Robotic Process Automation can save time, money

Many of the processes related to accounting are time-consuming and repetitive, tying people to tasks that could be automated and freeing them to focus elsewhere. Robotic Process Automation (RPA) in accounting can take over such tasks, saving a business time and money and improving efficiencies.

“RPA starts with the basics, the tasks you do on a daily basis that aren’t too complex and don’t take a human to judge,” says Cody Kiser, supervisor at Rea & Associates Inc. “Automating those processes can result in improved morale, better productivity and cost savings.”

Smart Business spoke with Kiser about how RPA can have a positive impact on accounting firms — and its potential across other industries.

What is RPA, and how can it improve accounting processes?

RPA technology allows companies to program and manage software that can complete tasks previously been done by humans. The software can understand what appears on the screen, navigate systems, extract data and perform other time-consuming, redundant tasks, doing so faster and often more accurately, without distractions or taking breaks.

Even with today’s technology, many tasks are still completed manually, either because of a lack of knowledge about potential solutions, or out of concern about handing over essential tasks to a robot. But humans still have control over RPA and systems can be configured to ensure someone checks exceptions that may arise.

There are many tasks that employees spend a lot of time on that could be automated, such as pulling bank statements. The system can be automated to log into a banking site to access statements and download them, move them to a folder and rename them, giving team members easy access. It can also be used for tax filings, handling back-end processes.

The biggest plus is that it cuts down on the time spent on mundane tasks, whether that is by executives or administrators within a business. The goal of RPA isn’t to eliminate jobs but to reduce the amount of time spent on tasks that don’t take a lot of brain power, allowing people to spend time on higher-value tasks, spend more time doing analysis for clients and work on things that actually need a human touch.

Is implementation expensive?

It can be expensive to get started, and it isn’t an overnight process. Employees will require training, but even those without a computer background will be able to understand the process.

It’s a long-run option, requiring a return on investment analysis, identifying the processes to automate, judging how much time it takes to complete those tasks at the hourly rate you are charging. You need to determine what is worth automating to make the most of the money you are investing.

It is also a time-consuming, ongoing process to do the programming as you analyze where you want to automate. Pick one area to work on and get it built and working before moving on. And understand that even once it’s in production and functioning on schedule, there may be some hiccups, such as if a bank changes its website and you need to reprogram.

It’s a long-term investment, but one more companies are making, and we are seeing a lot of automation not just in accounting, but across other industries.

How can other industries use RPA?

Many companies, for example, spend a lot of time processing purchase orders. That time could be eliminated and better used elsewhere by configuring the program to scan for critical data, input it and send out a request for approval. In addition, RPA can be programmed to easily handle invoice processing, flagging potential issues for human review and dramatically reducing the number of touches each invoice requires.

RPA is going to be a big piece of the future of accounting functions. It is time-consuming to implement but well worth the investment in the long term, saving time and money, redirecting resources and improving morale.

Insights Accounting is brought to you by Rea & Associates Inc.

How to determine the best way to handle HR in your organization

The main functions of Human Resources center on the lifecycle of the employee. From recruitment to compensation and benefits, ensuring company policies and laws are followed, to dealing with labor relations issues, HR is a core function of any company. However, as essential as its functions are, HR responsibilities are often treated as secondary issues.

“In some cases, finance might handle payroll, workers’ compensation, unemployment or even benefits administration when that’s typically an HR function,” says Robin Throckmorton, Shareholder, strategic HR, Clark Schaefer Business Advisors. “Other times, HR takes on responsibilities outside of their main focus, such as accounts payable or facilities. HR is often the second thought to a person’s job — they just assumed HR responsibilities but are really an office manager.”

Smart Business spoke with Throckmorton about the role of HR in a company, how best to manage those functions, and the consequences of under-resourcing it.

Who typically carries out HR functions in a company?

The rule of thumb in the HR space is one full-time HR person for every 75-100 employees. Sometimes, however, even as a company grows, the business owner, controller, a family member or office manager will roll up HR responsibilities into their primary function.

Companies don’t necessarily need a full-time, internal HR professional. They could contract with an outside HR provider, outsourcing those functions to get HR help or supplement existing HR personnel. Whether HR is handled by someone internal versus external depends on a few factors, such as the makeup of the organization and state of the business. For instance, a small but growing company could benefit from a combination of an outsourced solution with an in-house person. An organization with a strong culture, on the other hand, might want a dedicated, internal HR person making decisions along with the other executives.

What issues arise when HR is improperly handled?

Turnover can become an issue when it’s not clear who is handling HR responsibilities. That can be a big concern because losing an employee can cost an employer 50 to 150 percent of the outgoing employee’s salary. Further, if someone is not effectively managing HR functions, it can lead to higher costs for unemployment and workers’ compensation claims if the person handling HR didn’t properly contest an unemployment claim or didn’t work with an MCO to properly manage a workers’ compensation claim.

Lack of dedicated HR also can lead to employee morale issues, which can sometimes lead to lawsuits since people who are disgruntled are more apt to sue. Whether they’re right or wrong, a lawsuit will cost a company both time and money. Similarly, an upset employee could file a claim with the Department of Labor or OSHA, which could result in a fine.

When should a business reconsider how they handle HR?

Businesses should re-examine how they handle HR when they grow significantly or experience tremendous turnover or change, such as in a merger, acquisition or sale. In each of these occasions, it’s good to have dedicated HR helping because business leaders in other departments can be more effective when they’re focused on managing their core responsibilities.

Another trigger could be when business leaders begin to feel that they’ve taken on more than they can handle. When companies sense they don’t have the grip they’d like on these responsibilities, an HR audit will take the business through a checklist of HR functions to determine how well they’re being handled. That audit can also offer tips on what to do to improve in areas where there are deficiencies, and identify compliance issues.

A company could also talk with other similarly sized businesses in their industry to make an apples-to-apples comparison on how best to handle the HR role. A CEO or business group could also be a resource to determine what is working for others.

Companies, however, shouldn’t wait until there is a problem to address their HR function. Being proactive can prevent expensive mistakes from happening later on.

Insights Accounting is brought to you by Clark Schaefer Hackett

No matter your age, a mentor can help you improve

Mentoring is not just for young professionals. No matter where you are in your career, there is someone who knows more than you, who can help you gain a better understanding of yourself and improve your skills.

“You are never too young or too old to be mentored, if you want your journey to always be challenging and fulfilling,” says Betty Collins, director at Brady Ware & Company. “A good mentor can help you discover your why, even if you are in the later stages of your career.”

Smart Business spoke with Collins about how a mentor can help you reach your goals, and the pitfalls to avoid when mentoring.

What is the best approach to mentoring?

From an individual perspective, start by observing the people around you, who you are drawn to for being a mentor or mentee. Who needs something? Observe who has all the potential but doesn’t know how to get there. Don’t make it harder than it has to be. Start with two or three things. Wipe out what’s not important and focus on what is.

Also remember that a mentee must be willing and open to learning and receiving help. If you are dragging someone along, that is not going to be effective.

Regarding organizational approaches, smart companies invest in a formal mentoring program. That makes it more intentional, and intentionality is huge. Work with an HR consultant to identify companies that do this well. Ask people you respect who have been a part of mentoring for their perspective . But, keep it simple. Don’t create a burden; it should be about growing. A formal mentoring project helps keep employees longer, keep them engaged and develop continuity. A company that does it right will get its money back in the long run.

Women, especially, can benefit from mentorship from other women, encouraging others not to make their same mistakes, while helping them step out of their comfort zone. Communicate in a way that resonates to save them some of the hard steps.

When you’re in your 20s, everything is on the table. You think you can do anything and have it all, and you think you have forever to do it. In those years, there is a lot of ambition, and if it isn’t channeled correctly, the 30s are much harder. Then you have a family and a house and your priorities change. That’s when people get stuck in a rut because they are overwhelmed.

In your 40s, you think you need to make it count, buy another house, retire sooner. By your 50s, you’ve done pretty well and want to do things on your own terms. Every season has a different ambition, and a need for a different kind of mentor.

What are some common mistakes people make when mentoring?

Too often, people expect someone, especially someone younger, to be and understand what they themselves know. They expect others to grow the same way they’ve grown, which is a huge assumption and usually results in failure.

The purpose of mentorship is not to have people do everything you want them to but to help them grow into their careers. And while doing so may help you and your business, it also may not. Mentoring goes well beyond your business, and that person can be outside of it. You’re helping someone develop their personal and professional skills so they have a quality journey. People only get one shot, and if you’re able to, you need to help them get through.

People often think mentoring goes one way, but a younger person may have the skills to mentor up. An older person can learn so much from a younger person’s approach, so don’t close yourself off to potential opportunities. You don’t know what you don’t know. Be open to criticism and learning, and put yourself out there.

How can a mentor and mentee keep the relationship on track?

Schedule times to talk. Accountability is key. Mentoring is not warm and fuzzy. It’s, ‘Here’s what we talked about doing. Are you doing it?’ It’s also career counseling. ‘Here’s what you’re doing, here’s what you’d like to do. What are the expectations? What additional skillsets do you need?

Mentoring is crucial. Too many businesses overlook it and instead look to annual reviews or supervisors as ‘mentorship,’ but that’s not mentoring. Take the time to create true mentoring relationships and everyone will benefit.

Insights Accounting is brought to you by Brady Ware & Company.

Meeting the challenges of a worker shortage in a tough market

With a current shortage of available workers in the marketplace, employers need to be doing everything they can to attract new talent — and keep the people they have from going elsewhere.

“Employers are trying to fill positions, but there are not people available for those roles,” says Renee West, SHRM-SCP, PHR, senior manager – lead HR consultant, Rea & Associates. “On the flip side, because of the available opportunities, employers need to look at how to retain their existing workforce, because if people aren’t happy, they will make a change.”

Smart Business spoke with West about best practices and resources for employers to attract and retain key talent in a difficult market.

How can employers begin to assess how employees perceive their workplace?

Look at what you have in place. Is your pay structure competitive? What benefits do you offer? What sets you apart as an employer of choice when someone is looking at thousands of available jobs? Many employers are offering discounts, remote work, a shorter work week or job sharing. Think outside the box as it relates to hiring and retention.

Talk with your workforce to understand what they are thinking and gauge the pulse of the workplace. Survey employees about what they enjoy, what they wish was different, what benefits they like and don’t like, and what keeps them there. They are staying for a reason, and surveys can help capture what is positive, allowing you to recruit from that perspective.

How can employers stand out from the crowd?

Consider training people and providing opportunities for growth to make people want to stay. Start an internship program to attract new talent. Implement a referral bonus. And if you already have one, enhance it, offering rewards both at the time of hire and after six months. If you can’t afford monetary rewards, get creative about what an employee might want instead.

Employers that don’t care about their employees become a revolving door. You really need to focus on your employees as people and understand their needs.

What other steps can employers take to attract workers?

There is assistance at the state level for training workers. The Ohio Governor’s Office of Workforce Transformation offers programs that provide financial assistance for training, such as the High School Tech Internship Pilot Program, the Industry Sector Partnership Grant and TechCred.

Also revisit your job descriptions. Do you really know what you’re hiring for and what the position entails? Just saying you need five more people doesn’t work anymore and finding the right fit is essential. Candidates want to know what type of organization you have, how you treat people, what schedule they will have, and whether remote, hybrid job-sharing are options. Pay and benefits are no longer the top reason for people leaving a job for a new one. If you aren’t able to say, ‘Here’s our culture, here’s your specific role,’ you’re setting yourself up to fall below what other companies are doing.

Also, don’t stop pre-employment drug screenings to attract additional candidates. If you’re not doing it pre-employment, you’ll be doing it post-accident.

How can an outside adviser help identify ways to attract and retain workers?

An adviser can help you talk through what you need to do as an organization. Companies are struggling and don’t know what do. A third party can help you look at job descriptions and postings, and what you can be doing differently. Organizations that don’t have internal resources have a lot of questions and just need some help.

It’s a job-seeker’s market, and over the next several months, there is going to be a great increase in the number of people leaving their current jobs. During the pandemic, priorities have evolved. People are looking for a different environment. If someone is unhappy, there are plenty of opportunities to go elsewhere. It takes time and effort, but you have to look at what you need to change vs. what you’ve traditionally done to meet the challenge of attracting and retaining the top talent in your marketplace.

Insights Accounting is brought to you by Rea & Associates

Critical factors to consider to maximize value in a sale

Selling your company is the most important thing you will do in the course of owning a business, and whether you are considering an exit in the near future or in 10 years, the time to begin planning is now.

“As a business owner, starting to think about an exit is scary,” says Jeff Powell, who serves as managing director at Brady Ware Capital and has been providing guidance to businesses in transition for more than 20 years. “You need to reach out to someone in the M&A profession to start talking about what you’re thinking about, without feeling like you’re being pushed in one direction.”

Smart Business spoke with Powell and Stephen Ford, managing director, Mergers & Acquisitions, at Brady Ware Capital, about critical factors that can help increase the valuation of your business as you begin to plan your exit.

Why should every business owner be thinking about an exit?

You want to be in a position to make this transition when you want to, as opposed to when you have to. No matter what the timeframe, you should be considering how to position your business to maximize value and transition it in the most appropriate way.

You want to identify your business’s shortcomings through your own processes, versus someone else’s. Therefore, it’s important to evaluate and develop a plan to improve those areas as a natural course of action in business, as well as when you are ready for an exit. That will greatly help in monetizing on the back end and strengthen your business when you are still in operation mode.

What are some top drivers of valuation?

Preparation is key to achieving maximum value. Buyers look at consistency and predictability of earnings, looking to the past as an indication of the future. They look at customer concentrations. If a business is reliant on one or two customers, and they leave, you go from consistently doing well to not having a business. Diversifying is vital.

A strong, experienced management team is also critical. Buyers want to know there are capable people behind the seller. If an owner controls everything, that’s hard to replace.

In addition, you must have accurate financial data. It is imperative to have accurate and timely financial statements, because if buyers don’t have faith in the numbers, they won’t have faith in the deal.

Look at your key suppliers. Companies have learned just how important those relationships are. If you can’t obtain raw materials to manufacture your own, you are shut down, so it’s important to have multiple relationships. Developing niches within your industry and strategically diversifying enhances your market position.

Buyers in nearly all cases don’t purchase a company to keep it at the same size level and cut coupons. To get the desired return on investment, they must grow the company profitably. It it important for buyers to arrive at the beginning with some concrete thoughts and options for growth strategies that could be implemented with a new buyer based on what the seller has built and accomplished. If buyer and seller can envision a common growth strategy that accelerates growth for the buyer, the seller would have gone a long way toward increasing the value of the company at the time of sale.

How can a relationship with an experienced adviser ease the selling process?

Owners should be focused on their business, growing it and taking care of clients. A partner with expertise in maximizing value allows you to retain that focus. Working toward a sale can be extremely distracting. It’s an emotional investment that takes time, energy and due diligence, and it will bog you down. As a result, an owner takes their eyes off the company to focus on the sale, and the results can begin to go backward. A sale transaction gets deep in the weeds and is time consuming. Hiring an M&A adviser is a small price to pay to keep the owner focused on the business to ensure the owner is getting maximum value. An M&A adviser also helps you explore options regarding what you want to do and why, and what that looks like. An impartial expert can help explore your options, think about your plans and commit to a decision timeframe. You owe it to the business and yourself to be prepared and take the fear out of the process.

INSIGHTS Accounting is brought to you by Brady Ware & Co.

How to manage your sales and use tax obligations

The Wayfair decision changed the criteria that determine when a company selling goods or services can be required to collect state sales tax. But not all companies affected by the decision have complied.

“I am surprised by the number of companies that have yet to adapt, particularly companies that sell online,” says Stephen Estelle, Tax Manager at Clark Schaefer Hackett. “I continue to come across companies that have heard of Wayfair, but have done nothing about it.”

Smart Business spoke with Estelle about some of the ways companies can keep up with their sales and use tax obligations.

How does a company know where it needs to file?

To know if it has a filing responsibility, a company needs to understand state law and how it applies to the company’s activities in the state.
Wayfair expanded states’ ability to require an out-of-state company to collect the state’s sales tax. Now, states can require an out-of-state company to collect the state’s sales tax if the company has sufficient ‘economic presence’ in the state.

The most common economic threshold for a sales tax requirement is $100,000 in sales or 200 transactions in a state. The traditional parameters, however, such as whether a company has an employee presence or physical locations in the state, still apply. Complicating the situation, each state has its own parameters for determining when tax needs to be collected.

How can companies be sure they’re calculating the taxes correctly?

Calculating tax requires an analysis of state law and an understanding of the state’s sourcing rules. Depending on the state, some transactions are taxed all the time while some are circumstantially exempt.

Typically, a state will source a sale to the jurisdiction where the good is sold or delivered. Identifying that particular jurisdiction, however, can be tricky. While most states have a tax rate lookup system that enables companies to search for the correct jurisdiction and rate, it can be daunting when a company has thousands of customers with different addresses. Complete accuracy would require a check of every single transaction.

Alternatively, a company can invest in sales tax automation software. But, whether that software produces the correct result depends on whether the company gave it the correct information at the start.

What challenges are there for companies that want to handle sales and use tax compliance in-house?

There are three main challenges: personnel, cost and risk.

Calculating sales tax in-house requires at least one individual who is more than just knowledgeable about sales taxes. Companies who invest in such a person risk that person moving on and taking that knowledge with them. Also, sales tax isn’t really a full-time job. Returns are typically due around the 20th of the month, so there’s a lot of downtime for a sales tax expert.

There can also be ongoing technology costs, such as compliance and research software.

Finally, if the person handling sales tax doesn’t rise to the level of ‘expert,’ there’s increased risk that the decisions made will turn out to be incorrect and will lead to tax, penalties and interest on audit.

What are some tools companies can use to help with compliance?

Software can help, but the more the software is asked to do, the more expensive it gets. Also, the software needs to be set up correctly and checked often to ensure its accuracy, and that requires an expert.

Another option is to outsource the function or employ a hybrid solution — for instance, working with a sales tax expert on a quarterly basis to make sure filings are happening in the right states, that tax is being charged when it should be, and that it’s being calculated correctly and for the right jurisdiction.

Although it’s often the smallest item on the invoice, companies should take it seriously, especially now, because states are going to be hungry for revenue. If there is an out-of-state company that hasn’t been filing when it should have, states will be motivated to go after them.

Insights Accounting is brought to you by Clark Schaeffer Hackett

Keeping your data safe from internal and external threats

Enterprise Resource Planning systems are vital to growing and running a business, especially in the global marketplace. But systems may carry risks, and companies need to have the proper protections in place to keep their data secure, says Rex Moskovitz, senior manager — Cybersecurity and Data Protection Consulting at Rea & Associates Inc.

“Simply having an ERP system isn’t enough,” says Moskovitz. “It needs to be cared for and maintained, and there are internal and external security risks that businesses need to understand so they can mitigate them.”

Smart Business spoke with Moskovitz about the benefits of employing an ERP system and how to keep your data safe.

What is an ERP system, and what are common prevailing risk exposures?

ERPs are a very large computer program with affiliated software that runs an entire organization by automating the business. Once a business hits the $500 million mark, the day-to-day tasks of accounting, HR, supply chain, financial planning and analysis, budgeting and forecasting become too complex, and existing systems can no longer handle the data volume.

The bigger an organization gets, and the more modules that are installed and configured, the more users there are, and it doesn’t have the ability to keep up with all of the roles. Poor roles-based security profile settings allow excessive user privileges and unnecessary access to data.

Data is the new oil. It’s everywhere, it’s very difficult to get, but everyone wants it. To protect yourself internally, have a strong system of internal controls. Do a thorough, robust user profile analysis to determine which employees will have access to which transactions, and that they only have access to transactions that allow them to do their job. Roles-based authorization in ERP systems restricts access and blocks someone from running a report or accessing data they haven’t been authorized to see.

ERP systems also provide licenses for governance risk and control. These automated tools configure user profiles that control access to accounts so that any purchases over X amount need supervisor or manager approval, allowing you to detect and prevent porous threats internally.

In addition, governance, risk and compliance software can continually monitor ERP activities, user privileges and access, validate interface and API testing and support continuous IT – General Controls auditing.

How can organizations protect themselves from external threats?

An independent third party will be familiar with the common vulnerabilities and exposure of ERP systems and can monitor for, identify and detect external threats. In addition, ERP providers continually monitor the external environment and try to break into systems to identify vulnerabilities. And purchasing a maintenance agreement gives you access to service packs, enhancement packs, patch fixes and updates rather than having to install them on your own.

Taking these steps is critical. You don’t have to be a multibillion-dollar company to be at risk — where there’s money, there’s risk. It’s just a matter of time.

How can a company make the leap to a secure ERP system?

The first step is talking to people you work with regularly on complicated matters of tax, audit, accounting and operations. Talk to contemporaries within your industry, as certain systems are more commonly used in certain industries. Once you’ve identified a system, a systems integrators who knows your industry can integrate templates, installing preconfigured models so you don’t have to build from scratch.

Migrating to an ERP system and taking steps to keep it secure is like going into a marriage. It’s very exciting because of the promise of what the marriage will bring, but you need to go in with an open mind, be flexible and understanding, and not boxed in to certain expectations. Most important, expect challenges, and when they do arise, work through them with your employees, your ERP provider, your systems integrator and other professionals.

ERP is an investment in people, technology and, most important, time, that will pay off in increased security and better management of your organization’s data.

Insights Accounting is brought to you by Rea & Associates

Thinking through your post-pandemic strategy

Now that the pandemic seems to be nearing an end, companies are faced with a future that can’t be entirely like their past. That will require them to take inventory, internally and externally, to determine what they learned from the pandemic, what can they live with and what can’t they live without, where they were strong and where they were fragile. And with these answers, they can put themselves on a path that renews their strength or capitalizes on their newfound advantages.

“Companies need to think about how to get better going forward in part by remembering how they got to where they are today,” says Dave Mills, VP of Strategic Accounts at Clark Schaefer Hackett.

Smart Business spoke with Mills about some of the lasting effects of the pandemic and how companies might capitalize on those changes.

How might operations differ because of the pandemic?

Companies of all types and sizes have witnessed how essential their employees really are. They’ve had to place a great deal of trust in them in the shift to remote work and that has certainly paid off in the sense that employees have taken very good care of their companies.

Going forward, companies are likely to make a renewed investment in their development and retention efforts. And that’s increasingly important because right now, it’s hard to find and hire good people, and hard to hang onto them. There could be a doubling down on the importance of culture and how companies identify what makes their culture a market differentiator.

Connective technologies such as Teams and Zoom have shown that there are roles and positions that work well when remote. While more flexibility for certain employees to continue to work from home is expected, some teams will be more effective and more valuable working together in an office, so there should be an effort to create a structure for different roles and positions based on when remote work is most effective — and when it is not. Digging into the details of that means more than just doing a survey. It means getting the contextual information needed to make that determination. Building a talent magnet organization will be just as important for operations as productivity is going forward.

How could supply chain management change?

In the past 10 to 15 years, a common focus has been on limiting the number of suppliers to leverage scale and driving better pricing. Now that some of the risks of relying only on one or two suppliers have materialized, companies are likely to seek out more redundancy in their supply chains. That could also mean varying the country of origin to avoid certain geographical delays and risks. Even before the pandemic, companies were seeking out more domestic suppliers, and now that will accelerate. However, the price tag for such a move is going to be a challenge, depending on the industry and customer sensitivity to price increases.

Further, companies will be more open to keeping extra inventory on hand, seeing it as an investment rather than just an expense. And they will ask some of their suppliers to make sure they have more inventory on hand or pledge to keep more.

Companies will also look to determine who their best suppliers were and seek more partnerships. That’s always been important, but that position has been in competition with finding the lowest-cost provider. Now, there will be more interest in being collaborative and creating supplier partnerships built on trust and relationships.

How should companies evaluate their positions?

Risk assessment in this environment can be difficult, but companies should be adaptable, flexible and open-minded. Stay current with what’s happening and what has changed in your industry’s marketplace, and be clear on your organization’s tolerance for risk or willingness to invest.

Also, companies should look at their customers to learn what has permanently changed for them — what’s not going to come back and what new needs have arisen as a result of the pandemic — and adjust.

Many companies will be stronger coming out of this — it is a unique moment. In those cases, look to see where the competitive landscape has changed and seize the opportunity not just to get back to normal, but to get better and grow.

Insights Accounting is brought to you by Clark Schaefer Hackett

Understanding your company’s worth can help you increase value

If you don’t understand the true value of your business, you may be missing out on opportunities to grow its value.

“Valuations aren’t only necessary when selling a business or when a dispute arises,” says Owen Sizemore, CPA, CVA, manager, Valuation Services at Brady Ware & Co. “An annual valuation gives you a sanity check on how much your business is really worth and can start a conversation about the things you can do to create additional value. Valuations are a general management planning tool for business owners to understand whether the decisions they are making are creating value for the business and themselves.”

Smart Business spoke with Sizemore about the reasons for valuations and how technology is impacting the industry.

What are some reasons a business would require a valuation?

In addition to providing a deeper understanding of the company and identifying opportunities to increase its value, a valuation is necessary when there is a potential transaction, as in a sale or purchase. It is also a valuable tool in instances of a dispute between owners, or a shareholder dispute, in cases of divorce, or for a bank audit. Knowing that number is also useful for estate planning and when transitioning ownership to the next generation.

The process starts with an initial conversation between the valuation expert and the client to understand why the valuation is needed to make sure they are providing the appropriate level of service. The expert will gather information, such as tax returns and financial statements, to understand the scope of the project.

To prepare for a valuation, it’s critical that a business owner ensures that records are accurate. Keeping good financial records is just a smart business practice, but having clean books is critical to having a valuation done well and cost-effectively. You want inputs to be as good as possible so the output is as meaningful as possible.

Are owners often surprised to learn the true value of their business?

If owners are guessing at valuation, they often overshoot it, for reasons they just haven’t thought about. In many small businesses, a lot of the value is tied to the owner. Oftentimes, someone is an owner/operator, does a lot of the work and has a lot of the technical knowledge. In that case, if they want to sell the business without being a part of it going forward, it’s probably not going to be worth as much as they think.

In addition, some businesses have a high customer concentration, relying on one or two customers for the bulk of their revenue. Owners are often surprised by how detrimental to value these customer concentrations can be.

When you’ve spent your whole life working on something, it’s hard to be objective about it, which is why I encourage owners to get a valuation on an annual basis so there aren’t any surprises.

How is technology impacting the valuation process?

We are starting to see a commoditization as valuation software is starting to gain market share. But while software is competing on price, software alone may not give you the full picture. And it doesn’t address the subtleties and deep knowledge that a valuation expert — backed by a full-time, dedicated valuation team — can provide.

Valuation experts are really seeing the need to specialize, focusing on one industry, such as manufacturing, or one area, such as disputes. This provides businesses with a valuable adviser, with whom they can have a meaningful conversation about how to create value and manage their business more effectively.

It’s a good opportunity to work with an expert adviser who has seen a lot of businesses similar to yours and who can bring ideas to the table you might not have thought of.

Insights Accounting is brought to you by Brady Ware & Co.

How automating and streamlining can provide a treasure trove of data

If your business is still doing financial reporting the traditional way — manually entering data and reconciling reports each month — you’re likely missing out on a tremendous opportunity to use that data to move your company forward.

“Traditional reporting is time-consuming, mistake-prone, produces numbers that can be difficult to understand and reports numbers after the fact,” says Matt Long, Client Advisory Services principal at Rea & Associates. “Automating and streamlining reporting provides real-time, actionable data that is easy to understand and can be customized depending on what is important to your business. You’re already collecting the data. So why not do it more effectively?”

Smart Business spoke with Long about how automating your financial reporting can save time and money, and move you ahead of the competition.

How is the automation of financial reporting changing the pace of business?

In the past, businesses waited until the end of the month, made sure all activities had been posted, then spent several days reconciling. It was an exercise that reported what happened the previous month, with no end game in mind beyond having the data for an audit or tax purposes. There was no direction as to why you were doing it, what you were getting out of it or what you could take away from it. Now, there has been a monumental shift as companies realize they need live information, not static reports at month’s end.

How has automation moved data beyond the accounting department?

Traditionally, the accounting department manually input information, and no one else understood or cared about the numbers. Automation takes the data out of accounting and allows people in all departments to look beyond the traditional profit and loss statements to look at dashboards and graphs. And you don’t need to be an accountant to interpret the data.

The data itself is not valuable, it’s how you’re using it. Departments can access the numbers they need every day. Every industry has its own metrics to consider, whether it’s a manufacturer looking at how many hours a machine is running and what that’s costing, a restaurant looking at food costs, or a dentist looking at the numbers at a procedural level.

This is the future, with more automation and fewer human hours going into compiling data. The days of having a full-time accounting department manually entering data are over. And the pandemic has accelerated that trend, forcing businesses to prioritize what is important, opening them up to new opportunities to evaluate what is being done and how it’s being done.

How can a business start the automation process?

Evaluate how you are currently doing things. An outside adviser can help you take a step back and get out of the weeds. What is happening day to day, and how does that flow into the transactional level, the accounting system?

Look at your processes and procedures, your systems, where you can find areas to improve and where there is better technology available. Talk through logistics and timing and how you can make an impactful change. And while some companies want to change very quickly, that can be a mistake. Be methodical and intentional. Do it the right way to get systems in place that will last and that you can build on as the business grows.

It’s very important to spend the time up front and do it right, or you’ll constantly be chasing your tail and playing catch-up. It’s not a one-time thing; you don’t go through the transition to automation and then forget it. There’s room for improvement in any system, some of it incremental and some very impactful. The landscape is changing so quickly, almost daily, and you need to constantly re-evaluate.

And if you’re not looking at how to do things more effectively, your competition is. You may have the edge now because of the quality of your products and services, but eventually someone who is more strategic is going to catch up and make decisions that are more impactful, passing you by.

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