(415) 418-0020 info@proteafinancial.com
Tips To Avoid A Cash Crunch: 3 Ideas For Cash Flow Management

Tips To Avoid A Cash Crunch: 3 Ideas For Cash Flow Management

Cash flow is an important element of any small business. To effectively manage your cash flow, you need to be aware of all the aspects that can affect it and how they impact your business. The best way to achieve this is by understanding what might cause fluctuations in cash flow and coming up with solutions ahead of time for each negative event so as not to be caught off guard if one occurs. This article will discuss some common factors that may reduce or increase your company’s cash flow and provide tips on how to handle crunches when they arise.

What is Cash Flow?

In quite simple terms, cash flow is the money flowing in and out of your business each month. Small businesses need to strike a balance between accounts payable and accounts receivable to ensure that more money comes in than goes out each month. Although cash flow is related to net income, they have some key differences. 

Net income refers to the earnings of a business during a period after considering all expenses incurred during the period. Net income includes sales recognized but not collected until subsequent months. In addition, net income likely includes a monthly depreciation charge which is a non-cash item. These are important to consider when comparing net income to your operating cash flow.

Why is Cash Flow Important?

Understanding how your business generates and uses cash can help you better navigate the growth of your company. Analyzing your cash flow helps you see how well your business is performing and how much liquidity your business has. 

Having cash on hand puts you in a better financial position, adds stability, and gives you better purchasing power. Your cash flow determines how quickly you can expand your business. Additionally, having positive cash flow that leads to a surplus makes you a worthwhile investment for banks or investors. 

maximize cash flow

Tips for Boosting Your Business’ Cash Flow

There are so many things you can do to keep your business running smoothly.

You should have a plan for every day; when the unexpected happens, you should be able to react. There are three areas to focus on for boosting cash flow.

Increase Revenues

  • Keep an eye on customer retention rates, customers are the backbone of any business, and if you have a low customer retention rate, it is time to look at what is going on. Customers are the lifeblood of any company. They provide the revenue that funds your business, and they keep you in business. 
  • Find out what is lacking in the market and offer new products and categories to augment your current offerings. You may be able to charge a higher price for new or improving on existing items.

Decrease Expenses

  • Reach out to new suppliers or renegotiate prices with an existing vendor. Even offering to pay early could result in getting a small discount, which is almost always worth taking.
  • Find ways to automate, or even outsource, parts of your operations. 
  • Find less expensive suppliers that have nothing to do with the product you sell. You do not want to sacrifice product quality for a lower price since this affects your image and reputation in the market. Focus on costs such as office supplies or a less expensive insurance provider. 

Operational Efficiency

  • Be open about what your cash flow is like with your team. They will need to know what is going on if cash flow is already tight or if it becomes tight. They can help your business quickly find ways to cut expenses or reinvest profits into projects with high rates of return.
  • Find ways to increase your return on assets. Smart business owners track their return on assets because it reveals how effectively you are investing in your business.
  • Manage inventories through buying more efficiently or increasing inventory turnover. When you buy efficiently your customer is the focal point, which makes it easier to make more sales.


An interesting observation by the Italian economist Vilfredo Pareto helps explain how best to manage cash flow. He noticed that 80 percent of the land in Italy was owned by 20 percent of the population. He further noticed that it happened in nature in that 80 percent of the peas in his garden were produced from 20 percent of the pods.

What does this have to do with cash flow management? Look at your business: it is likely that the Pareto Principle, also known as the 80/20 rule, is in play. Do 80 percent of your sales come from 20 percent of you customers? If so, it might make sense to cut out some of your more high-maintenance, low profitability clients. Your ratios may be different but understanding roughly 80 percent of an output results from almost 20 percent of an input gives you a competitive advantage on where to look to focus your effort and resources. 

By keeping an eye on your expenses, income, and operational efficiency you can predict when you might need a little extra cash coming in or going out. You can even use a budgeting tool to help with this process. You will see how much money is coming in each month and where all the money is going out each month, so it is easy for you to make changes if needed.

Accounting Software: Control Your Finances With Confidence and Ease

Accounting Software: Control Your Finances With Confidence and Ease

An accounting software system is a valuable tool for any business. It allows for more accurate record keeping, which in turn means less work and lower risk of mistakes. It enables you to automate labor-intensive accounting tasks and accelerates tax preparation. There are many benefits to using an accounting system, so it is important to explore them before making the decision on what type of software will best suit your needs. In this post we will review some popular features offered by accounting software systems and the costs associated with each one. We hope that after reading this you will have a better idea of how an accounting system can help you grow your business!


What is an accounting software system?

An accounting software system enables a company to keep track of all the various transactions that happen in a business. Transactions vary depending on the company and the industry, but most likely include sales, invoicing, accounts receivable, purchases, accounts payable, taxes, and payroll. All these transactions can be summarized, which provides valuable data for creating charts and predicting future performance.

There are three main types of accounting software systems. First, open-source accounting software is free and can be customized to the needs of the business. The downside is that open-source software may have hidden costs such as compatibility issues, support costs, training, and setup costs.

Second, canned accounting software (or desktop software) runs on your laptop or desktop. The data is also stored on the machine it is installed on. This is a great solution if you live in a rural community with a slow internet connection. It is also easy to use, costs less than other systems, and secure when you are not connected to the internet.

Last, cloud accounting software is stored online. With everyone being hacked these days you may wonder whether your data will truly be safe. The good news is you will not have to lie awake at night wondering if you many years of hard work will one day come crashing down. You are protected—many cloud-based solutions use bank-level encryption, so your finances are as secure as the money in your bank. In addition to security, no installation is required, no updates, backups are automatic, and you can access your data from multiple devices.


What are the benefits?

Using an accounting software system will save your company time and prevent avoidable human errors. Instead of tracking everything in a spreadsheet or a paper system, you have all your transactions in one place. It is easy to see what was spent or how much cash is coming into the business. You always know exactly where to find this information.

Accounting software automates some of the most boring accounting tasks, which dramatically increases the accuracy of your data. For example, you can set up so when a sale is made an invoice is sent to the customer set up on credit. The longer you wait, the harder it is to collect. By automating the process, you increase the likelihood of collecting. Furthermore, you can track your unpaid invoices and offer discounts for early payments.

Another benefit of an accounting system is the ability to track cash flow. Just like you can automate your accounts receivable, you can also automate other areas of accounting such as cash flow analysis. By connecting the accounting software to your bank accounts, you can easily reconcile your bank balance to your book balance in real time. No more waiting until the end of the month to find out where you stand financially.

One commonly overlooked area that is a huge win for businesses using accounting software is staying in compliance with taxes. Without good software, it can be difficult and keep track of taxes owed. A good software will calculate the sales tax and prepare the form for you.

If you opt for a cloud-based system (which I highly recommend), you have access to your accounting software system anytime you want. Literally, access to your business is at your fingertips. You can login anywhere you have a connection. So can your accountant, which makes it easy on everyone. Especially at tax time. Your accountant has everything he or she needs to file a complete and accurate return on your behalf.


Leveraging an Accounting System

New technologies continue to disrupt the role that accountants play in the marketplace. This is good news because accountants are well-positioned to provide the highest value to their clients. Because accountants are trained to see the big picture, they can further develop an accounting system to tailor to the needs of their clients. As a result, your accountant can be an invaluable source of analytics, insights, and best practices.

Gone are the days of the one-size-fits-all approach. Online accounting systems are compatible with hundreds of third-party applications that extend the usability of their platforms. Take QuickBooks Online, for example. There is a reason why QuickBooks has an 80 percent market share. Not only do they offer one of the most affordable accounting software packages, but they also have one of the most versatile accounting software systems. At the time this article was written, QuickBooks simple plan is $25, their Essentials plan is $40, their Plus plan is $70, and their Advanced plan is $150. All plans include QuickBooks mobile apps, support, and app integration.

What sets QuickBooks apart from their competitors is the software integrates well with third-party services, which make your financial management easier. As your business grows, you can add apps for spend management, billing and invoicing, eCommerce, time tracking, analytics, and inventory management. With over 650 apps to choose from, you are bound to find one that addresses any problems your business needs solved.

There are many advantages to using accounting software for your business. With QuickBooks Online you can use an online solution that is tailored specifically to you and your company’s needs. The benefits of a system like this will outweigh any potential risks associated with not having one in place. There are some great opportunities when choosing between different types of systems as well. We know how difficult it can be to choose which type of software works best for you, so please feel free to contact us if you have any questions.



Get a Full Picture of Your Business with Accrual Accounting

Get a Full Picture of Your Business with Accrual Accounting

The cash basis of accounting is the method of recording revenue when cash is received and recording expenses when cash has been paid out. This method is easy and enables the business to legally manipulate taxable income. Paying less in taxes is as easy as spending more money.

The cash basis is common for small businesses that are not yet established. However, the Internal Revenue Service requires businesses to use the accrual method for inventories. As a result, some businesses adopt a hybrid basis where they use both the cash basis and the accrual basis. This is referred to as the modified cash basis of accounting.

Because there are so many advantages to using the accrual method, it makes sense to just commit to using the accrual method of accounting. We will explore what the accrual method is and why it makes sense to use it.

What is accrual accounting?

Accrual accounting is a method of accounting that records revenues when they are earned and record expenses when they are incurred, regardless of whether money has changed hands. The goal is to recognize related revenues and expenses in the same period. Accountants refer to this as the matching principle.

A quick example will better illustrate what this means. Your top salesman had a stellar month in January and sold $750,000 worth of merchandise, earning himself a commission of $7,500. Everyone hustled and it shipped by the end of January. The salesman was paid February 1. Under the accrual method the commission expense should be recorded in January, since the commission was for the sale generated in January.

What are the benefits of accrual accounting?

There are four major benefits to accrual accounting. First, the ability to match revenue with the related costs enables you to track profitability and better understand cash flow. As you track profitability, patterns will arise that will enable you to make better decisions. 

Second, it provides a more accurate picture of the state of your business than cash-based methods. The accrual method makes it easier to anticipate your expenses and predict sales. Being able to predict and budget are essential skills to be able to anticipate the needs of your business.

Because the accrual method of accounting provides a clearer picture of your business, many banks require financial statements to be prepared accordingly. This makes it easier to obtain credit and expand your business to meet market demands.

Third, it is compliant with Generally Acceptable Accounting Principles (GAAP). GAAP is a collection of accounting standards and industry practice that have been developed over many years. This one is huge because it puts everyone on the same page. Accounting is commonly referred to as the language of business. GAAP ensures that everyone is speaking the same language.

Last, GAAP makes it easy to answer the question “How are we doing?” Because GAAP creates one standard for everyone it makes it easy to compare the current period to past periods.

Even more, you can compare how you are doing to how others in the industry are doing. For example, pretend you are a producer of red wines. You can look up publicly traded wineries like Vintage Wine Estates ($VWE) or Willamette Valley Vineyards ($WVVI), which are both listed on the NASDAQ. Look up their statistics on Yahoo! Finance to get an idea of what how they are performing. Knowing how others in the industry are performing gives you an idea of what your numbers should be. 

Creating metrics to gauge your financial performance is a whole other—but exciting—conversation. To show you what is possible, $WVVI, who started publicly trading in 1994 enjoys a 10.28% profit margin. Whereas $VWE, who recently started publicly trading only enjoys a 4.52% profit margin. What does $WVVI know about wine making that $VWE is missing, as illustrated in the stark differences in profit margins?


Accrual Accounting and Protea Financial

Although accrual accounting takes more time because it can be complicated, the advantages outweigh the disadvantages. It enables you to track profitability and better understand cash flow, which provides a more accurate picture of your financial position. In addition to being compliant with GAAP, it also provides useful information for making business decisions about inventory purchases, investment opportunities, and financing needs.

Accrual accounting is more than cash transactions; it provides information about assets, liabilities, and earnings. Accrual accounting provides a better view of your overall financial position. Because the accrual accounting method is consistent with GAAP, the rules to prepare financial reports of both public and private companies are oftentimes a more accurate method for most companies.

For more information about accrual accounting or other business accounting basics subscribe to our blog for updates. 

Tax Preparation Enablement

We provide your organization a true end to end solution to all of your tax needs. Tax season is year round to Protea – if you aren’t preparing daily, it’s too easy to get behind. We are always working with your organization to streamline your businesses tax management.

Outsourcing Accounting Services: Increase Your Bottom Line

Outsourcing Accounting Services: Increase Your Bottom Line

Outsourcing accounting services is a great way to save time, money, and your sanity. It can be difficult for many business owners to find the time or expertise necessary to keep up with all the paperwork that comes from running a successful company. We will examine how outsourcing accounting services can help you improve your efficiency and your bottom line.


You will have access to a team of experts

Accounting is one of the most difficult professions to master. Most accountants have many years of education, training, and experience. Many accountants work toward one or multiple certifications—Chartered Accountant, Certified Public Accountant, Certified Managerial Accountant, Enrolled Agent, or others.

Each certification is useful depending on whether the accountant wants to focus on financial accounting, taxes, auditing, or general business. Each certification has rigorous requirements that require many hours of study, experience, and testing.

In most cases, the requirements for certification are overkill for what is used in daily business life. So, if your accountant is not certified, it will likely not have an impact on their ability to have a drastic effect on the long-term success of your company. What it reveals is how serious the accounting industry is about producing talented accountants.

Also, accountants work with many businesses daily. By outsourcing your accounting, you gain the benefit of avoiding the mistakes that other businesses have made that your accountant has already solved. Accounting can be frustrating, so your accountant has had many wins in their career.  This shows that your accountant has the moxie and resolve to ensure the continued success of your business.


You can avoid the headache of hiring and training employees

For most small and medium-sized businesses, hiring and training a quality accounting team can be an expensive and resource-intensive process. Even retaining the best talent can be a headache. Because the needs of a business can change throughout the year, it is easy to adjust an accounting team through the outsourcing company.

By outsourcing your accounting, you are passing on headaches that would otherwise be yours and instead hand them off to an expert who specializes in accounting. This frees your time up to focus on core business functions that add value to your company. You are free to do what you are best at… while they do what they are best at—adding to your bottom line.


You will save money and time

They say that a penny saved is a penny earned. First, you will save on the large amount of money that goes into office facilities, software, office machines, and supplies. As briefly mentioned, not only will you bypass the headache of maintaining a staff, but you will also save on the salaries and payroll taxes of in-house accountants. By outsourcing, you will have access to the latest technologies and innovations without additional costs.

They will find money you did not even know you had. Did you know that when the coronavirus hit, congress passed several laws aimed at helping businesses survive the anticipated economic impact? If you did not know, your accountant did and already had several strategies on how to help you benefit.

Additionally, the tax laws change every year. By outsourcing your accounting, you will partner with accountants who are on top of these changes and help you get access to help and tax deductions that will enable you to thrive—especially during difficult times.


You will be up to date on your financial position

For simplicity, many small- and medium-sized businesses choose the cash basis of accounting. In essence, revenues are recognized when cash is received; expenses are recognized when cash is paid out. Although it saves time, you lose out on what your true financial position is. For example, if you prepaid some expenses—such as rent or insurance—you may have more cash available than you think you do.

An outsourced accounting team is likely to prefer to use accrual accounting because it gives insights into the financial health of a company. Accrual accounting recognizes and records transactions when they occur. For example, you buy a $20,000 distribution truck to be used for the next 10 years. Under the cash basis you expense $20,000 when purchased. This makes one year look bad and all the other years look good. Under the accrual basis, you would depreciate it as it is being used—over the next 120 months. As you are using the asset, you are likely generating a profit from using the asset.

An outsourced accounting team can create accurate and timely financial reports so you can predict future revenues and costs. This will help you make well-informed decisions for the long-term success of your business. With the accrual method all sorts of metrics are now available to tell you exactly how you are doing. Where performance is measured, performance improves.


Outsourcing your accounting services to a team of experts is a wise investment for your business. The right partner can help you increase your bottom line and avoid the headache of hiring employees. They will give you guidance on how to best manage risk in each area of business so that nothing falls through the cracks. You will be able to save time by not having to worry about staying up to date with technology and billing cycles.

Having an expert staff who has years of experience in the industry who is always looking out for ways to improve efficiency and reduce cost is one of the best ways to give your business a competitive edge. Having access to a team of professionals dedicated solely to handling all matters related to finance and taxes on behalf of your organization means you are better positioned not only from a risk management standpoint but also having funds available for other pressing needs within your company.

Property Insurance in the Wine Industry

Property Insurance in the Wine Industry

As things begin to open back up with COVID-19 getting more under control, we find that it is “fire season” in Wine Country.  With fire season front and center, we find ourselves saying that “it’s not if there is another fire in our area, it’s when will the fire occur and where?”  How do wineries of all shapes and sizes navigate the turbulent property insurance marketplace?  The entirety of 2020 posed significant challenges in the property insurance marketplace due to our previous fires, and 2021 will have similar challenges. Insurers have either scaled back the offering of property insurance in the wine industry, reduced limits of insurance being offered or have ceased writing business altogether.  Many wineries have received a Notice of Non-Renewal from insurers while others have seen rate / price increases in their property premiums in excess of 100%-200% or more.  Is there any relief in sight and what steps can wineries take to position themselves in the best light to receive a favorable property insurance renewal?  While we are not going to be able to eliminate wildfires and fire activity in our region, there are several things that we can do to be prepared in advance of a fire.  These begin with advance preparation and evolve into an on-going dialogue and changed behaviors in terms of policies, procedures and routines.  Here are a few important thoughts about preparedness:


Be Prepared.

One valuable resource is Ready for Wildfire  www.readyforwildfire.org   which includes planning tools, home and business hardening information, defensible space, evacuation preparation, toolkit list, etc. both in English and Spanish.  This site also includes an ap for planning purposes for providing a defensible space checklist as home and business owners conduct their own walkaround.  The ap also includes a statewide fire map linked directly to CAL FIRE along with current updates on fires.  CAL FIRE’s website is www.fire.ca.gov and on the front page is a link to Wildfire Incidents.  This is very current and is where many other websites get their information from.  If local incident phone number is available, it would be published here as well.  This should be a first step in a fire prevention and mitigation process. 


Have a Plan. 

This includes the development, refreshing or increased focus and emphasis on a Disaster Preparedness and Recovery Plan.  Disaster planning focuses primarily on wildfire issues and will be a document that once completed, will be always subject to changes with modifications as the organization learns and embraces the plan.  The plan will outline key personnel with their roles and responsibilities throughout the stages of a wildfire alert, potential evacuation warning, voluntary evacuation warning, mandatory evacuation warning, and post disaster recovery.  The plan will address the separation, segregation and movement of stock and inventory to remove it from the path of a wildfire and secure it safely out of harm’s way.  If you have the ability, segregate your stock / inventory into multiple locations.  This will reduce the likelihood of a fire loss to all of your stock / inventory.


Communicate Often. 

As wineries work to navigate the property insurance marketplace, communication with their insurance broker / risk management consultant is critical.  The property insurance marketplace is ever changing and what was true last month may not necessarily be true today.  Communication about the ever-changing marketplace is a crucial component to being aware of what an upcoming renewal might look like in terms of rate and limits being offered.  The earlier in the process and the more often a winery can communicate with their insurance broker / risk management consultant, the less likelihood of a big surprise at renewal.  It is no longer acceptable for an insurance broker to take a client to lunch and deliver renewal terms the day before renewal.  In order to properly budget and be prepared for an insurance policy renewal communication early and often is necessary.  By utilizing an insurance broker / risk management consultant that is familiar with the wine industry, the back and forth questions will be greatly reduced as there is familiarity with exactly what is required by the particular insurer(s) that are involved.


Know Your Limits. 

This is not to know your boundaries and capabilities, rather to know what the true value of your winery assets are.  A property policy will pay Replacement Cost in the event of a fire.  The Replacement Cost of a winery’s brick and mortar assets for the building, tanks, furniture and fixtures are relatively easily established via a contractor, valuation models or other avenues.  Stock / Inventory may not be so easily established.  The Cost of Goods Sold to produce a bottle of wine is known.  The cost to produce / purchase the juice is known.  These are relatively easily established.  Once a bottle of wine is ready for sale, the mark-up / profit margin must be established.  Some insurance contracts will pay Selling Price on Stock / Inventory in the event of a fire loss or damage.  Your property insurance limits of liability on your insurance policy must adequately reflect the values that, in the event of a fire loss or damage, you expect to receive.  This is a critical step that must be documented before an insurance policy is in force.  In essence the winery is “settling a fire loss with the insurance company before the fire occurs.”  Through a well-documented Statement of Values, all parties have the full picture of what is at risk.  Expectations of insurance policy limits of liability and anticipated pay-out must be set prior to the policy issuance, not afterwards.  Also, check with your bank to see what your loan covenants require in terms of limits required to purchased. 



The property insurance marketplace for wineries continues to change.  For the balance of 2021 it is likely to continue to be an extremely hard marketplace with limited insurers willing to offer insurance to wineries.  As new capacity begins to enter the marketplace for wineries, it is possible in 2022 to see some relive in terms of rate and availability of additional limits of insurance. Vigilance in the heightened awareness and thoughtfulness about a potential fire is important.  A keen eye towards knowing what is happening in the local region and maintaining a safe and protected winery are critical. 

For additional information please contact Chet Laws at InterWest Insurance. Chet and his team have an extensive background in the wine industry.  He can be reached at claws@iwins.com / 707-657-4505