New Year, New Accounting Resolutions

New Year, New Accounting Resolutions

January is the perfect time to assess your current accounting processes and tools and make a plan to become more efficient.

New year, clean slate — we accounting professionals are rolling up our sleeves and getting ready to kick off the new accounting period. This year, I’m sure, involves a lot more strategic planning than usual, knowing we need to be ready to monitor changes in business results and execute decisions quickly.

But we can’t forget it’s also a time for reflection, measuring how successful we were at executing last year, balancing our responsibilities, and acknowledging the huge effort our teams put forward.

The beginning of each year is the ideal time to assess the company’s accounting processes and workflows, define goals for improvement, and create plans for better internal performance. We need our accounting processes to flow smoothly, to balance required output with constraints, and we have just a few moments of peace to think about what the future will bring, fix our mistakes from the prior year, and set things on the proper track.   

Accounting professionals have always been responsible for recording, summarizing, analyzing, and reporting financial data, but we all know that, in reality, the role has become much more complicated. Tracking customers and receivables can take an entire department, involving multiple people, jobs, and workflows that support the larger process. Then there are vendors, accounts payable, cash management, financial analysis, forecasting and planning, inventory, revenue recognition, payroll, sales taxes — and as the business grows each year, these processes become increasingly complex.

Rarely do we take the time to sit down and plan improvements while we’re racing through the thick of it.

Past Processes

In many companies, established processes like accounts receivable and payable are showing their age. There’s a divide between current accounting department responsibilities and those the processes were built to handle in past years. Tasks like monitoring customer balances, tracking KPIs, sending balance reminders, and timing vendor payments were left without integrated solutions.

As a result, new employees were tacked onto the team to help plug gaps and deliver results. But this created Frankenstein-like branches and tangents on process maps — and wasted lots of time and money on duplication and manual effort. Rarely were processes modeled and planned for maximum efficiency.

In contrast, today’s lean accounting teams carefully choose solutions and regularly update processes to ensure optimal performance and add value to the company.

Today’s Tech: Smarter, Not Harder

Accounting professionals know there are better ways to handle archaic processes than simply throwing another warm body in the mix and hoping for the best. Critical assessments of processes that struggled in prior years is the starting point. Clearly defining desired performance and establishing goals is the next step. The gap between the two can then be identified and resolved. Better tools and accounting software, like NetSuite, can then take processes to the next level and deliver desired results, like speeding up slow approval processes, tracking KPIs, and monitoring customer balances accurately and in real time.

NetSuite cloud accounting software is built to help companies do more with less, delivering a complete accounting solution for a fully connected and automated platform that centralizes accounting data and operations and improves the speed and efficiency of accounting processes. Automation technology helps address the challenge of coordinating multiple accounting processes without human error, and NetSuite’s automated solutions connect accounting processes back to one database, ensuring better data quality and integrity.

NetSuite continuously delivers solutions to expand accounting capabilities and improve prior year processes. Simplified workflows, better financial visibility, and timely monitoring ensures you can operate more efficiently, meet deadlines calmly, and dedicate more time to meaningful tasks that support improved decision-making in the coming new year.

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Managed Modernization: The Thing Your Business Might Be Overlooking

Managed Modernization: The Thing Your Business Might Be Overlooking

Managed Modernization is a service that helps organizations to modernize their legacy systems and applications. This service includes the planning, execution, and management of the modernization process, and is designed to help organizations to transition smoothly and efficiently to more modern, flexible, and scalable systems and applications.

Some key features of Managed Modernization services may include:

Expert guidance: A team of experienced professionals will work with your organization to identify opportunities for modernization and develop a customized plan to modernize your legacy systems and applications.

Comprehensive planning: The Managed Modernization service will include a detailed planning phase to ensure that the modernization process is well-defined, well-organized, and aligned with your organization’s business goals and objectives.

Smooth execution: The Managed Modernization service will include the execution of the modernization plan, including the migration of data and processes to the new systems and applications.

Ongoing support: The Managed Modernization service will include ongoing support to ensure that the modernization process is successful and that the new systems and applications are meeting the needs of your organization.

Managed Modernization can help your organization to realize the benefits of modern, flexible, and scalable systems and applications, while minimizing the risk and disruption associated with the modernization process. By outsourcing the modernization process to a team of experienced professionals, you can focus on your core business while the modernization process is managed for you

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6 Steps to Automate Your Accounting Processes

6 Steps to Automate Your Accounting Processes

Manual accounting processes are notoriously time-consuming. By relying on spreadsheets to handle core finance operations like accounts payable, payroll and tax compliance, tasks that could be completed in seconds or minutes can take several hours or even days. What’s more, every step in the manual process is prone to human error, which can lead to additional costs, delays and frustration.

Enter accounting process automation (APA). By automating essential accounting operations with software, businesses can significantly speed up their processes while reducing the risk of human error considerably. This article explains the ins and outs of APA, including its benefits, which tasks to automate first and how cloud-based solutions bring new levels of speed, accuracy and security to accounting operations.

What Is Accounting Process Automation?

Accounting process automation involves the use of software solutions to automate finance and accounting tasks. Businesses have increasingly adopted APA to replace traditional accounting processes that rely on spreadsheets and manual handoffs between human stakeholders, both of which are less efficient and accurate.

Key Takeaways

  • Accounting process automation (APA) involves the use of software to automate accounting operations, especially time-consuming and tedious tasks that are prone to human error.
  • The benefits of APA include faster accounting processes, reduced operating costs, improved scalability and more robust data integrity and governance.
  • Accounting tasks that can be automated today include accounts payable and receivable, payroll, expense management and monthly financial close and procurement.

Accounting Process Automation Explained

Accounting process automation has many use cases. It can be used to enhance processes ranging from monthly reporting and the financial close to expenses and supplier invoicing and payment. It works by replacing manual record-keeping and information-sharing in spreadsheets with an automated approach that requires much less human intervention — and in many cases none at all.

Consider the case of accounts payable, a core finance operation that dictates how and when businesses pay their vendor bills. As a company grows, it has more payments to manage, which in turn makes its accounts payable processes more complex. Instead of reaching the point where that complexity leads to slow or missed payments and strained vendor relationships, the business can automate with APA, making the process more efficient and scalable.

It’s also worth distinguishing between accounting process automation and another popular automation technology, robotic process automation (RPA). RPA involves the use of software bots to complete simple and repetitive business processes, like invoice processing. APA goes even further, transforming accounting processes from end to end by replacing distinct manual tasks with an integrated digital workflow.

Benefits of Accounting Process Automation

Accounting process automation leads to the faster, smoother and more accurate completion of accounting tasks. This more efficient process, in turn, delivers a range of benefits to a business and its customers, all of which stand to improve a company’s bottom line. Here are some of the biggest advantages of APA.

  • Major time-savings.

    Time-savings is one of the primary drivers for process automation. Accounting tasks like bank reconciliation and quarterly reporting have traditionally required finance professionals to check and copy large volumes of data across multiple systems, which is a long and error-prone way of working. With APA, accounting data is automatically verified and moved between systems, saving finance teams from spending too many hours on tedious tasks.

  • Reduced operating costs.

    Automated accounting processes are faster and require less human intervention. That makes them more cost-efficient in virtually every way. Take the case of accounts receivable. According to the American Productivity and Quality Center (APQC), the cost of invoicing a customer drops to as low as $2 for high-performing businesses, compared with $9 per invoice for the worst performers.

  • Better data quality and integrity.

    Manual data entry often leads to mistakes, which increase in frequency as the business and its accounting needs grow. This is another reason why automation can be an invaluable tool. With APA, finance teams can record, shift and update thousands of data points at once with minimal risk of that data being lost or compromised.

  • Improved data access.

    APA automates data entry and record-keeping on a centralized software platform. Instead of digging through spreadsheets or actual piles of paper to find a crucial document, accounting professionals simply need to enter the relevant search terms in their APA solution to find the files they’re looking for within seconds.

  • Streamlined document approvals.

    Similarly, documents like purchase orders and supplier contracts are automatically uploaded and made accessible to relevant stakeholders, eliminating bottlenecks from the approval process.

  • Healthier business relationships.

    Mishandled invoices and delayed payments can strain relationships between businesses and their customers and suppliers. APA speeds the entire procure-to-pay cycle to all parties’ satisfaction.

  • Ensures compliance and governance.

    APA software automatically prepopulates tax returns, creates financial statements and updates tax documents in line with regional regulatory requirements and rates. Not only does the software streamline processes, but it also ensures they are more accurate and compliant. Meanwhile, improved data visibility and integrity improve governance while easing the pressure on accounting teams that monitor compliance.

Drawbacks of Accounting Process Automation

As with any new technology, accounting process automation can present challenges, especially if it’s not implemented correctly. Here are three worth considering:

  • Upskilling employees.

    Working with new technology naturally requires accounting teams to learn how to correctly adopt APA software. Upskilling may require patience as every employee will have different levels of comfort with using technology and relying on computerized processes to handle accounting tasks they had previously completed manually.

  • Workflows needing updates.

    A well-defined automated workflow can work wonders, but a poorly adapted workflow, or one that has not been sufficiently tested, can lead to chaos and accounting errors on a large scale. Testing, iterating and perfecting APA workflows is the key to avoiding issues.

  • Change management.

    Resistance to change is a universal human trait, and accounting teams are not immune. They must be encouraged, supported and given the resources they need to learn how automation will make their jobs easier, so they can embrace APA and integrate the use of automation in their daily work.

7 Accounting Tasks Your Business Can Automate Now

Every business starts from a different position and adopts APA at its own pace. Some companies will choose to automate many processes at once while others will proceed more systematically, automating one task at a time in order of priority. Here are seven accounting tasks that every company can start to automate today.

  1. Accounts payable.

    Automating AP simplifies payment processes across the board. It helps accounting teams better track invoice due dates and ensures the on-time payment of vendor bills. What’s more, APA minimizes the risk of fraudulent invoices slipping by, flagging any the system deems suspicious or otherwise problematic.

  2. Accounts receivable.

    Automating AR helps companies manage their cash flow, improve invoice accuracy and reduce processing costs significantly. Opportunities to automate exist throughout the AR process, from scheduling invoices to be sent to the collection of past-due payments.

  3. Payroll.

    Manual payroll is a major time drain for companies with limited accounting resources, especially as they grow and the demands on their accounting teams increase. Automating payroll processes helps to ensure employees are paid on time and that an overworked team never misses filing any important payroll forms.

  4. Month-end financial closes.

    The month-end financial close process is an essential business task, but it also can be one of the most stressful for finance teams. Accountants are under growing pressure to complete their monthly closes more quickly, which inevitably leads to rushed processes and questions around the validity of end-of-month results. Automation of the monthly close alleviates many of these pressures around speed and data accuracy, helping accounting teams deliver faster results without sacrificing quality.

  5. Procurement.

    The procurement of goods and services from external suppliers has traditionally involved a great deal of paperwork, all of which must be reviewed and processed manually by multiple stakeholders. By automating procurement processes like purchase order management, companies can cut significant time and cost from their procurement process without sacrificing the integrity of their processes or affecting their supplier relationships.

  6. Expense reports.

    Expense reports are a necessary evil. At many companies, employees still need to print their expense reports as spreadsheets, staple receipts to forms manually and submit the whole package to accounting for approval. Automated expense reports allow employees to digitally fill out and share their expenses with accounting, reducing the administrative burden and paper pileup for all parties.

  7. Sales order process.

    A clear sales order process is the key to ensuring customer orders are completed and shipped on time at the right price. Automation software allows businesses to codify every step of their sales order processes, ensuring they consistently meet customer expectations.

    6 Steps to Automating Your Accounting Processes

    Automating accounting processes isn’t as simple as just buying APA software. It requires a methodical approach that starts with understanding the tasks that need to be automated, breaking them down step by step and adapting manual workflows to the way APA software works. It also involves testing to make sure the automated workflows perform as intended. Here are six steps businesses can take to automate their accounting processes.

    Step 1: Analyze current accounting processes.

    Many, but not all, accounting processes can be automated. The best candidates for automation are tasks that require employees to do frequent, repetitive work, involve few interpersonal connections and take little to no creativity. The aim of automation is to boost speed and efficiency to help accounting teams, not replace them altogether.

    Step 2: Evaluate existing technologies.

    APA is a software-based approach. The best automation approach for a business will depend on its existing accounting technologies and software applications, whether these systems already speak with each other or need to be integrated. In the latter case, cloud-based APA solutions are a popular option that unifies a company’s accounting and finance systems on a single platform where data is created, shared and processed in a common language.

    Step 3: Assign a project owner.

    Automated processes run on software alone, but it’s still important to have a human being oversee APA workflows to make sure everything runs smoothly and troubleshoot problems on the rare occasions they arise. For example, software runs off of rules set by users or the company admin, and those rules can cause inaccuracies in payroll, leading to late payments. A project owner can spot and address that issue before it affects employees, or at least mitigate the effects by fixing the problem quickly.

    Step 4: Create and document current workflows.

    The goal of APA is to simplify existing workflows and make them more efficient, and the best way to do that is to look for opportunities to streamline processes. By breaking down existing workflows at a granular level, businesses will then see where they can be improved and how to best re-create tasks with an APA solution.

    Step 5: Automate based on the updated workflow.

    Every workflow in a business can be broken down into three parts: a trigger, an action and an outcome. When automating workflows, it’s important to spell out these three parts at a granular level to ensure they deliver the intended results every time.

    Consider, for example, a simple workflow in the purchase order (PO) approval chain. A trigger might be the submission of a new PO from your procurement manager. That trigger would in turn set off an action, such as an automatic email to the relevant stakeholder in your business that the PO is ready for approval. The desired outcome is an approved PO.

    Step 6: Test and iterate.

    To make sure that an automated workflow delivers the intended results consistently, businesses can test and iterate. One test run might be enough, but it’s common to test and iterate a few times to iron out wrinkles, especially when adapting manual workflows for automation software.

    accounting process workflows
    How to go about automating an accounting workflow.

    Examples of Accounting Process Workflows

    An accounting workflow describes the sequences of tasks involved in a specific accounting process, be it expense management, invoicing or employee-onboarding. The workflow helps finance managers organize, standardize and track these processes, while assigning clear responsibilities for their teams.

    Consider the expense management workflow, which clearly outlines the path that an expense receipt takes from the instant an employee submits it to their expense management system to the moment they are reimbursed. Even this relatively simple accounting process workflow can be broken down into more than 10 steps:

    1. Employee gathers records.

      The employee collects the receipts, credit card statements, bills and any other documents that prove a purchase was made.

    2. Employee creates report.

      Expense reports are the primary documents an employee uses to make their expense claims. They are generally submitted monthly.

    3. Report routed for initial approval.

      Once submitted, an employee’s expense report is first validated by the person’s direct supervisor and company’s accounting team.

    4. Senior approvers prompted to review.

      Once validated, the report is sent to other internal stakeholders — often managers and team leaders — to ensure the entries are legitimate and reimbursable.

    5. Expense report approved.

      Senior stakeholders review the expense report, approve it or send it back to accounting for revision. In the latter case, the process goes back to the beginning.

    6. Expense report sent to accounts payable.

      Once approved, the expense report goes to the AP coordinator to be posted and scheduled for on-time payment.

    7. Verification of receipts.

      Receipts submitted with the expense report are verified and filed for tax and accounting purposes.

    8. General ledger or tax codes added.

      An accounting employee enters the correct ledger and/or tax code for each line item on the expense report.

    9. Expense report posted.

      With all the necessary information now included, expense items are added to the business’ accounting or ERP system, reviewed and approved, and then posted to the general ledger so that the employee can be paid.

    10. Expense reimbursement authorized.

      The employee’s expense reimbursement is authorized and a payment date is set based on the company’s expense management schedule.

    11. Employee reimbursed.

      The employee receives their reimbursement payment.

    Every accounting process has many moving parts, and they become more complex as a business grows. Accounting teams stand to save significant time and energy by simplifying recurring steps throughout their process workflow, be it expense management, client-on-boarding, billing and invoicing or countless others.

    A Short History of Accounting Automation

    The history of accounting automation can be traced back to the 19th century, when inventor Herman Hollerith developed the world’s first punch-card machine to help streamline the United States Census. Hollerith would go on to become the founder of the company that led to the creation of IBM, where his punch-card invention was used for accounting.

    The next big development in accounting machines came after World War II with the 1951 invention of the UNIVAC, the first commercial computer in the U.S. Developed by physicist John Mauchly and electrical engineer J. Presper Eckert, the Universal Automatic Computer saw data storage move from punch-cards to magnetic tape. This approach was first embraced by businesses in 1955, when General Electric bought a UNIVAC to handle its accounting operations.

    Automation as we know it today first began to take form during the computer age. Since the late 1970s, programmers have been building increasingly powerful software to take on accounting tasks, from VisiCalc, the first-ever spreadsheet software, to Peachtree, the first accounting software for PCs. Adoption was swift, and within a few years millions of companies were running some form of accounting software.

    Today, accounting automation has transcended physical offices and manual data management. Since NetSuite released the first web-based accounting software in 1998, finance teams have been able to access, manage and manipulate accounting data via an internet connection. Cloud-based accounting software continues to improve, speeding up accounting processes and fueling efficiencies across industries.

    accounting process timeline
    Accounting automation timeline.

    Automation and the Future of Accounting

    The adoption of automated accounting processes will only accelerate, but not at the expense of human thought and oversight. Automation is not intended to replace accountants; rather, its role is to take repetitive work off their plates so they can apply their valuable time and brainpower to strategic business imperatives.

    Businesses that use cloud-based software will see these time-saving benefits compound with every new accounting task they automate. For instance, when their invoicing, spend management and general accounting platforms are integrated and automatically share data, finance teams will spend less time copying data points from one system to the other and will instead have a single, accurate view of all their accounting data in a single location.

    Get the Benefits of Automation With NetSuite

    Automation dramatically speeds up a range of accounting processes, reducing both overhead and the risk of human error. But cost and efficiency gains are only part of the story. Improved data management and visibility also help with increasingly important mandates, like regulatory compliance.

    NetSuite’s Cloud Accounting Software delivers a complete accounting solution for companies ready to move from spreadsheets or entry-level software to a fully integrated and automated platform that centralizes their data and makes it accessible to stakeholders across the business. In turn, accounting teams spend less time on manual data entry and repetitive tasks, and instead use their more complete view of accounting data to make faster and better-informed decisions to support their businesses.

    APA helps accounting teams unlock their full potential by increasing efficiency and optimizing the many essential tasks they manage, saving them time and improving the accuracy of results. For years, manual accounting processes were labor-intensive, costing businesses extra time and money. With APA, businesses of all sizes are increasingly overcoming that hurdle.

    Accounting Process Automation FAQs

    What is robotic process automation in accounting?

    Robotic process automation (RPA) involves the use of software bots to replace manual and repetitive accounting tasks at scale. It is generally used to handle low-skill work, rather than replacing the complex thinking required to handle strategic accounting tasks, like planning and budgeting.

    How is AI used in accounting?

    Artificial intelligence (AI) has many uses in accounting. Whether it’s understanding digital files through natural language processing (NLP), extracting data from photos with computer vision algorithms or automatically populating forms to speed up accounting workflows, new use cases for AI in accounting are regularly emerging.

    Can RPA read invoices?

    When combined with artificial intelligence, RPA can scan, understand and digitize key data points from an invoice for further processing.

    What is an automated accounting process?

    An automated accounting process is handled by software, replacing the need for staff members to manually complete repetitive tasks, such as data entry, number crunching and transaction tracking.

    How do you automate accounting tasks?

    To automate an accounting task, businesses first need to break the task down into a step-by-step workflow. From there, they can build an automated workflow that will deliver the same results with little human intervention.

    Is there a way to automate accounting?

    Accounting teams can automate many elements of their accounting, from invoice processing and payroll to the monthly financial close. That said, automation technology will never replace accounting staff entirely, as human brainpower and experience will always be required to troubleshoot, handle complex accounting tasks and align them with business strategy.

    What types of accounting tasks will be automated?

    Numerous accounting tasks can be automated. Some of the most popular tasks that benefit from automation include accounts payable, accounts receivable, payroll, expense management and the monthly financial close, among others.

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Must-Have Features and Capabilities for a Cloud Accounting Solution

Must-Have Features and Capabilities for a Cloud Accounting Solution

Companies just starting out tend to have limited revenue, a handful of employees, and few expenses, so they can often get by with spreadsheets and an entry-level accounting package. Over time, however, as new products and services are launched, additional sales channels are opened, and sales increase, keeping track of revenue, expenses, liabilities, and assets — not to mention owner equity — becomes more challenging.

Hiring more people in accounting helps for a while, but eventually, those rudimentary systems and processes begin to inhibit growth because they don’t provide the insights, flexibility, or efficiency companies need to remain competitive.

Continuing to rely on a system that doesn’t meet the needs of your business is a no-win proposition. Ultimately, if you’re forced to use spreadsheets for accounting tasks your current software can’t handle, you’ll struggle to provide the detailed reports your colleagues really want. If your staff spends much of their time on data entry, or the system doesn’t support your governance, risk, and compliance objectives, it’s time to look for a new solution.

While evaluating financial management software might not be at the top of your bucket list, finding a system that fits your business will give you more control over your finances. A cloud-accounting solution will not only provide you access to the features you’re looking for, it will reduce IT overhead and increase flexibility by allowing team members the ability to work from anywhere, at any time.

Cloud Accounting Essentials

What you should look for in a cloud accounting solution depends to some extent on your business model. A service provider, for instance, will need robust revenue recognition capabilities that an ecommerce retailer probably won’t. That said, however, the core requirements are the same for most companies.

A rock-solid general ledger. The general ledger (GL) is your company’s financial backbone. It should map to the structure of your business so it’s easy to track where cash comes from and where it goes. The traditional way of doing this, using complex account codes, is cumbersome, limits what can be tracked, and becomes harder to manage as companies grow.    

When evaluating cloud accounting software, look for a solution with a dynamic general ledger that allows you to use dimensional values rather than complicated account codes to categorize transactions. Dimensions are like tags or labels that can be added to transactions for enhanced reporting. Think organizational details (department, location, division), details related to revenue (product, channel, customer) or other characteristics that may be useful for performance tracking.

Automated core processes. Manual process are a drag on productivity, yet many accounting packages still have limited automation capability. As a result, accounting personnel often spend several hours a day performing mundane, repetitive tasks like data entry instead of using their skills and intellect to solve problems. This is a poor use of resources that results in errors, stress and employee turnover.

Look for a cloud accounting solution that automates major steps in the record-to-report process, including tasks like invoicing customers and processing payments; entering, approving, and paying vendor bills; recording depreciation, accruals, and other recurring transactions; allocating and recognizing revenue; and reconciling bank accounts. It should also incorporate technologies like artificial intelligence and machine learning to help accounting personnel identify and address anomalies.

Data Visibility and Reporting.

The accounting system should be the central repository of your organization’s financial data. If important accounting processes are being managed with spreadsheets, then at least some of that data is sitting outside of the accounting system. And because spreadsheets are static, the information they contain quickly becomes out of date, which makes it hard to get a complete, real-time view of what’s happening in the business. Cloud-accounting software avoids this by providing a single source of real-time financial data. So instead of struggling to pull information from multiple sources, you always have an up-to-date view of your current financial position.  

Having that single source of real-time data is valuable, but you also need the ability to share information with key stakeholders, including department heads, the board of directors and shareholders. 

Basic packages typically provide preformatted templates that can be used to produce financial statements and other standard reports. This saves time by eliminating the need to create reports from scratch. A format that works for one company, however, doesn’t necessarily meet the needs of others. Unfortunately, these templates are often hard-coded, making it difficult to modify the layout or decide which data elements to include on a report. This can prevent you from communicating information in a way the makes sense for different stakeholders.

To take full advantage of business data, your cloud accounting solution should include robust analytics. In addition to providing configurable standard reports, it should also include tools for producing custom reports, tracking key performance indicators (KPIs), and creating dashboards. While many software providers offer these tools, not all systems are created equal.

Look for a system with robust reporting capabilities that are also user friendly.

Effective controls. Internal controls are the policies and rules organizations use to protect themselves from financial fraud, serious errors, and intentional abuse of benefits, resources, or authority. Effective controls ensure compliance with government regulations and accounting standards. They also help ensure effective decision-making regarding investment of capital or allocation of company resources.

A cloud accounting solution must have embedded governance, risk, and compliance (GRC) features that enable you to comply with tax laws, accounting rules, and federal, state and local regulations everywhere your business operates. It must also meet privacy and data protection requirements as well. Finally, it should include review and approval workflows to ensure proper management oversight of expenditures and reduce the risk of fraud.

NetSuite Cloud Accounting Software

NetSuite cloud accounting software transforms the general ledger, giving you the ability to record transactions with multiple dimensions while helping reduce errors by simplifying your chart of accounts.

NetSuite also increases the efficiency and productivity of accounting staff by automating accounts payable, invoicing, bank reconciliation, revenue management, and other core processes. Powerful analytics capabilities give you the tools to produce more meaningful reports, track KPIs in real time, and glean new insights that lead to better decisions and improved performance.

Finally, NetSuite’s built-in governance, risk, and compliance (GRC) features provide essential controls to reduce fraud and adapt to increasingly complex regulations and accounting standards.


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34 Tips And Tricks for Increasing Your NetSuite Admins’ Productivity.

34 Tips And Tricks for Increasing Your NetSuite Admins’ Productivity.

Two NetSuite experts, Toast Senior NetSuite Administrator Oxana Kabakova and NetSuite Principal Compliance Manager Lisa Robinson, ran through a number of oft-overlook tips and tricks in a session at SuiteWorld 2022. They covered a lot of ground, so we broke their handy suggestions into categories. Here are the highlights:

Keyboard Shortcuts

1. When inputting a date, type “t” in the box to autofill with today’s date.

2. Type “y” to autofill with the previous day’s date.

3. Press “Shift + t” to autofill with the following day’s date.

4. Type “m” to autofill with the final day of the current month.

5. To reach the global search bar, press “Alt + g” (Windows) or “Option + g” (Mac).

6. Enter the first three letters of several record types in the search bar with either a colon or carat to search specific record types, like cus: for customer, con^ for contact, inv^ for invoice or “emp:” for employee

7. Search only exact matches by putting the term in quotation marks, e.g. “Tech Services Corp.”

8. Add % at the end of a search term for everything that starts with those letters. For instance, tech% will pull up anything that starts with “tech.” 

9. Put percentages around a numeral to pull up any records containing that number, as in %495%.

10. Put an underscore between numbers to pull up customer numbers starting and ending with those numerals. Cu: 4_5, for example, shows customer records 415, 425, 435, etc.

11. To search up to three terms simultaneously, use “OR” (use capital letters) between the terms. Te% OR Tech% OR Techno% would turn up records with any of those prefixes.

12. To see your 12 most recently viewed records, hover over the circular arrow in the top-left corner. Click on the record to open it or hover over it and click edit to change the record. 

General and User Preferences

13. Adjust the number of rows in a list or entries in a search bar dropdown by going to Home > Set Preferences and under Optimizing NetSuite selecting the preferred number of results. 

14. Admins can standardize date formats on that same Set Preferences General tab under Formatting.

15. Seeing internal IDs for all fields, records, lists, workflows and custom forms is useful when you’re making customizations through SuiteScript. To make these visible, in the General under Defaults select Show Internal IDs.

16. Change your NetSuite UI color scheme by navigating to Home > Set Preferences > Appearance. The Color Theme dropdown shows all available colors, including school colors for many US colleges.

17. Admins can give all non-admin users the same toolbars rather than role-specific ones by navigating to the same Appearance tab and under Centers & Dashboards selecting the box next to “Use Classic Interface.”

18. If you’re booking out-of-period transactions that you want tied to the general ledger for reporting purposes, go to the Analytics tab in Set Preferences, and under reporting change Report By Period to All Reports instead of Financials Only (the default setting). 

Reports and Searches

19. Web queries allow admins to share many reports with colleagues that don’t have a NetSuite license. Navigate to the Report, click Customize and under the More Options tab, click the box for Allow Web Query. You can export the report to Excel and, once saved, the report will refresh with the latest data every time you open it. Note: this does not work for reports with the Financial Statement Layout.

20. Set up an audit trail custom search by creating a new saved search and selecting Analytics Audit Trail as the search type. The results will show who made any changes to records in a certain time period. 

21. To see a list of who deleted what records and when, start a new saved search and select Deleted Record as the search type. 

22. You can also delete multiple records at once by going to Lists > Relationships > Customers. Make sure Edit is enabled at the top of the screen, then hold the CTRL key and select all the lines you want to delete. After that, hover over the New column on the far left and select Delete Record.  


23. The Navigation Portlet SuiteApp can provide a major assist to admins, as it allows them to create a role-specific home dashboard portlet with categorized quick links to commonly accessed reports, records and other information for different users.

24. Sales and operations employees can quickly get the information they need with customer or vendor dashboards. First pull up a list of customers or vendors. Hover over the record and a Customer/Vendor Dashboard button should appear to the right of the Edit button. You can also access this when in a customer or vendor record by clicking View Dashboard in the upper-right hand corner. 

25. For more information on the latest NetSuite release, hit Personalize in the upper-right corner of your home screen. Click the icon labeled “New Release” to add the New Release Portlet to your dashboard. From the portlet you can review release notes and access your Release Preview account.

26. Change how reports are categorized to what makes the most sense for you by navigating to Customization > Centers and Tabs > Center Categories > New.  


27. Double-click the Oracle NetSuite logo in the top left-hand corner for quick details on the performance of your NetSuite instance to quickly identify potential issues.

28. Download the NetSuite Application Performance Management SuiteApp for a deeper look into system performance, including customizations and mission-critical operations. It shows a dashboard highlighting potential issues, performance KPIs, server and client response times, helps prioritize problems by usage and traffic, and more. 

29. Visit to see if problems with NetSuite are only affecting your account or hitting multiple companies. 

Other tips

30. If admins are not seeing a certain feature, make sure it’s turned on by going to Setup > Setup Manager. Then search for the feature you’re looking for and see if it’s enabled.

31. Admins can reschedule system maintenance by navigating to Setup > Company > Customer-Scheduled Maintenance and clicking Reschedule next to the maintenance item. You can then select from available dates and times (slots are first come, first served).

32. Use the Copy to Account tool to move custom objects between accounts by going to Customization > Lists, Records & Fields > Record Types, then selecting the record adn clicking Copy to Account. You can select a target account, choose dependencies and record instances to include, then preview and deploy the custom record. Copy to Account is best for simple objects like custom fields.

33. There are two types of non-production accounts: sandbox and development. Sandbox accounts include a full replication of your production account, including all customizations and data. Development accounts have all the features of your production account but none of the data if you don’t want users to see sensitive information. They also don’t include third-party SuiteApps.

34. SuiteAnswers is a great place for admins to direct others for self-service as it’s accessible to all users. They can access it from any page in NetSuite by clicking Support > Go to SuiteAnswers or from the Help button at the top of the screen.

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Straightening Out Your Financial Reports

Straightening Out Your Financial Reports

Consistency in data management and control is the key to preventing messy books.

The Start

The very essence of accounting is organization. Recording transactions, summarizing activity, and reporting results fundamentally revolve around organized data and information. But good accounting is all about organizing data correctly — that is, in a manner that lends itself to further analysis. 

A new business with few transactions may not have difficulty keeping its accounting organized or quickly putting together clean, accurate financials. But as a company grows and transaction volumes increase, it becomes increasingly difficult to juggle all the processes necessary to keep accounts and financials in order. Inconsistent sorting, random adjustments, and too many unwieldy and ultra-specific accounts are all too common.

The result? Unreliable, messy books that make it difficult for leaders to get an accurate picture of the company’s past and present positions. 

The Mess

Duplicate, incorrectly sorted, and unmatched transactions obscure the true picture of income and expenses in a period. Trusting — and acting on — misstated account balances can be costly for a business, and realizing that the financial information presented is essentially meaningless can be extremely frustrating.

One miscategorized transaction can throw off two or more accounts. And the more those mistakes multiply, the less our books depict an accurate picture of past, present, and future positions.

The mess creeps up slowly at first. A few transactions are sorted into the wrong accounts and left to fix “later.” An executive decision is made to include location-specific expense accounts, exponentially expanding the chart of accounts. The summer intern accidentally duplicated all of last month’s transactions. And now, all of a sudden, the financials are all wrong, a deadline is approaching, and you have no idea where to even start.

For this very reason, periodic clean-ups have become a standard process in many accounting departments. Time is earmarked to determine just how far the books have strayed from the truth, if the difference is material or not, and what adjustments are needed to bring the financials back to order.

Problem is, in no time at all after each in-depth review and adjustment session, the errors collect just as fast as before. Limited resources and overstretched employees make it near impossible to manually improve data management, oversee every single accounting decision, and avoid all errors.

And since adjustments and short-term fixes fail to address the root cause, it’s inevitable that poor data management stemming from ineffective tools, rules, and processes will continue to produce chaos.

The Solution

Permanently breaking the cycle of errors requires better tools and efficient information structures that support enhanced control over data. NetSuite’s cloud accounting software solution is an intelligent, rules-based engine that automatically classifies transactions, applies accounting treatments consistently, and assigns accounts based on defined criteria.

When incoming transactions are sorted into the correct accounts all the time, every time, it reduces the need to locate errors and keep making adjustments, year over year. Additional accounting tools specifically built for managing complex processes, like accounts receivables and fixed assets, simultaneously provide a deeper level of control and better management while reducing manual effort and human error.

NetSuite’s platform operates from one single source of data that ensures the information from these systems supports the accuracy and reliability of core financial statements. With these tools and NetSuite’s multidimensional data capabilities, finance professionals can address the root cause of messy financial data, eliminate errors, and improve oversight and control.

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How AP Automation Saves Money, Reduces Risk, and Increases Efficiency

How AP Automation Saves Money, Reduces Risk, and Increases Efficiency

While accounting software has been around for decades, manual processes still play a major role in many accounts accounts payable (AP) operations. From manually entering vendor bills to generating check runs and mailing payments, accounting personnel often spend several hours a day performing mundane, repetitive tasks that could easily be automated. This is highly inefficient.

The Hidden Costs of Manual AP Processes

Manual processes are time consuming, labor intensive and prone to error. They also put a strain on accounting resources, taking time away from higher-value tasks like analyzing data and investigating anomalies. Companies that rely heavily on manual AP processes also tend to have higher overhead costs, spending by some estimates nearly five times more to process a single invoice versus organizations that are fully automated.

Manual AP processes can delay payments to vendors. This isn’t necessarily a bad thing if a company is experiencing a temporary cash shortfall. If payments are habitually late, however, it can lead to higher supply costs and missed savings opportunities. 

Suppliers tend to offer good customers the best prices. Purchase volume is the main consideration, but the customer/supplier relationship also plays a role. When customers don’t pay on time, it hurts that relationship. So a company that consistently pays late is unlikely to get the same pricing as one that always pays on time. 

Many companies offer early-payment discounts. While it may not be feasible to take advantage of every discount, an occasional early payment still saves money. But if manual AP processes make it difficult even to pay on time, then those potential savings are out of reach.   

Manual AP processes also increase the risk of errors and financial fraud. Manual data entry is a common source of errors. It’s easy to transpose numbers or leave out a digit when entering a vendor invoice or moving data between two systems. Caught in time, these errors are easily corrected, but with limited time during the close process, it’s not always possible to review every transaction. 

Identifying and correcting inconsistent or misapplied accounting rules is more difficult. Companies may not even be aware they’re making these errors, but they can prove quite costly for publicly traded companies and those preparing for an IPO.

Payment fraud is a growing concern, and relying heavily on manual processes increases the risk of falling victim. Maintaining separation of duties and other financial controls is essential to prevent internal personnel from submitting and approving fraudulent invoices. Avoiding this kind of fraud requires careful monitoring of every transaction to ensure approval hierarchies and other procedures are consistently followed. Overworked controllers and managers rarely have the bandwidth to do this, however, especially if it requires sifting through hundreds or thousands of daily transactions. This makes enforcement of internal controls spotty at best.

Automation Opportunities

Automating AP simplifies invoice processing, approvals and payments; helps accounting staff keep track of invoice due dates; and reduces the risk of fraud by ensuring vendor invoices are legitimate. Automation can also save money by ensuring on-time payment of vendor bills and making it easier for companies to identify and take advantage of early-payment discounts.

Invoice capture. As previously mentioned, manually entering vendor bill data into the accounting system takes an inordinate amount of time and is a significant source of errors. Fortunately, technologies like object character recognition (OCR) and machine learning have progressed significantly in recent years, making it possible to convert PDF and image files into digital text with a high degree of accuracy. 

For AP staff, this means bills in electronic format can be imported automatically into the accounting system rather than entered manually, reducing the potential for errors.  

Invoice matching and approvals. It’s important to make sure goods and services have been delivered before a vendor invoice is paid. Matching the purchase order, invoice details, and receiving documents is standard practice, but the process typically requires input from multiple departments, which can lead to delays. Automating three-way matching simplifies the process. Receiving data can be captured electronically and linked to the PO and invoice in the accounting or ERP system, making it easier to compare documents to ensure accuracy. 

Automation also makes it easier to ensure proper oversight of payments by enforcing payment authorization policies. Once the accuracy of a vendor bill is confirmed, it can be emailed automatically to the appropriate person or people based on the company’s internal approval hierarchy.

Making payments. Printing and mailing physical checks is time consuming, increases processing costs and makes it more difficult for companies to pay bills early. Automating the payment processes improves AP staff’s efficiency by eliminating these manual tasks. Electronic payment options give companies greater flexibility to decide how and when to make payments, allowing them to hold on to cash longer while avoiding late charges.

Automating Accounts Payable with NetSuite

NetSuite helps companies save money, reduce risk and increase efficiency by automating the entire vendor bill settlement process. NetSuite AP Automation provides a simple, fast, secure way to process invoices and make payments. NetSuite digitizes and automates the entire vendor bill settlement process, saving time by making it easier to pay suppliers and helping businesses scale their entire accounts payable process, allowing AP teams to support business growth without adding headcount. 

  • Receive. Capture and convert electronic invoices into digital text.
  • Match. Automatically match vendor invoices to purchase orders and receiving documents.
  • Approve. Route bills to the appropriate personnel for review and approval, with automated reminders.
  • Pay. Make payments via virtual credit card, ACH, or check with embedded banking services provided by HSBC.
  • Reconcile. Track the status of payments and reconcile transactions with full audit control.

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Take AP Automation to the Next Level While Reducing Fraud with NetSuite & HSBC

Take AP Automation to the Next Level While Reducing Fraud with NetSuite & HSBC

NetSuite Suite Banking aims to transform the way financial services and ERP work together, because ‘there’s magic to be had there.’

Why is accounts payable automation all the rage? An expected $7 trillion dollars of embedded banking flows by 2026, to start. Companies that are still manually entering and paying vendor bills — a labor-intensive and fraud-prone process — will fall further behind competitors that have automated their AP systems to process bills and make payments via banking integration. 

NetSuite not only automates the entire invoice-to-pay process, from data capture to reconciliation. Companies can also take advantage of embedded banking services executed by HSBC to pay bills directly from NetSuite, and businesses that use HSBC virtual credit cards to pay suppliers can earn cash-back rewards.

At SuiteWorld, NetSuite announced new AP automation functionality, and Scott Derksen, Senior Director of Business Development at NetSuite, and Brian McKenney, Chief Business Officer at HSBC Platforms, shared insights on added benefits from the NetSuite/HSBC partnership.

Cutting the Phishing Line

NetSuite AP Automation automatically imports bank and card data into NetSuite each day, which smooths reconciliation and allows for greater visibility.

“This will help you reduce fraud and human error,” said McKenney. “For organizations, about 5% of their revenue is lost to fraud every year, and about 80% of organizations in any given year will experience a fraud attack. Payments is one of the main vectors.”

In fact, AP accounts for 18% of business fraud, with an average loss of $300 per month for 10 months before it’s discovered. Often, the fraudulent payment goes out repeatedly until the legitimate vendor goes, “Hey, you haven’t paid me for 10 months!” 

These attacks are often accomplished via phishing, where a fraudster acts like a supplier or potentially even the CEO or CFO.

“They’ll send a spoofed email and target someone that works in accounts payables or in treasury and say, ‘You have an urgent payment that’s overdue. Can you please make this now?’” said McKenney.

Where in the past, an employee would receive that request, log on, and make the payment, AP Automation adds a layer of protection. A minor change in, for example, the supplier’s bank account information would flag as an exception that requires additional approval.

The process goes like this: With bill capture, finance drags and drops digital invoices into NetSuite, or vendors send them to a designated email inbox. Bills are scanned, and relevant details are converted into digital text. NetSuite uses machine learning to compare the bill to previous invoices, including bank routing info. The bill is then automatically matched with the associated POs and receiving documents to ensure details like unit pricing, quantity and totals are accurate, then routed to the appropriate personnel for review and approval. 

‘Quantifiable Savings’ with HSBC Partnership

As for the HSBC partnership, at SuiteWorld, NetSuite group VP of product management Craig Sullivan showed how NetSuite AP Automation now goes beyond scanning and matching bills to save on headcount, add business agility, and improve cash management. 

“This is the kind of thing that fuels growth,” said Derksen. Having banking embedded inside of NetSuite will eventually change the way companies access capital.

Sullivan walked through how customers can now track balances on their HSBC virtual cards and quickly and seamlessly make payments, all from the SuiteBanking dashboard. 

Additionally, a new account reconciliation tool can automatically match thousands of transactions across all journals and general ledger accounts, including transactions from third-party point-of-sale systems and corporate credit cards. 

“It’s just the beginning,” said McKenney. “We’ll be working to continuously improve the product, bring additional payment types in and also open up a world of opportunity, helping customers internationally.”

HSBC operates and has banking licenses in over 60 markets. By embedding that global outlook in NetSuite, finance can easily manage international vendor payments, currencies, and foreign exchanges across jurisdictions.

From vendor billing through three-way matching, approvals, and convenient, automated payments via HSBC, AP Automation and embedding financial services in the suite is all about keeping finance teams from having to leave NetSuite to jump into a banking portal — another significant time-saver. 

AP Automation has long delivered better security, reduced fraud, and fewer human errors. Now, add in cash back.

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Cost Analysis: What Is It and Why Is It Used?

Cost Analysis: What Is It and Why Is It Used?

Clean data and quality reports are traditionally the result of painstaking efforts to gather the required information and organize it meaningfully quickly enough to ensure relevance. Companies can do better.

To deliver valuable business insights and rich comparative reports, any kind of business analysis needs to follow an organized approach, beginning with gathering and sorting data. Cost analysis follows much of the same methodical process but maintains a narrow focus on the total costs for a company’s goods and services. That close tracking and examination of cost patterns enables organizations to identify what may be driving spending higher, determine if they are getting enough value for their money and understand if there are alternative materials, suppliers or processes worth exploring.

This systematic review categorizes expenditures by their direct and indirect effects on goods and services produced. Once you have this data, you can review costs, revenues and profit margins and compare and analyze spending by product, location and across different levels of the business. 

Understanding how your organization generates costs, spends money and where improvements may be found can make all the difference when margins are tight and competition is fierce.

For business leaders determined to make informed decisions, the first step is to ensure the information at hand reflects an accurate business position. Confidence in data inputs and understanding of informational outputs help finance leaders create more accurate budgets, plan better and control cost drivers. But manual processes for gathering data, calculating variances and analyzing comparisons consume a substantial amount of time and effort that companies can scarcely afford — not to mention often delivering incomplete or error-filled results.

Challenge: Unorganized, Inconsistent Data

Faced with the challenge of obtaining and aligning data from multiple sources, most companies try their best to piece it all together. But a constant need for ever-more accurate and timely information clashes with complex and manual cost accounting processes, where methods of allocations, analysis and comparisons typically involve manual and repetitive entries, multiple tabs and dozens of summary spreadsheets.

Without timely and automated coverage and analysis of each angle and level of the business, the risk of errors and omissions increases exponentially. Missed opportunities for expansion, course correction and savings can prove costly. Like an arrow launched from a bow slightly off course, imperfect and stale data used in cost budgets and forecasts can yield wildly off target results or worse — provide an advantage for competitors.

The answer: A solid foundation on which to analyze reports and accurate, timely information to form assumptions. Both are critical in cost analysis.

Automate Cost Analysis with Oracle NetSuite

Automating repetitive tasks like data collection and reporting ensures uniformity and consistent application of rules. Accounting databases primed with this normalized data can then retrieve critical information in an organized, timely manner. That supports better decisions and frees up time for value-added activities and analysis.

NetSuite, an accounting software suite dedicated to automation, instantly captures, categorizes, calculates and analyzes transactions with synced data, automated allocations and journal entries and live dashboards and KPIs. Saved searches and configurable reports simplify analysis, ensuring that current information is automatically displayed in an organized fashion by location, product line and customizable classifications.

Forget the struggle of sorting data, updating spreadsheets and racing against time. NetSuite provides the precise data capabilities companies need for comprehensive cost analysis and automates these procedures, ensuring better control over your decisions — and your business.

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A Practical Guide to Financial Modeling and Projections for Growing Businesses

A Practical Guide to Financial Modeling and Projections for Growing Businesses

CFOs are prioritizing improvements in the financial planning and analysis capabilities of their businesses in 2022. In a recent Deloitte survey, financial planning and analysis (FP&A) topped the list of the finance functions North American CFOs are focused on improving. Financial leaders also want to strengthen the data analytics and forecasting capabilities of their finance teams.

As FP&A skills become a must-have for all finance professionals, it’s worth revisiting a core analytics discipline they need to understand and can continually improve upon: financial projections and the modeling techniques used to produce them. Enhancing these skills has grown more important to remaining agile, resilient and profitable in the wake of unpredictable business, economic and supply chain events, as well as to inform strategies for future growth as the economy starts to expand.

Financial projections and the modeling techniques that shape them are in sharp focus because they help companies input assumptions, see the projected outcomes and choose the most favorable ones so they can take the best steps to move the organization forward.

Businesses of any size can take advantage of financial projections and modeling. What’s more, while much of the basic work can be done in spreadsheet applications, more sophisticated tools are now accessible for smaller organizations. This ebook will explain the value of financial projections, what information you need to get started, a few popular models and how your business can leverage these techniques to thrive and grow.

What Are Financial Projections and How Do They Differ From Forecasts?

The term financial projection is often used interchangeably with forecast, but there are key differences. Financial projections and financial forecasts are alike in that they both aim to predict outcomes based on specific assumptions. But where forecasts present the assumptions that reflect what the business expects to happen, financial projections apply a financial model to play out various assumptions to see what might happen. The output, projections, is a forecast of what might happen as a result of those assumptions along a spectrum of best-case and worst-case scenarios, what ifs and more. All that information allows the business to plan and think about its actions in the event that any of these outcomes—good, bad or neutral—occur.

In the past, forecasts provided a sort of internal map to guide business decision-making, and projections were used to show outside investors how their money would be used. For instance, if a bank gives you a loan for $200,000, what will you do with it? How do you plan to pay it back?

More recently, projections have become essential business tools to recalibrate strategies and build contingency plans in light of unanticipated supply chain disruptions, changing expectations from the workforce (like a growing preference for working remotely) and more.

Watch the Video: What is Financial Modeling?

Why Do Companies Use Financial Projections?

A financial projection predicts a likely outcome based on one or more hypothetical assumptions. Those assumptions are the inputs of the financial model, which is a statistical tool used to predict what might happen as a result of different business decisions, market scenarios and more. With that information, the model can then show the expected financial position, operational results and cash flow.

Calculating several financial projections simultaneously in order to evaluate multiple scenarios and the possible responses is a common practice. Projections help a company better plan for risks, like a natural disaster that prevents it from getting a key part from a supplier or a sudden drop in demand after a competitor launches a superior product. They also help prepare for positive outcomes, like a spike in demand for a certain product or the increased capacity from opening a third warehouse. They give the business a much better idea of how external factors will impact its financials and the adjustments and investments it needs to make to achieve its goals.

Projections cover multiple financial metrics. Revenue projections can give investors and lenders a sense of how, for example, a 20% increase in sales could impact operating expenses on the income statement. Cash flow projections show where you will get that money—from receivables, loans, a line of credit or another source. A balance sheet projection can suggest the anticipated rate of return for someone who invests in your company.

Financial projections are useful for:

  • Developing business plans. The financial section of a business plan should provide quarterly or even monthly projections for the first year and annual projections for the four years after These include projected income statements, balance sheets, cash flow statements and budgets for capital expenditures. The projections are important internally to determine everything from break-even points to growth plans, and to measure the company’s performance in its early years.
  • Informing growth strategies and business management. Financial projections show discipline in financial management, and better financial management increases the chance of overall business success in a big way. By using a financial model to make projections, you can see if, when and whether your business will make a profit with its initial business model, what could happen if it added new products or services, when to hire new people to support the company, when to make capital investments and their potential payoff, and
  • Due diligence for investors and lenders. The people and institutions investing and lending money will need to see proof that you can pay them back, and have a solid understanding of how you plan to do that. Some common benchmarks to project include how long it will take until the company turns a profit, sales in years three and five and data showing how your numbers compare to industry standards.

What Do You Need to Get Started?

Both financial forecasts and financial projections rely on current and historical transactional data, coupled with information on market conditions and industry trends.

Financial projections take the analysis a step further by applying a financial model to determine how certain variables will change the assumptions. Financial projections use information from current and past financial statements and external market information from government agencies, such as the U.S. Department of Labor, or market and industry projections from leading research and advisory firms.

Many finance leaders complete their first models in a spreadsheet program like Microsoft Excel, and the formulas allow you to model assumptions you’ve made. To build a financial model, you will ideally have at least three years of historical data, and the Journal of Accountancy provides a comprehensive list of financial data and metrics to include, such as:

  • Revenue (including revenue levers, drivers, revenue driver activity assumptions and pricing)
  • Cost of sales
  • Selling, general and administrative (SG&A) expenses
  • Capital investments

Oftentimes, the hardest part for startups and younger small businesses is getting these numbers in the first place.

Startups often run into the problem of trying to figure out what data to use for the foundation of their financial models since they have little to no sales history or metrics to work from. One source is industry and market research, like Standard and Poor’s (S&P) or Dun & Bradstreet, which provide national averages for businesses in different markets.

Newer companies can then pare down that information into the numbers most relevant to their organization. These figures can include the standard costs of revenue in every industry, the percentage of revenue attributed to the direct cost of sales or what percentage of revenue goes to overhead.

Another approach is to base calculations on the market share you want to capture in a certain time frame (top-down) or based on the resources at hand and the current data (bottom- up). Bottom-up forecasts are usually best for the shorter term (one to two years) and top-down for the longer term (three to five years). Used together, these two strategies offer a healthy balance between ambition and the reality of how much market share you can capture.

What Financial Models Should My Business Use?

Once you have these inputs, you can build and apply a financial model.

The three-statement model is the most important financial model and the one on which every other financial model is based.

True to its namesake, it takes the three core financial statements—income statement, balance sheet and cash flow statement—and uses assumptions and formulas to create a forecast for a given time period. The forecast starts with revenue and can also calculate expenses, debtors, creditors, fixed assets and more. Once the three-statement financial model is in place, employees can apply other financial models to conduct scenario planning and sensitivity analysis.

An employee building a financial model in a spreadsheet will create tabs for the income statement (showing revenue and expenses), balance sheet (detailing assets and liabilities), cash flow statement (money in versus money out), capital expenses and depreciation costs to establish a clear picture of the current financial health of its business. A finance professional then uses the assumptions as inputs and applies formulas to drive outputs that are projections. On the income statement, for example, assumptions can include revenue, average order value, refunds as a percentage of revenue, discounts as a percentage of revenue, cost of goods sold (COGS) as a percentage of revenue and operating expenses as a percentage of revenue.

Once the three-statement financial model is in place, other financial models can be applied to further understand the impact of various assumptions. These include:

  • Sensitivity Analysis (What-If Analysis): A sensitivity analysis shows the effects of changes in assumptions such as selling price, supply chain costs, fixed costs, forecasted sales, delivery costs and other Sensitivity analysis models generally change one variable at a time and then demonstrate the impact of that change. For instance: How does changing the price of packaging or the advertising budget affect the forecast? Can the company boost profits if it changes the average selling price? For this reason, sensitivity analysis is also called what-if analysis. It challenges the person looking at the numbers to consider the reliability of the assumptions made. What happens if actual results turn out to be much different than expectations? Which factors have the biggest impact on the forecast or projections?
  • Scenario Analysis: This financial model is closely related to sensitivity analysis but involves changing all or many variables at the same time, rather than one at a time. A scenario analysis looks at what happened in the past and what could happen in the future, including major changes that would have a lasting impact on the company. It typically includes base-case, worst-case and best-case scenarios. Scenario analysis could be used, for instance, to model the impact on total revenue of launching a direct-to-consumer channel, adding a new enterprise customer or, on the more challenging end, a natural disaster or the loss of a critical customer.
  • Strategic Forecast Model: Businesses use a strategic forecast model to see how various initiatives they’re considering would affect long-term, strategic Also called long-range forecasting, this model helps organizations evaluate the impact of corporate projects, major finance initiatives and marketing and analysis plans on its long-term strategy. For example, a company may use the strategic forecast model to project the costs and potential revenue of opening a second manufacturing plant, building stores in another country or launching a new product line. It can then help leaders determine whether it’s in the business’s best interest to pursue those projects.
  • Discounted Cash Flow Analysis: A dollar today is always worth more than a dollar two years from now. If you do nothing to your business and it makes a predictable amount of money each month, you know your cash flow. If you make an investment now—acquiring another company, for instance—that will produce new revenue streams in the future, that future money is not worth as much on a dollar- per-dollar basis as the money you’re spending right now. If you have a customer who is ready to sign a five-year contract to purchase a specific quantity of your product, that’s the basis for your new investment. As long as that customer has a strong business, you have a sure thing— you know the company will receive a certain amount of income for five years. You can use the interest rate on some other sure thing (like a five-year Treasury bill) to determine your discounted cash flow. If your estimated return on investments has historically been 90% of what you initially expected, then your discount rate needs to reflect that. In that way, your discount rate reflects both what you could earn if you just invested the money, plus a measure of risk based on market trends, your own history or both. You’ll use that discount rate to calculate the net present value of your investment, and if it’s positive, you’re making a good investment.

Calculating the net present value of investments is the best way to determine whether an investment is a good one or not. But the quality of calculation is highly dependent on your ability to set the right discount rate.

Step-by-Step Guide to Creating Financial Projections

While many finance departments rely on customized spreadsheets to do financial modeling and impact analysis for these models, there are several issues with this approach. Spreadsheets are challenging to manage, lack data transparency and integrity, do not integrate with operational plans, and are generally not efficient at handling financial modeling activities.

With planning and budgeting software, models don’t have to be created from scratch every time an executive asks for a projection. Cloud-based planning solutions enable users to create and compare multiple models that incorporate real- time financial and operational data. Since there’s less legwork required, the business can scale and apply this type of analysis to more business decisions, leading to faster insights for decision-makers. Despite those clear benefits, only 11% of small businesses surveyed by Robert Half said they have automated their financial modeling practices.

Small businesses just getting started with financial planning can create a basic model in Excel by following these steps below. 

1. Create a new spreadsheet and label the first row “Assumptions.” Label columns B, C, and D with three future fiscal In these columns, you’ll make predictions about your performance in each of those years for a variety of metrics.

2. Label rows with revenue, units, price, COGS and operating expenses like marketing, labor or other categories of expenses that are relevant to your business.

3. Fill in the values with your assumptions, based on financial forecasts and your current financial Use a font color that is easily distinguished from black in the corresponding cells (like blue). Remember to format any dollar figures with the accounting number format by right- clicking the cells, going to “format cells” and selecting “accounting” in the “numbers” tab.

4. This is a good time to freeze panes. To do this, highlight cell B4 or its equivalent in your worksheet, go to “View” in the task bar, and click “Freeze panes.” This keeps your labels visible as you toggle around in the If you pay attention to the row numbers as we move on, you’ll see how this improves readability.

5. Next, move down a couple of rows to start calculating projections for your income statement, beginning with net The font for these values will be black. You will run the numbers in your assumptions through a formula to calculate net revenues by multiplying units by price (=B6*B7 in the sample from Figure 1). Copy and paste the formula to the next two cells to the right. The spreadsheet should automatically apply the formula appropriately for the year you’re working in, but it’s a good idea to make sure that it did by double-clicking the cell to view the formula. Ensure that the letters match the column for that cell. Make sure your number formatting is set to “accounting.”

6. Calculate COGS by multiplying units by unit cost (=B6*B10 in our example). Just as before, copy and paste that formula in the two cells to the right, checking to make sure it was applied appropriately for each column. Check your number formatting to ensure that it’s “accounting.”

Now, the format of your worksheet should resemble Figure 2.

7. Still within the income statement area, calculate gross profit by subtracting COGS from net revenue (=B18–B20 in our example). Copy and paste the formula to the next two cells to the Check the formulas and the number formatting for the correct column and “accounting.”

8. If you would like to see margins, you can divide the gross profit by revenue (=B22/B18 in Figure 3) and change the number format to percentage so you get the gross profit percentage.

9. While still within the income statement, calculate operating For our sample, this included labor and marketing in our assumptions—you may want to include additional costs—and we will reflect those same expenses in the income statement. Remember that you don’t want to enter the same value in two cells, so fill in these cells by using a formula to pull numbers from the source in the assumptions. In this example, we would compute labor for 2020 by entering =B13 because we got that number from the assumptions. That way, if we change the assumption later, the income statement will adjust along with it. Repeat this step for the remaining five cells in the operating expenses section of the income statement. Check your number formatting.

10. Calculate the total for operating expenses by adding all of the costs in this section together. In our case, we can simply add labor and marketing, but if you have more than two items here, you can use the sum formula. As always, check the number formatting.

11. Calculate operating income by subtracting operating expenses from gross profit (=B22–B28 in Figure 5, see next page). Copy and paste the formula in the cells to the Check your formula and number formatting.

12. Determine operating income margins by dividing operating income by revenue (=B30/B18 in Figure 5, see next page). Again, copy and paste the formula for the next two years, and check your formulas and change the number format to “Percentage.”

Now you have built a dynamic model using best practices that automatically calculates gross and operating margins as you change assumptions. While this is a basic model, it’s one of many that can help you set goals and make decisions for your company. It quickly gives you an idea of what your finances would look like based on projected revenue and expenses, and you could create multiple versions based on expected, high or low sales estimates.

Enabling Easier, Accurate Financial Projections With Software

There are clear advantages to automating financial modeling capabilities with a planning and budgeting tool. Software can process more data and create visualizations to make projections easier to consume and glean information from.

The automation enabled by these systems means less time spent finding and entering data, and more time using the outputs of the model to inform and shape business decisions.

But any investment in automated financial modeling or manual calculations will be for naught without reliable, accurate inputs. That’s why it’s so important to start any journey to financial analysis by first automating as many accounting and finance processes as possible, since all other activities will use those numbers. As noted earlier, accurate financial statements are the baseline for solid financial analysis. In that sense, an ERP platform with robust financial planning capabilities like NetSuite often serves as the foundation for financial modeling and projections. Having a central database that updates in real time assures decision-makers that they’re using trustworthy numbers across all departments.

That single source of information helps financial planning and analysis teams overcome their chief challenge: data collection.

One survey found that the teams spend 75% of their time gathering and processing data. A system like NetSuite Planning and Budgeting eliminates that work by automatically pulling in historical data and applying it to pre-built, industry-specific statistical models that include revenue and expense modeling. That allows businesses to more accurately model what-if scenarios and predict potential results. NetSuite’s planning and budgeting application then generates a dashboard summarizing those predictions, and users can apply predicted values directly into their plan or forecast. Finally, the module eases the presentation of those results with drag-and-drop capabilities to build reports for different audiences and make it easier to share them with various stakeholders.

Financial models and projections have become increasingly crucial for finance teams. As companies become more aware of the various risks that could have a dramatic impact on their operations and revenue, they’re doing everything they can to plan for such events and avoid scrambling. Although financial modeling may sound daunting, anyone with a basic understanding of your finances should be able to perform basic projections. An ERP solution and planning and budgeting software will take your efforts to the next level and make more complicated and frequent projections feasible.

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