Case 1
Streamlining Cash Flow Management
About Client :
Client is in Cleaning Solutions business and is a mid-sized cleaning services company offering janitorial, commercial, and residential cleaning across several cities. With a team of over 40 employees and a rapidly growing client base, client faced various bookkeeping and financial management challenges that impacted their cash flow, payroll, and overall business growth.
Issues :
- Cash Flow Management Issues : High operating expenses, unpredictable payments, and seasonal business fluctuations led to frequent cash flow crunches.
- Tracking Service-Specific Revenue and Costs : Client offered multiple types of cleaning services, each with unique pricing and costs, which were not accurately tracked. This lack of segmentation led to an unclear understanding of service profitability.
- Payroll Complexity : Their payroll was complex, with hourly employees, varying work schedules, overtime calculations, and frequent new hires due to high turnover.
- Expense Management : High transportation, cleaning supplies, and maintenance costs made expense tracking and categorization essential, yet they lacked a systematic approach.
- Delayed Reconciliations and Reporting : Monthly reconciliations were delayed, and the company did not have accurate, up-to-date financial reports, making it difficult to assess financial health and make informed decisions.
- Sales Tax Compliance : They struggled with accurately calculating and filing sales tax due to differences in local tax rates for various cleaning services.
Resolution by us :
We implemented a comprehensive bookkeeping solution tailored to Client’s needs to address these challenges :
1.Cash Flow Management :
* We introduced cash flow forecasting to help client anticipate financial needs and prepare for seasonal slowdowns.
Additionally, we set up a system to monitor receivables and follow up on delayed payments, improving their cash collection
rate.
* With better cash flow projections, Client could plan expenses strategically and maintain a reserve fund for emergencies.
2. Service-Specific Revenue and Cost Tracking :
* We restructured their accounting system to track revenue and expenses by service type (e.g., commercial cleaning, residential
cleaning, janitorial). This setup provided clear insight into the profitability of each service type.
* Monthly reports were generated to analyze each segment, allowing Client to focus marketing efforts on their most
profitable services and adjust pricing on less profitable ones.
3. Payroll Management :
* We implemented a payroll software solution that automated wage calculations, including overtime and tax deductions. The
system integrated with their time-tracking software, making payroll processing faster and reducing errors.
* Automated tracking of overtime and hourly rates also ensured accurate compensation for employees, improving satisfaction
and retention.
4. Expense Tracking and Categorization :
* By setting up specific categories in their accounting software (e.g., cleaning supplies, vehicle maintenance, transportation), we
made it easier for client to track and manage operating costs.
* We also helped establish spending limits for variable expenses, such as transportation and supplies, and regularly reviewed
expenses with the team to identify cost-saving opportunities.
5. Timely Reconciliation and Financial Reporting :
* We scheduled weekly reconciliations, ensuring that all transactions were up-to-date and accurately recorded. This
allowed Client’s management team to make timely, data-driven decisions.
* With clear monthly profit and loss statements, cash flow statements, and balance sheets, Client now had a reliable view of
their financial health and could adjust their strategy quickly if needed.
6. Sales Tax Compliance :
* We set up automated sales tax calculations based on location and type of cleaning service, ensuring accurate, on-time filings and
avoiding costly fines.
* By monitoring changes in local sales tax laws, we helped client maintain compliance and reduce risks associated with tax filings.
Outcomes :
After implementing these solutions, Client experienced substantial improvements in their bookkeeping and financial management processes :
- Improved Cash Flow : With consistent cash flow forecasting and faster collections, client managed to reduce cash shortages and maintain better liquidity.
- Increased Profitability : By tracking profitability by service, client focused on higher-margin services and phased out or restructured less profitable offerings, leading to a 15% increase in net profit within six months.
- Payroll Efficiency : Payroll processing time was reduced by 60%, and employee payroll discrepancies were minimized, improving morale and reducing turnover.
- Expense Control : With clearer expense tracking and categorization, client reduced unnecessary costs, saving 10% on operating expenses in the first year.
- Accurate and Timely Financial Reports : Real-time access to financial reports allowed client’s management to make strategic decisions, ensuring sustainable growth and financial stability.
- Sales Tax Compliance : Automated tax calculations reduced errors, and client avoided previous issues with late filings and penalties.