How CPAs can survive cash flow peaks and valleys

Throughout the COVID-19 pandemic, CPAs have played a pivotal role in prioritizing and executing financial transactions so small businesses could stay afloat and avoid getting caught off guard by their finances. They provided guidance on liquidity options like the Paycheck Protection Program and assistance for small businesses struggling with bookkeeping, managed accounts payable and receivable, and eliminated nonessential expenses.

While CPAs have provided crucial financial counsel to clients navigating economic uncertainty, it does not mean they themselves are out of the woods. The harsh reality is that most small businesses — even accounting firms — fail within five years because they don’t have the capital or cash flow to keep the doors open.

When cash is tight, accounting firms can be forced to make some difficult decisions between important business priorities. That can mean having to choose between paying rent and paying employees, paying vendors or keeping the lights on.

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Improve Cash Flow By Decreasing Time To Cash

Founder and CEO of Gotransverse. A 25-year veteran of global enterprise software with a focus on monetization.

In any business, cash is king, and no matter your revenue model, generating sales is meaningless if you can’t collect the money. While showing consistent growth is essential, maintaining shorter time to cash is critical because cash keeps the lights on.

With more organizations adopting recurring revenue and pay-as-you-go billing, the time-to-cash problem is frequently more acute. Recurring revenue introduces monthly recurring revenue (MRR), a normalized measurement of recurring revenue, typically measured as a constant value in each month of the subscription period.

Even with MRR billing, it’s still important to focus on cash flow. MRR shows you the value of your subscriptions (i.e., your sales), while cash flow is the measure of money flowing in to support business operations. With MRR, your objective is to shorten time to cash and maintain

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