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A Process for Building Your Business’s Financial Backbone

The most stressful part of building Omniscient Digital has been the financial side of things. Probably because I didn’t have any experience with it. It’s one thing to be able to build a product or deliver a service, but a whole different game when I started thinking about whether we’re tracking and analyzing our finances correctly and not screwing ourselves over.

Building a Foundation

I started off using Quickbooks Online to keep track of income and expenses, invoice clients, and pay vendors.

I eventually learned how to set up recurring billing through Quickbooks. I wasn’t a fan of the interface or the design of the invoices and moved on to Stripe for Invoicing instead.

As we worked with more vendors and had to manage more 1099s, I set us up on Gusto, knowing that we’d eventually hire W2 employees and keep track of how we pay ourselves.

I eventually felt overwhelmed by all the tools and learning how to do our bookkeeping and realized we needed help from a professional.

Finding my Guide

I did a search for CPAs and bookkeepers who could help me get set up and found Erin Armstrong who help us get our account set up. From there I did my own bookkeeping, setting aside 30-60 minutes at the beginning of each month categorizing expenses and reconciling our accounts.

How I figured my way through that… I’m not entirely sure.

There came a point when the numbers weren’t making sense and I had to get Erin’s help fixing my books.

She also helped us answer questions around tax strategies, business structure, and more strategic questions. In retrospect, these were not important or very impactful questions yet. We just needed to get the basics right.

At that point, the business was growing and we had to focus on delivering services to our clients. I decided it no longer made sense for me to stress out about figuring out bookkeeping and instead find someone to help with that.

Finding a Bookkeeper

I wasn’t sure who I could trust to handle my bookkeeping on Quickbooks and didn’t want to spend the time vetting a bunch of independent bookkeepers. I also heard mixed reviews about Quickbooks’ Bookkeeping service. To be honest, I didn’t do too much diligence on it.

I evaluated a few Quickbooks-certified bookkeepers I found on Google and Bench Bookkeeping.

There were two things I had to weigh between the two options. I could:

  1. Knowing that Quickbooks is the de facto platform for most bookkeepers, accountants, and financial analysts, I could find a Quickbooks-certified bookkeeper and stay on the platform. The downside was the service was hit-or-miss or I could take more time to evaluate more bookkeepers off the platform.
  2. OR I could move to Bench which uses their own proprietary platform which would require migrating off Quickbooks, paying for catchup bookkeeping, and working with a bookkeeper through Bench’s platform. Bench’s service had mostly good reviews. The bad reviews called out Bench for using subcontracted bookkeepers (I verified that they don’t) or that there was so much turnover that they worked with a new bookkeeper every few months. After multiple conversations with a rep, I wasn’t too concerned about those things. The other downside was they only do cash-based accounting, not accrual-based accounting. This didn’t seem to make a big difference for us at the moment, so I didn’t weigh it heavily in my decision-making.

I went with Bench for our bookkeeping services for five reasons:

  1. I didn’t care that they use their own proprietary software. I can imagine migrating to another platform is a matter of exporting and importing a CSV.
  2. They had a much better product interface that I felt comfortable navigating to answer any questions I had about how much money was coming in and how much was going out each month and where that money was going.
  3. Our assigned bookkeeper was very responsive and helpful with all my questions. She also proactively let me know when they were getting started on my books and when they were done.
  4. If there was an expense that she had trouble categorizing, the user interface for categorizing those expenses was very simple and straightforward.
  5. Quickbooks Online + Bookkeeper would have cost about $250 per month. With Bench, I was able to lock in a rate at $159 per month.

The good news after choosing Bench is their platform continues to get better and better over time.

Here’s how the interface looks as of this writing:

Reporting dashboard
Chat interface with my bookkeeper

Get started with Bench now and get 30% off your first 3 months.

Finding an Accountant

My partner and I were also advised to find a business accountant that was different from our personal accountants to avoid crossing wires.

Erin shared some recommendations, one of them being Anthony Aversano at R&A Tax and Accounting who has helped us with our taxes for the last few years and counting.

We now had our building blocks:

  • A strategist to help us make sure we weren’t making stupid financial decisions
  • A bookkeeping service
  • An accountant

This system has been humming along smoothly for the last two years.

Becoming Strategic with Our Finances

After about three years in business, we’re not at the stage where must become more strategic with our finances and answer questions like:

  • How many people do we plan to hire in the next year?
  • How much could we pay them?
  • How much cash in the bank should we have in case things go south?
  • How much should we have available in a line of credit?
  • What’s the exit strategy, if any?
  • Based on the exit strategy, how should our business be structured?

At this point, we hadn’t engaged with Erin much and she had many other clients so we had to find someone else, a fraction CFO to help us navigate these questions.

I evaluated Pilot, CFO Share, and Paro.

I immediately disqualified Paro based on a single question they asked me during the call: “What background do you want the financial expert to have?”

How am I supposed to know? I’m looking for help.

Turns out they’re a lead generation company for freelance finance experts. They don’t have any financial expertise and just take care of the billing. Pass.

Pilot is one of the larger companies that has recently gotten a lot of funding and works with large brands. It was clear I’d be a small fish for them, but they were willing to figure out a package that would work for us. It was too pricey for me though.

I ended up going with CFOshare, a boutique financial services firm in Denver, Colorado. I had a few good conversations with Matthew there and decided to seal the deal with them.

Why did I go with a smaller firm?

It’s simple. I felt like I’d get more time with them and I wouldn’t be one of thousands of clients. My assumption is, at most, I’d be one of hundreds of clients for them. Because of their business model, they use a blended hourly rate so they were able to offer an hourly rate that was a third of what Pilot had pitched and all-in the annual cost was less than half of what Pilot pitched.

We recently kicked off with the CFOshare team and I’ve been impressed. They’ve already been helpful in raising strategic questions I should consider for the growth and structure of the business and helpful in explaining the financial model they’ve built for us to map out growth and hiring.

Now, that point earlier about Bench doing only cash-based accounting and not accrual-based accounting? That’s now important for me to consider. And turns out Bench isn’t as detailed with expense reporting.

We might have to migrate back to Quickbooks later in the year.

The biggest thing I’ve learned through all of this is really a reiteration of one of the principles of Omniscient Digital: Bias toward action. To be more specific, bias toward the most impactful actions.

I could’ve gotten caught up learning the ins and outs of bookkeeping and spending hours on it per month. Or I could’ve hired someone.

I could’ve gotten caught up in having the most optimized bookkeeping by sticking with Quickbooks and evaluating bookkeepers and accountants until I found the right one. Instead, I moved to Bench, knowing that it wasn’t the perfect long-term solution but it was the right solution at the time.

I could’ve gotten caught up reading about financial strategy for a business, or I could find someone who has done this stuff for multiple businesses and help me answer the questions I’m not even thinking about.

It has always been about finding the right person to help me and the team so we can focus on areas where we can have the most impact: growing our client base and growing revenue.

Learning from People Who’ve Done it Before

Now we’ve solidified the three financial foundational pillars for the business:

  • A CFO (albeit fractional)
  • An accountant
  • A bookkeeper

At this stage, the financial piece happens in the background. What we’re focused on is learning from other agency owners and how they think about business growth, hiring, client retention, operations, and so on.

This is where the fun is.

If you’re building a business and learning to figure these things out, I’m happy to chat.