Money To Burn? Watch That Cash Flow!

In every business, Cash Flow is King – this is just as important when you’ve got loads of “money to burn” as when you have a very limited budget. money to burnBesides the obvious risk of running out of money, high cash burn rates are a bad idea because they mean poor strategic agility. Poor what now?

If you spend all your cash on fancy frills, you’re probably not growing the business and scaling. If you burn too much money hiring, you’re not really leading. If you kill all your cash, you can’t adapt quickly if the market changes.

Silicon Valley is really starting to worry about it, as expressed recently by the likes of Marc Andreessen (Netscape), respected venture capitalist Bill Gurley, and Fred Wilson (Union Square Ventures).

Raising a lot of money gives the illusion that a startup has made it: salaries can be high, offices can be glamorous, and it can make employees feel a false sense of relief, like all its hard work is done.

Here are some things to watch out for:

BLOAT

Hiring people is easy. Laying them off is devastating. The more you hire, the more the business starts to bloat, burns cash, and begins to run poorly. What was once a singular vision of the Founder is now beginning to diffuse, in the hands of more and more people. This is actually a fairly natural progression which is to be expected – and can be mitigated through proper brand continuity and standards, in place of the Founder holding everyone’s hand. Hiring binges may signal growth but can also demonstrate lack of control. Make sure the overall vision of the company flows through management, operations, and into each and every individual who comes aboard.

COMMUNICATION OVERHEAD

Too much cash and too many people usually leads to communication breakdowns, as the business loses its clarity of purpose. A big shiny office with lots of new staff can give you a (fake) “we’ve made it!” feeling and distract from the need to actually deliver results. This can exponentially slow everything down as you lose sales to smaller, more agile competitors and become obsessed with differentiation – and in the process, lose your edge. A lack of balance between decisive edge and communication makes your startup a bad place to work, fragmenting your culture and your offering. It becomes too complex and unwieldy to easily change course.

At some point you have to build a real business, generate real profits, sustain the company without the largess of investor’s capital, and start producing value the old fashioned way.

There are no exceptions to the above but if you’re reading this, you’ll probably be OK – here are some things you can do now:

CUT THE FRILLS. Stay Lean and don’t worry about things like office design and expensive coffee machines. You can have the Herman Miller chairs when you’re cashflow-positive and pulling in decent monthly sales – until then, grab your coffee down the street and get to work.

HIRE WOLVES, NOT SHEEP. Spend your money on top hires who bring immediate appreciable value to the business and who can move the needle for you. If a new hire isn’t already making a dent the day they land, their value is questionable.

INVEST IN MARKETING. What to know what’s on every analyst’s mind? Brand Or Die. Differentiating on the basis of brand can be the extra you need to overcome competitive pressure and analysts are telling tech companies to stop worrying about whose widget works better and start brand building. Figure out who you are, what you do and why you do it.

 

Sterling Smith

Sterling has extensive experience in important sounding stuff and something about his opinions and blablabla are you seriously reading this right now?
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There’s nothing wrong with you!

confused Joey“Everyone keeps telling me Xero is awesome but every time I try to use it I just get confused and can’t figure out what I need to do. What’s wrong with me?”

There is NOTHING wrong with YOU!

The problem isn’t you. The problem is the fact that most accounting products – including Xero – were designed by accountants and if you don’t happen to know anything about accounting, then you are naturally going to be a little bit confused when you’re using something that is meant for your accountant.

FOR DUMMIESCan I just use a self-help book?

Sure – there’s one of those “for dummies” books which, if you’ll pardon the insult to your intelligence – once again, assuming there’s something wrong with YOU – is only going to cost you an additional $30 on top of what you’re paying to use Xero, in the first place.

Rod Dury asks nicely

Xero was having a usability problem

The creator of Xero actually asked the author to write it! I guess there were a lot of other people out there, like you, who couldn’t figure out how to use his product…

Why does all this cost so much?

Well… it depends what you need.

You might be able to get away with Xero’s basic entry-level product, BUT you are extremely limited by that product and you might not be able to get everything you need done with it. This is no small coincidence! Xero hasn’t yet made a profit since they began in 2006 – they get their money from shareholders and rounds of investor funding. They need to maximise the amount of money they can squeeze from their customers, so they can turn around those losses and start making those shareholders happy.

Make no mistake:

they want you to upgrade to the $50 a month version – and then pay extra for other things you need, maybe even a self-help book they helped to write!

Here’s a quick comparison with eLEDGER:

comparison chartNotice the lack of green arrows on that $25 a month plan? Even if you upgrade to the $50 a month version, you still need add-ons to access some features – features which come standard on the “Executive” plan with eLEDGER, at less than their limited, basic package – features which will cost you extra and complicate your accounts because they come from third party providers that charge you separately!

What if my needs are simple?

Good news – you can get away with the most basic package from Xero! You might want to take a moment to consider what you are paying, for that. If you don’t need all those fancy “Premium” features, do you really need to pay what you might call a “Premium” price?

If your needs are simple, there’s no reason your accounts need to be complicated.

If Xero is not really helping you to cut down the confusion and save time with this stuff, try a “Leanaccount with eLEDGER – it’s going to cost you less than half the price and you can try it FREE for 30 days to see if it works for you.

 

The best part is there’s no such thing as “eLEDGER for Dummies”!

 

Sterling Smith

Sterling has extensive experience in important sounding stuff and something about his opinions and blablabla are you seriously reading this right now?

 

 

Is your BAS due and you haven’t even STARTED?

tax nightmareDealing with the Tax Office can be painful and, as with any kind of pain, your first instinct is to delay that pain as much as possible…

But you can’t delay it any further – that BAS is due today and you haven’t even started to work out all the details you need to fill in all those boxes!

It’s OK – you can get it sorted in a matter of minutes, by using just 3 simple steps:

STEP 1: THE BIG GREEN BUTTON

Big Green ButtonSign In to your eLEDGER account an click on the big green button to enter your SALES – remember this is for the previous quarter, so we’re entering in money that you’ve received in the last three months – not including this month.

incomings

Go back to your Home Screen and use the same button as many times as you need to, in order to get them entered. If there are a lot of them, you can import your transactions from PayPal or your internet banking and get them in that way instead.

STEP 2: THE BIG RED BUTTON

Big Red ButtonNow use the big red button in your Home Screen to enter your PURCHASES – again, this is for the previous quarter so we’re entering in expenses that you’ve paid in the last three months – not including this month.

outgoings

If you imported your transactions in STEP 1, this is really just the same process but the records will go against your PURCHASES instead of SALES.

STEP 3: THE BIG BLUE BUTTON

Big Blue ButtonNow use the big blue button in your Home Screen to see a GST SUMMARY – again, this is for the previous quarter so remember to change it to the last quarter and not this one, which it automatically defaults to.

GST Summary

 That’s it! You’re done – now that you have all the information you need, go ahead and lodge that BAS statement…

 

Sterling Smith

Sterling has extensive experience in important sounding stuff and something about his opinions and blablabla are you seriously reading this right now?

“Lean Accounting” workshop in Melbourne

skinny piggy bankWe are actually going to go AFK next week and host a real live workshop for real live businesses in Melbourne! Here are some details:

Lean Accounting – what it is and how to do it
Do you know why it’s such a chore to keep your accounts up to date?

Accounting principles and methods used by almost all modern businesses were actually designed to support mass production, in the early 1900’s. Reports were developed to present an accurate view of a company to outsiders – they were never designed to help managers run their business.

New Lean accounting systems can effectively replace “traditional” accounting methods like standard/activity-based costing, variance reporting, cost-plus pricing, complex transactional control systems, and confusing financial reports with direct costing, simple recording and control systems, and simple summary reports that are presented in “plain English” and everyone can understand.

This is no different than applying Lean methods to any other process – the objective is to eliminate waste, free up capacity, speed up the process, eliminate errors & defects, and make the process clear and understandable.

Hosted and delivered by Michael Mehmet (Director and Founder at eLEDGER) it should be an informative night for startups and businesses struggling to stay on top of their accounts.

Date: Thu 24th July 2014
Time: 5:45 – 7:15pm
Place: The Village at NAB, 700 Bourke St Melbourne
Price: FREE
RSVP: http://is.gd/jAve0n

If you are based in Melbourne and you own or manage a small business, chances are your books are actually more complicated than they need to be. If you can make it, come along and find out more – especially if you’ve never been to The Village before, which is quite an interesting experiment by NAB in supporting the local startup community.

When book-keeping is not quite easy enough…

Even when you’ve created something “quick and easy” there is still a learning curve, no matter how gentle. The eLEDGER support team know that the “Get Help” section has been pretty sparse and they’ve been busy creating some new features to expand that section.

For a start, the most Frequently Asked Questions (and the answers, too) are now also included in that Help section. They’ve assured us they’ll be adding more questions and answers in there over time, so things like how Invoices or Purchase Orders work can be worked out, without having to take time reaching out to someone.

The big news is that there are now tutorials in that section as well – in video form!

Not only are these in the Help section, there is now also a handy little “tutorial” button, when you are doing something which there is a tutorial available for.

Image

For your quick reference, here is a list of these tutorials, which are also accessible on YouTube:

Keep up the good work!

 

Sterling has extensive experience in important sounding stuff and something about his opinions and blablabla are you seriously reading this right now?