CPAs, How’s Your Cash Flow?

Author: Jody Padar | February 8, 2017

Here’s something we as CPAs don’t often say out loud or even admit: Accounting is a seasonal business. I mean, we’re not exactly a water park, but we have times throughout the year where business ebbs and flows. Not only do we have tax season to get through in April, but September and October both see our firms with an influx of demand and extension deadlines to meet. So while some months may be flush (ahem, April, new computers anyone?), other months (like August) can be more of a challenge cash flow-wise.

Knowing this, here’s my question for you: What do you do when have a bump in your cash flow? How do you make sure you’re covered so the lights stay on and your employees can get paid? Fixed price agreements may have prevented a lot of the gaps, but trust me when I say those bumps still show their face at one point or another during the year.

So how do you prepare for those seasonable bumps in cash flow or, better yet, prevent them from happening? The short answer: Knowing the right resources to call upon when the going gets tough.

You’re Not Alone

First things first—I want to set your mind at ease and let you know you’re not alone in dealing with cash flow issues, so let go of the shame. I run across firm owners all the time (from sole practitioners to managing partners at T100 firms) who are dealing with this. But guess what? No one really wants to talk about it. That’s why I am addressing it here. There’s also this mentality floating around, “Shouldn’t I already know this? After all, I am a CPA.”

Tax season has been around forever, and collectively as a profession, we haven’t done the best job figuring out how to address the cash flow bumps. It’s not just you. Promise. Managing our firms gets in the way, customer demands get in the way, and of course, no one really likes to follow up on receivables. While we love our customers and nurture our customer relationships, who wants to call them up and say, “Hey, where’s our check?” And as much as we love to get paid, collecting the actual cash is always the last of our priorities. We don’t want to risk hurting our relationship, and no one wants to ask for owed money—I don’t care who you are.

We’ve always done it this way—and it’s because we haven’t known there were other options. We’ve also believed that our customers wouldn’t change to work with us in a new way. Why rock the boat, right?

Wrong.

We already know the old-school business model is a seasonable business model, and it’s changing because a lot of people are working to change it. But like most change, it takes time. So what do we do in the meantime to fill in the gaps? Aside from saving money when those bumps of cash hit your bank accounts, what else can we do?

How to Close the Cash Flow Gap for Good

The first thing to do is get informed. In my work, I see a lot of CPAs who are afraid of change. They are afraid of the new tools out there, afraid of getting on the cloud, afraid of ditching time sheets, and moving to a more fixed price. We must face this and move forward. That said, we all know cash is king and cash flow is critical to keeping a business (whether it’s your customers’ or yours) afloat. Consider these tips on how to keep cash flowing all year long.

  1. Follow up on receivables

    It may seem obvious, but like I mentioned above, there is a lot of resistance here to actually collecting what you are owed. If you are a sole practitioner, hire someone to do this for you. If you are a larger firm, make sure someone is regularly on top of this. Sometimes this means chasing your customers down, looking at your aging report and following up more than once. You must have the guts to stand up to your customers. If they are several months behind in payment, cease doing work. Request a credit card upfront before you continue on with customer. Consider requiring a deposit for new customers and those who have difficulty paying.

  2. Develop a recurring revenue model

    This means you charge for the work that you do upfront—whether you keep time or don’t keep time. Last year, I worked with a customer and their bill was $8,000. This January, we’re going on a monthly payment schedule to make it easier all around. While it may be great to get a big chunk of money at one time, it’s more effective if that payment is spread out through the year.

  3. Use a lending tool

    With Fundbox, you’ll receive your money based on a specific receivable the next business day. This can be a lifesaver as you can go on to other things that your firm demands without the crunch a lack of cash flow brings. For example, once approved (no paperwork or credit check required), you can choose specific invoices to advance. Their fees are reasonable and transparent—you’ll always know them before you advance—and there are no early repayment fees. I know CPAs are typically afraid of doing something like this, but as I will get into below, it can make a huge difference to you when you’re trying to keep your practice moving forward.

Let the Cloud Help You

If you are working with customers on the cloud, you’re in real-time. If you’re in real-time, you will become more accessible and your work will just be a lot easier. It’s the perfect climate for a recurring revenue model. Accessibility, transparency, and real-time communication is an added value, and when you’re adding value, that’s the time to increase your prices. It’s a lot easier to change your pricing when there is something new and additional going on as opposed to saying to your customer, “Oh, we’re raising your prices this year.” There are several cloud tools on the market that can make your job as a CPA easier and dare I say it, more enjoyable.

If you’re in the position where you need to boost your cash flow, Fundbox makes it easy since it is cloud-based and connects with your bank account so you can get access to funding in as little as one business day. Safety isn’t an issue: Fundbox is under strict compliance guidelines, has secured millions of dollars in venture capital, and is one of the top-rated apps in Intuit’s App Center. One quick tip: if it integrates with Intuit, the vendor is legitimate because stringent due diligence has already been done.

Take Your Own Advice: Goals & Strategies for the Cash-Conscious CPA

Chances are, you already do some sort of cash flow consulting with your customers. We are consultants, after all! We should be taking our own advice. Whether you’re setting up a long-term or a short-term cash flow goal, the key is to use the tools and resources you have access to in the best way possible. Here are my recommendations on how to do that:

  • Get on the cloud. Just do it
  • Create a document stating what prospective cash will be coming in within the week, the next two weeks, the month, and the next three months. This always changes.
  • Initiate weekly conversations about the prospective cash document, bill payment, priorities, and recurring payments with your accounts receivable person.
  • Gain clarity on the timeframe it takes to close a deal completely, when your customers pay, and how the seasonality of the business impacts this.
  • Document the fixed payments and recurring monthly bill payments.
  • Make sure you have a designated person in charge of collecting receivables and contacting customers who are late with payment.
  • Develop a go-to list that can change when appropriate. Cash flow is a constantly moving target, and your firm’s needs are always changing and being reprioritized.
  • Forecast actual cash needs and determine if there is a surplus or deficit.
  • Pay attention to the long-term and short-term debt. Really think about how you will prioritize repayment over the short-term, mid-term, and long-
  • Make bill payment decisions based on priorities and opportunity of cash on hand. Know your own risk tolerance!

Using a lending tool requires you to shake off your conservative values around the cost of borrowing money. When you find yourself questioning your decision, remember that the world around us has changed. The cost of doing business has changed. By using Fundbox, you are embracing a new opportunity to fuel your firm’s growth.

Think of it this way—if you know how to use Fundbox and other online tools that are out there, you are in a better position to serve your customers. And let’s face it, that’s exactly where you want to be.

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