Each team leader is responsible for 1-3 “rocks” per quarter, and this meeting is a weekly opportunity to check in, encourage and help one another with our big picture projects. These “big rocks” require our primary focus and attention so we allow ample time for this section. For each item we do a full review, check off completed tasks and tackle possible hiccups.
Headlines & Accountability
After the Rock Review we go on to further agenda items. We spend a short and sweet five minutes on client “headlines” where we update one another on how clients are doing and then do the same with team “headlines.” We move from there to our To-Do List from the previous week which is not only an accountability check, but also a chance to address any roadblocks team members may be facing with their To-Do’s.
Rather than spending time throughout the week notifying each other of headlines with either clients or team members, we all know that we have this standing weekly meeting where all of those topics will be discussed. This keeps the overall weekly “noise” level down and we can trust that there is time and space to discuss these things every five business days.
Identify, Discuss, Solve
What follows next is the main section of the meeting, IDS (Identify, Discuss, and Solve—credit Traction). For this portion of our time together—45 minutes—we bring up company issues and rank them by importance. To do this each team leader gets five votes and chooses which topics are highest priority for them. The items with the most votes go to the top of the list, those with the least are bumped down to the bottom. This way we are working on issues that are critical to the company as a whole, not to just one person’s portions. We get through as many elements on the list as possible knowing that the rest will carry over to the next meeting. Out of this IDS time comes our to-do list for the following week. Our team knows they will be checked on for these items in the next meeting so it is a good reminder of exactly what is on each of our plates going forward.
To finish we end with rating the meeting. Each team leader rates the meeting on a scale of 1-10 and if there is a 7 or lower, the call leader asks that person why they gave that particular rating. That team leader then has an opportunity to explain their rating and it is a chance for us all to hear that and improve the meeting for next time.
Once the meeting is done the call leader copies the agenda, pastes below and then clears the solved issues, clears off completed to-dos, moves to-dos from this week to last week and makes sure the agenda is prepared and “fresh” for the next week. A clean slate! Something we can all—and especially the next week’s call leader—be grateful for. Throughout the week leaders can add topics directly to the IDS section of this newly created agenda. So instead of blasting an email that says “Guys, we have an issue we need to discuss,” that person can put the issue on the agenda and know it will be covered during the next meeting.
Know Your Meeting “Why”
The main goal for this meeting and for sticking to the agenda so closely is communication and connection. We are able to stay in the loop with each other, with team members, with clients and with whether or not goals are being met. This meeting allows us to avoid having to do daily calls and makes a huge difference in being able to better keep everyone’s respective time budget. Having a predictable meeting template has been critical to our success. Not having clear guidelines for how a meeting will run or what should be included just leads to confusion, frustration, and miscommunication.
Don’t be afraid to get critical about how and why you meet! Hopefully with some strategy, your business can find a cadence for your own leadership meetings that will motivate your team to reach its full potential.
If you’d like a free copy of our Leadership Meeting Template, just click HERE!
Earlier this year, one of our favorite payroll providers, Gusto, decided that one of the best ways to continue to innovate its product was to build an advisory council composed of the experts who use it every day: their accounting partners. After invites and interviews, Gusto created its first Gusto People’s Advisory Council (GPAC) with an exclusive set of members to act as their panel of experts for product and service feedback. GPAC is meant to be heavily relied on as Gusto works on releasing platform updates for payroll, benefits, and HR.
Forty firms are represented after the selection process and I am super excited to represent System Six alongside the various companies that are part of GPAC. There’s a wide variety of small and large firms from all areas of accounting, tax and finance. The Gusto team heading the program are super innovative, pose great questions and ideas, and desire to integrate our feedback on the Gusto product.
Representing People Well
The most recent update to Gusto was the release of their People Advisory Certification. Over the past year and with the advent of COVID, it’s become more and more apparent that payroll cannot be separated from other employment practices (What kind of benefits do you offer? What kind of benefits can you offer? What are the state-mandated sick leave laws? Are you required to offer PTO?). The People Advisory Certification is designed to train accountant-users how to utilize the HR features built into the Gusto software to better advise our clients through these and similar questions.
As always, we at System Six strive to represent and advocate for you at every turn. With ever-changing products and procedures, we aim to be on the edge of new developments. It’s our hope to be the first to bring you services that can support your business goals and systems. This partnership with Gusto will allow your concerns and input to be directly channeled to those who have the ability to make improvements. I can’t wait to see what changes will be made that will directly improve your user experience and am proud to represent System Six and our clients on this panel.