5 Signs You’ve Outgrown Your Current Accounting Plan

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It’s not unusual for a business to outgrown their current account plan. In fact, most businesses hit a critical restructure point within the first 5 years of business. We typically see business owners reaching out for accounting help between year 3 and 5, usually with the same statement—my accounting feels out of control. I need help!

Luckily, you don’t need to wait until you hit that point to restructure your accounting plan. Below are 5 Key Signs You’ve Outgrown Your Current Accounting Plan, followed by what you can do about it.

#1 – Your Transaction Volume Has Increased

The tell-tale sign you’ve outgrown your accounting plan is an increase in transactions. We say this because a significant increase in transaction volume has ripple effects throughout your business—it affects accounts receivable, usually causes issues with inventory and/or available work hours, and often leads to more people being hired.

With transactions growing, you’re handling more sales, managing more clients and customers, and dealing with larger numbers when it comes to transactions and business performance. While you may have only experienced hiccups thus far, you’re probably feeling the strain your system. You may realize a one person department doesn’t work anymore, or that manual data entry or a DIY or free software system isn’t the right choice for you.

Regardless of how it manifests, increased transaction volume is the #1 indicator that your current plan is strained.

#2 – Accounts Payable and Accounts Receivable Are Getting Backlogged

You guessed it—the next tell-tale sign is that accounts payable and accounts receivable are getting backlogged. If you’re struggling to pay invoices (whether due to lack of time to dedicate to it or lack of funds) and/or get paid on time, a critical component of your accounting plan is no longer working.

It’s the unfortunate reality of business that chasing down unpaid invoices, sending reminders and notices, and reconciling accounts receivable is part of the job. If you don’t have time to do this or are losing track of who has paid and when, it’s probably time to take a closer look at your accounting processes and adapt.

#3 – You’re Having Issues With Inventory or Service Hours

This is a huge, huge, huge indicator that you need to take a very close look at your accounting plan, as well as your budget and forecast. All of these items will need to be adjusted if you’re having issues with inventory and/or service hours.

If you’re dealing with products, managing inventory can feel like a full time job, from inventory planning, ordering, and stocking to real-time tracking and looking at sales across platforms, it’s a resource-intensive process. If you’re finding that you’re not keeping enough products in stock, dealing with backlogs and supply chain issues, or even just can’t seem to ever get a handle on how much you have in stock, there’s probably something gone awry in your accounting strategy. Luckily, some of this can be remedied with straightforward strategic fixes, from changing your order volume and timeframes to implementing inventory tracking software designed for the job or even having an outside audit.

Conversely, if you’re in a service based business, you may find yourself unable to keep up with the opportunity load. If you’re feeling overworked, finding yourself making errors, or simply feel you cannot provide service at this level for this long, this is a sign something must be adjusted. Whether it’s changing your pricing structure, expanding your team, or rethinking your service line, there are many ways to remedy this issue.

#4 – You’ve Added More Revenue Streams

Arguably the precursor to the increase in transaction volume (provided expansion of services and good is successful), adding new revenue streams typically puts a strain on your accounting plan.

A note: It’s always best practice to revisit and adapt your accounting plan, including your budget, forecast, and inventory tracking system before adding new revenue streams.

Maybe you’ve expanded into e-commerce and that’s impacting your inventory management. Or, perhaps you’ve rolled out new products, which has caused an increase in popularity for other products and you’re straining to keep up.

It could simply be that you’re not on top of where your sales are coming from and which revenue streams are performing best.

#5 – You’ve Expanded Your Workforce

What to Do Now?

Most people think about accounting problems as the result of a downturn in business, difficult economic situation, or even just a bad investment gone wrong, but the biggest accounting problems we see are actually caused by increased success!

The great news for you is that if you’re experiencing any of the 5 signs above, business is probably going well for you.

So, what do you do now?

The best thing you can do is..

#1 – Identify Your Current Problem Areas

The first thing to do is identify and outline all of your current problem areas. List out any errors that have been made, any processes that seem convoluted or underdeveloped, and where you need to see improvements. This can be anything from staffing issues to software to overall business direction.

#2 – Determine Your Goal For Moving Forward

The next critical step is to decide what your goal is moving forward. Do you want to build on the momentum and expand your business even further, or do you want to reduce your client load to a loyal dedicated few? Do you want to build and manage a team, or remain small and nimble? Is your goal to increase your profit margins? Do you wish to scale your business to make it more appetizing to sell? Are there areas of the business you don’t want to deal with anymore, and want to hand over to a professional?

These are just a few questions to ask yourself. It might help to take some time to think about what you see your role being in your business 1 year from today, 2 years from today, 5 years from today, and 10 years from today.

#3 – Create Your Solutions List

Your solutions list will depend on what you determine for #1 and #2. Some samples of solutions that have worked for our clients in these situations include:

  • Increase Pricing
  • Change Pricing Model
  • Upgrade Software
  • Expand Service and Product Team
  • Reduce Offerings and Limit Inventory
  • Budget Reallocation
  • Outsource Accounting and/or Bookkeeping to a CPA Firm
  • Bring in a Consultant for a Strategy Session

It’s best if these are a mixture of immediate implementations and items to explore. For example, if you know you’ve outgrown your software, you can begin looking for a new one, but if you’re not quite sure the best way to tackle a problem with accounts payable and accounts receivable, consider bringing in an accounting consultant with expertise to examine your system and make recommendations based on what they’ve seen work for other clients.

#4 – Adapt Your Accounting Plan Accordingly

Now that you have your solutions outlined, it’s time to adapt your accounting plan. This means spending in accordance with your new budget, implementing new software, or initiating work with a CPA to get the day-to-day accounting tasks off of your hands.

#5 – Make Note of How to Take The Next Step In the Future

We remind all of our clients this—these hiccups in business are a learning experience! Taking some time to note down what you’ve learned from this change in your business can help serve as a guide for what steps to take in the future to avoid this. Maybe you reassess with a consultant every three years, promise to do more pre-planning, or remind yourself that as the business owner, you don’t actually need to do it all. A solid team and the help of professionals can help.

And, if you’re in this situation, don’t forget amidst the stress to recognize your success! Business growth and expansion always causes pain points in the accounting process (we see it every day!). Be sure to celebrate your successes along the way.

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