I want to talk to you about my fireplace.
When my wife and I bought our first house, we had a short checklist of ‘nice to haves’ that we took to every open house. A porch, a gas stove, a full second bathroom, and a fireplace. The house we ended up with checked every box apart from the gas stove, so you can imagine our excitement as we sat in the first year’s cool fall evenings on the porch, looking out over a cord of firewood.
Soon the days would turn cold, with frost glazing the rooftops and a bitter wind sending the prudent indoors. Those would be the days of fires and red wine, sitting on the floor and talking about life. Ah, bliss.
Of course, the homeowners in the audience already know what we would soon discover – a house is not just a lovely place to live and a (sometimes) wonderful investment, it’s also a soul-sucking, money pit.
The fireplace, it turns out, had been renovated at some point in the house’s seven decade history. The renovations had left the formerly conical smoke chamber a roughhewn mess of bricks. Apparently the idea of building a fireplace out of firebrick was also a stretch too far, so mine was constructed out of run-of-the-mill – also known as ‘not fireproof’ – bricks.
I can make the fireplace work, but it can only be coaxed into a sort of half-hearted fire. The boxy design hurts airflow, and to get anything resembling a roaring fire, I’ve got to pop most of the windows on the ground floor. It’s not an ideal heating situation.
Your small business accounting fireplace
Every small business is its own home. It provides protection and stability for its employees. It has a core purpose around which everything else is centered. It can be improved and built up by its founders and executives, changing from a one-story shack into a mansion, over time. And it can be neglected, its foundation rotting away under poor management.
At Capterra, our core purpose is to help small businesses and nonprofits find the software they need to succeed. Over time, we’ve built up a solid foundation and a substantial structure. But in every house, and every business, there’s something like my fireplace.
There’s a part of the business that isn’t a core function. You do sales and this just supports sales. It’s the human resources department or the accounting department or payroll or any number of business practices that make the business better, but that don’t make money.
Typically, these back office functions are ignored. Maybe you dress them up with cheap bricks to make them look nicer than they really are. At some point, though, the home inspector comes calling, and you’ve got to make sure you’re right with the world.
When Nadia, our Jill-of-all-Trades, joined in 2009, she stumbled right into Capterra’s fireplace.
Capterra’s accounting system had been Excel-based until 2006 – which is to say, we didn’t have a small business accounting system. At that time, we finally switched over to something more robust, but there was still dust on the accounts and cobwebs in the ledger.
Investing in what you can’t see
I have three options with the fireplace in my home. I can pay someone to fix it, I can fix it myself, or I can ignore it and smoke jerky in my living room. You have the same choices when confronted with your business’s back office functions.
At some point, the room is going to fill up with smoke, and you’re going to either hire someone to clear it out, or you’re going to buckle down and do it yourself. The challenge every business faces comes from the nature of back office functions. They don’t make money, they cost money.
When people say they can’t afford to hire an accountant or an office manager, they mean, “I can’t pay someone who doesn’t pay for themselves.” So they do it in their spare time. Start-up founders and chefs and designers sit hunched over QuickBooks2006 in the middle of the night, trying to figure out why they’re debiting an account to add money to it.
That was Capterra’s solution until 2006. If your business is using Excel to manage your small business accounting, you’re doing it yourself and you’re spending too much time on it.
We tend to think that the alternative is to hire someone who has an accounting background – or to outsource it to an accounting firm. Sometimes, that is the right answer. But it wasn’t the right answer for Capterra, and it doesn’t have to be the only answer for your business.
The middle ground of software
Instead of teaching yourself, hire someone who can learn it for you and give them the tools they need to overcome your back office woes. Nadia didn’t come to Capterra with an accounting background, but in the seven years she’s been here, she’s gotten an education.
That’s been a formal education through accounting training and coursework, but, more importantly, it’s been on-the-job training. She was given the time, space, and resources to learn our accounting system. Most importantly, perhaps, she was given the latitude to change what was broken and make it run correctly.
That certainly meant investing. Capterra invested in an intelligent and fast learner by hiring Nadia. We invested in training to make her job easier and give her the skills she needed. We invested in software to save her time and make the whole thing possible.
Now, she can manage the accounting for a multimillion dollar business in just one week each month.
With the software tools at her disposal, she can also manage billing, payroll, benefits, on-boarding, and basic tax preparation. Of course, it helps that she’s a superstar, but even a superstar needs the right tools.
For Nadia, that means a combination of:
Do we go out and use professionals when the need arises? Of course. We have auditors and tax preparers to make sure all the pieces are in the right places, but we manage most of it in-house.
The back-office value hierarchy
A strong back-office is the foundation to your business. The bigger you grow, the more pressure you’ll put on these functions and the more they’ll be tested. When they fail, it’s a spectacular failure. The IRS kicks in the door and walks out with the roast beast. To keep your business stable and growing, I’d suggest these three steps, in this order.
1. Hire the best – This means taking the time to find the best, paying to retain the best, and treating people like they are the best. When you start with quality materials, you end up with quality products.
2. Invest in training – Give people the time they need to learn and give them access to the materials they need.
3. Let software do the heavy lifting – You don’t need someone to understand every part of a process to make software do what it’s supposed to do. By farming part of the process out, you can keep your business focused on what it does best.
Capterra’s fireplace roars like a dragon, these days. We can push growth without having to worry about our infrastructure. Sure, the initial investment wasn’t zero, but it also wasn’t equivalent to hiring seven more people. Instead, we found one great person and gave them seven bits of software.
As for me, my house’s fireplace is still a work in process. So if you see me walking around looking like Dick Van Dyke’s character in Mary Poppins, cut me a little slack. I’m just cold.