Good Financial Habits & Hacks To Get There

Tom Zehentner

Jesse Rubenfeld is a CPA and Python developer who founded FinOptimal on the back of his experiences as CFO of Limewire and Controller of D.E. Shaw Research. Each month, Jesse breaks down different topics to give business leaders actionable insights about how to optimize their accounting and finance department to get more while spending less.

This month's topics include:

  • Good habits to unlock financial visibility
  • Accrual accounting 101: what it is and why it matters
  • Making better decisions with financial data
  • Advantages of a faster monthly close
  • The direct and indirect cost savings from using accounting automation
  • Tips and tricks for using QuickBooks at a large company

Key Habits For Unlocking Financial Visibility

What are some 🔑 key habits of companies that have great visibility into their finances? 

Some key habits I see in companies that have excellent visibility into their finances:

👉 Frequent reviews: Companies with excellent visibility into their finances frequently review them. This is highly correlated with a quick monthly close. 

👉 Quick monthly close: Companies that want to close their books quickly keep their bank balances up-to-date throughout the month, making bank reconciliation at the end of the month easier. 

👉 Dashboards: Reviewing a dashboard with multiple members of the team and assigning accountability to numbers. To achieve this, it may be necessary to tweak the chart of accounts and implement an accounting system to help adopt these habits.

What Is Accrual Accounting and Why Does It Matter?

Why should companies keep their books on an accrual basis?

👉 Because accrual accounting is the language of business 👈

So the short answer is: companies should keep their financials on an accrual basis because it’s the language of business. It’s difficult to communicate with investors, employees, and customers without using this language.

Accrual accounting eliminates the need for qualifying statements and caveats, making communication more efficient and eliminating the need to “translate” your finances into a language that others can understand.

How To Make Better Decisions Using Financial Data

How can companies make more informed decisions using their financial data?

This starts with determining, in advance, which numbers are most important to the business. It is important to go through an exercise to identify these key metrics. When setting up a new QuickBooks company, for example, a default chart of accounts for your industry is usually not exactly what you need. There may be specific metrics that are important for your particular business that do not appear in the standard chart of accounts.

Identifying these key metrics is a crucial step in achieving better results and making better decisions. Business owners should be able to measure the impact of their decisions, so that they can adjust if necessary. A solid accounting system delivers the metrics business owners need in order to measure that impact.

Advantages Of Closing Your Books Faster

What are some advantages companies get when they close their books quickly on a monthly basis?

👉 For one, they are less stressed in a wide range of scenarios, from preparing for board meetings, to performance reviews, to analyzing compensation.

👉 They have the information they need readily available to make informed decisions about whether the right people are in the right positions.

Without this information, they may have to rely on anecdotal evidence and provide qualitative answers (e.g. to a question in a board meeting, yikes!)However, with a quick monthly close, they have the results in front of them and can ask better questions, anticipate better questions from stakeholders, and feel more prepared. Closing the books quickly is a key part of the preparation process. It allows the business to feel more confident in their decision-making and have a better understanding of their financials.

Save Time And Money on Accounting

The cost of accounting, and what can or cannot be automated, is often misunderstood. Many companies and investors are attracted to the idea of fully automating accounting, but I don’t believe the goal should be 100% automation. It should be more like 95% 🙂

Reducing the cost of accounting involves both direct costs, such as the number of people working on the financial operations team, and indirect impact on costs, such as reducing errors.

The focus should be on separating the duties of computers and accountants, with computers handling the majority of the work and accountants focusing on the more important tasks.It’s often possible to automate the vast majority of the accounting work, in the range of 95%, but that last 5% really should be done by a qualified finance professional.

This approach reduces the burden on accountants and allows for a more efficient and accurate financial operation.

QuickBooks Tips & Tricks

What are some common mistakes companies make when using QuickBooks at scale?

Often, they overuse the most commonly known concepts, such as adding tons of accounts to their chart of accounts, and this can lead to problems. Or, put differently, they lean on one feature to do things it’s not really supposed to do.

They may not be experts in using other dimensions of the accounting system, such as class or department, that are available in QuickBooks. This can lead to an overly large chart of accounts and other problems that weren’t anticipated. When you use your chart of accounts to do things that class or other dimensions are supposed to do, it really becomes a problem at scale, and makes it much harder to get the insights you need out of your financial data.

Instead of trying to become experts in using QuickBooks, it’s better for business leaders to hire a professional who knows exactly how to help businesses scale in QuickBooks.

Tom Zehentner

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