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Build A One-Page Financial Clarity Dashboard That Tells The Truth · My Accounting Advantage

• 0:04
  SPEAKER_01: Hello and welcome back to the podcast My Accounting Advantage.
• 0:08
  SPEAKER_01: Today is episode 30.
• 0:10
  SPEAKER_00: Yay.
• 0:11
  SPEAKER_01: I can't believe it through 30 of these complex topics.
• 0:14
  SPEAKER_00: That's right.
• 0:15
  SPEAKER_01: And today is a topic very close to my heart.
• 0:19
  SPEAKER_01: The financial clarity dashboard, why most business owners feel financially blind.
• 0:24
  SPEAKER_01: Now, my this was me.
• 0:26
  SPEAKER_01: I don't go into zero and look at those complex reports, but I've got one report that says money in, money out, profits, tax owing, and I also calculate our cost per day to run.
• 0:41
  SPEAKER_01: And a lot of people ask me, why would you do that?
• 0:44
  SPEAKER_01: Well, you can think you're having a good day, but what does it cost per day to run?
• 0:48
  SPEAKER_01: Yeah.
• 0:49
  SPEAKER_01: And knowing that number, by about 11 or 12 o'clock, you want to make sure you pass that number.
• 0:53
  SPEAKER_01: And that's as tight as it gets.
• 0:54
  SPEAKER_01: Take us into what we're going to learn today.
• 0:57
  SPEAKER_00: Yeah.
• 0:57
  SPEAKER_00: So what I want the listeners to walk away with is, you know, how to build their own financial clarity dashboard and what numbers there should be tracking and what um should be included in your dashboard for your day-to-day operation of the business.
• 1:16
  SPEAKER_00: And a lot of people come to me and they feel that they're a bit lost.
• 1:20
  SPEAKER_00: They have Zero, but they don't know how to use it.
• 1:23
  SPEAKER_00: And a lot of people don't even know how to run reports within Xero.
• 1:27
  SPEAKER_00: Like I said, look, you know, you need to go to reports and then pull up the PL, which is profit and loss, and you can have a look at your gross profit margin and also your net profit margin.
• 1:39
  SPEAKER_00: And they're like, oh, you've lost me.
• 1:41
  SPEAKER_01: So and I've got I'm a plumber.
• 1:43
  SPEAKER_01: I've got to go and put some pipes in the ground.
• 1:45
  SPEAKER_01: That's right.
• 1:46
  SPEAKER_01: And you're right, people use Xero because the accountancy firm uses Xero to report to the taxation office.
• 1:53
  SPEAKER_00: Yeah.
• 1:54
  SPEAKER_01: But getting a financial snapshot on your business is critical.
• 1:58
  SPEAKER_00: That's right.
• 1:58
  SPEAKER_01: Take us into it.
• 2:00
  SPEAKER_00: So now the exciting thing is a couple of weeks ago, Xero has announced that there's an AI tools called Jax that is now making financial clarity more accessible than ever.
• 2:13
  SPEAKER_00: So what does Jax stand for?
• 2:15
  SPEAKER_00: Jax is actually a stand for just ask Xero.
• 2:19
  SPEAKER_00: Wow.
• 2:20
  SPEAKER_00: Yes.
• 2:20
  SPEAKER_00: And it's an AI agent that's built into Xero itself.
• 2:25
  SPEAKER_00: So if you actually, if you actually have a Xero file as your bookkeeping and payroll system, beautiful.
• 2:34
  SPEAKER_00: You can actually ask Jax questions like um what you would do with Chat GPT or Copilot.
• 2:41
  SPEAKER_01: That is amazing.
• 2:42
  SPEAKER_01: So you could say, what do I cost per day to run?
• 2:44
  SPEAKER_00: That's correct.
• 2:45
  SPEAKER_00: And it as as long as your data is up to date and correct.
• 2:50
  SPEAKER_00: So um yeah, you just I use my accounting advantage.
• 2:53
  SPEAKER_01: Oh yeah.
• 2:54
  SPEAKER_01: So you'd be fine.
• 2:55
  SPEAKER_01: And your beeping services.
• 2:56
  SPEAKER_01: So mine's immaculate.
• 2:58
  SPEAKER_00: Yeah, yeah.
• 2:58
  SPEAKER_00: No, you you you're fine, Lee.
• 3:00
  SPEAKER_00: So your financial data is taken care of.
• 3:03
  SPEAKER_00: So for those who have their own bookkeeper, you know, just make sure that all your bookkeeping is up to date.
• 3:10
  SPEAKER_00: And then you can just ask your AI, Jax, in this case.
• 3:14
  SPEAKER_00: There's a symbol.
• 3:15
  SPEAKER_01: It's available now.
• 3:16
  SPEAKER_00: It's available now.
• 3:17
  SPEAKER_00: Wow.
• 3:17
  SPEAKER_00: Yes.
• 3:18
  SPEAKER_01: So how do you get that popped on?
• 3:20
  SPEAKER_00: So it's actually on your dashboard, and there's a symbol on the right hand side, and it looks like a sparkle.
• 3:28
  SPEAKER_00: You just hover over it and then click on Jax, and then it will say, How can I help you?
• 3:33
  SPEAKER_00: And then you can ask it to pull up your profit and loss and what are your net profit for the past month or past quarter.
• 3:43
  SPEAKER_00: And then you can say, Look, look like my profit margin has gone down or my revenue has gone down.
• 3:49
  SPEAKER_00: Why is that?
• 3:50
  SPEAKER_00: It actually does an analysis for you.
• 3:52
  SPEAKER_01: That is absolutely amazing.
• 3:54
  SPEAKER_01: And for all the people who have enjoyed the chat GPT experience of I'm talking, getting answers, talking, getting answers, this makes Zero incredibly valuable.
• 4:05
  SPEAKER_01: And you're not constantly sending emails back and forth to your bookkeepers and accountants to do it.
• 4:10
  SPEAKER_01: You just ask Jax and that how's the accuracy?
• 4:13
  SPEAKER_01: Have you tested it?
• 4:14
  SPEAKER_00: Yes, I have tested it, and it's pretty good.
• 4:17
  SPEAKER_00: As long as your um financial data, your bookkeeping is up to date and accurate, it's not going to divert from that accuracy at all.
• 4:26
  SPEAKER_00: And I'm testing it at the moment at at my firm, and we we were able to just pull up any financial data that we want.
• 4:35
  SPEAKER_00: So I I have billed a bit of questions for you so that I will share in this podcast so that you cannot go and ask Jack's oh your fundamental financial data.
• 4:46
  SPEAKER_01: And just for our listener, the importance of the questions in AI is called prompting.
• 4:51
  SPEAKER_00: Yeah.
• 4:52
  SPEAKER_01: And I did an AI course, my, and they said, How would you go about this?
• 4:56
  SPEAKER_01: And I typed it in and my results come up.
• 4:59
  SPEAKER_01: They said, Cut and paste our prompting.
• 5:01
  SPEAKER_01: Oh my goodness.
• 5:03
  SPEAKER_01: The difference was same machine, same problem, but the way you prompt it is everything take us into the prompting.
• 5:10
  SPEAKER_00: So there are five questions that you should be asking is where is my money come from?
• 5:16
  SPEAKER_00: You know?
• 5:17
  SPEAKER_00: What a great question.
• 5:19
  SPEAKER_00: Yeah.
• 5:20
  SPEAKER_00: So we we want to go through, you know, the like what I'll I'll do, I'll go through the first five important questions that you should be asking your AI, you know, Jax, to answer is number one is where is my money coming from?
• 5:37
  SPEAKER_00: Number two, what is making me money?
• 5:40
  SPEAKER_00: Number three, where is my cash going?
• 5:43
  SPEAKER_00: Number four, what risks are emerging?
• 5:46
  SPEAKER_00: And number five, what should I focus on next?
• 5:49
  SPEAKER_00: That is amazing.
• 5:50
  SPEAKER_00: Yeah.
• 5:51
  SPEAKER_00: So go back to where is my money coming from?
• 5:55
  SPEAKER_00: Even more of a deep digging down question for you is you can ask it which product generate the most revenue or which services are growing or which clients contribute the most.
• 6:08
  SPEAKER_00: So it will go through the financial data and provide you with those critical answers.
• 6:13
  SPEAKER_00: And number two, what is making me money?
• 6:17
  SPEAKER_00: So we're looking at profitability now.
• 6:19
  SPEAKER_00: Okay, so this is quite crucial because a lot of businesses have different revenue streams.
• 6:24
  SPEAKER_00: So they should really have a look at what's making them money or what is sucking, you know, the net profit margin.
• 6:32
  SPEAKER_00: Because sometimes you you don't really know.
• 6:35
  SPEAKER_00: But at the same time, you know, you need to document certain revenue streams rather than have everything lump into one, then you'll never be able to identify which one makes you money and which one doesn't.
• 6:48
  SPEAKER_01: Take us further into what is making me the money.
• 6:51
  SPEAKER_00: Yeah, so that measuring profitability of the business.
• 6:54
  SPEAKER_00: So further questions that you could ask, Jax, is which revenue streams are actually profitable?
• 7:01
  SPEAKER_00: Okay, so and it's in it is important for you to identify, you know, what are the revenue streams that different revenue streams that you have within your business and categorize them.
• 7:12
  SPEAKER_00: You shouldn't really just have one and then lump everything in into one code because otherwise you can never measure and you you don't really know what revenue streams are making money and what's not really, because a lot of businesses provide different services within the one business.
• 7:30
  SPEAKER_00: So you need to identify the service category for your business and just break them down and invoice appropriately.
• 7:37
  SPEAKER_00: Use the right code within zero.
• 7:39
  SPEAKER_00: So, I mean, if you don't really know how, ask your bookkeeper or we can help you with that at My Accounting Advantage.
• 7:45
  SPEAKER_00: The next question is which services look busy but deliver little profit?
• 7:50
  SPEAKER_00: So that's quite important because those services that you provide, it might consume a lot of your staff time, but really they don't generate a lot of revenue.
• 8:01
  SPEAKER_00: So perhaps you might want to give that one away.
• 8:03
  SPEAKER_01: Just on that model, the very famous story of Kodak who invented the digital camera and squashed the project because they made so much money out of chemicals for photography dissolving and went under because they didn't see the future versus looking at where revenue is coming from today.
• 8:23
  SPEAKER_01: Yeah.
• 8:23
  SPEAKER_01: So is there going to be a shift in the game?
• 8:26
  SPEAKER_01: Yeah.
• 8:26
  SPEAKER_01: And with AI, Jax is already coming to me, if someone who doesn't know how to use Xero and has had a few companies, this is a game changer because I could talk to Xero all day long.
• 8:39
  SPEAKER_01: Because I know what I want to know, but I don't have the skills or the time to know how to find the report or read the report.
• 8:47
  SPEAKER_01: Anything you want.
• 8:48
  SPEAKER_00: So that's where Jax is going to change the landscape for for you, for business owners, for clarity in your numbers, because you know, we we used to interpret the profit and loss for our clients because they look at it and they're just go, they're just numbers.
• 9:04
  SPEAKER_00: I don't know what any number does and why why we have surplus and why we have deficit.
• 9:10
  SPEAKER_00: So this way you can actually ask Jax in plain English if you're making money or not, and it will respond with you know the appropriate responses.
• 9:20
  SPEAKER_00: And the last question I would ask in in terms of profitability is are margins increasing or shrinking?
• 9:27
  SPEAKER_00: That's quite important.
• 9:29
  SPEAKER_01: I like number three is a question.
• 9:31
  SPEAKER_01: Where is my cash going?
• 9:34
  SPEAKER_00: Yes, I know a lot of people they're cash poor, but on profit and loss, they're making a lot of money and they're just not quite sure where their money went.
• 9:44
  SPEAKER_00: So in this case, ask Jax, why am I profitable but feel cash poor?
• 9:49
  SPEAKER_00: And it will tell you where you've spent your cash and even provide you a list, you can tell it to give you a breakdown as well.
• 9:59
  SPEAKER_00: And the next question is what is consuming working capital?
• 10:03
  SPEAKER_00: And if you don't know what working capital is, is basically your reserves within your business.
• 10:09
  SPEAKER_00: So when you make money and um you have cash surplus, you have excess cash that you can put away as your working capital.
• 10:17
  SPEAKER_00: And then that working capital will be allocated to pay for the hidden costs like GST and your PIG withholding, which is tax on wages, etc.
• 10:30
  SPEAKER_00: Because, you know, that really absorb quite a fair fair bit of your cash each quarter there.
• 10:37
  SPEAKER_01: I'll give you a good example of this.
• 10:39
  SPEAKER_01: I saw a post the other day at the pizza shop in Gosford saying, I haven't been murdered, I haven't gone missing, I'm just on a holiday, we haven't gone broke, we'll be back in a couple of weeks.
• 10:49
  SPEAKER_01: But it's a good example that without the pizza shop owner there, yeah, he doesn't just have someone who can come in and take over it.
• 10:56
  SPEAKER_01: It's a big gig.
• 10:57
  SPEAKER_01: But how many weeks can you go without any revenue coming in?
• 11:01
  SPEAKER_01: So that's a good one.
• 11:02
  SPEAKER_00: Yeah, and the question that you should also ask is how many months of cash reserve do I have?
• 11:08
  SPEAKER_00: Then it will should you have?
• 11:09
  SPEAKER_00: Well, you should really have at least one month of cash reserves to pay for your operating costs.
• 11:16
  SPEAKER_00: So the good indication whether or not you have enough backup cash in your bank account is have a look at your average operating costs per month, and then make sure that you have at least that sitting there in your business savings account.
• 11:32
  SPEAKER_00: Now is you can ask Jax what is your average operating cost per month in total?
• 11:39
  SPEAKER_00: And it will provide that to you.
• 11:41
  SPEAKER_01: Number four, what risks are emerging?
• 11:45
  SPEAKER_00: Yes.
• 11:46
  SPEAKER_00: So this question is focusing on, you know, the key performance indicator and the trends of the business.
• 11:52
  SPEAKER_00: What we are measuring is, you know, are we going to be running out of cash?
• 11:57
  SPEAKER_00: Our debtor days, is it a bit longer than we anticipated?
• 12:01
  SPEAKER_00: So you can ask the AI to say debtor days increasing, is it too long?
• 12:07
  SPEAKER_00: You can even ask that.
• 12:08
  SPEAKER_00: Is payroll growing faster than revenue?
• 12:12
  SPEAKER_00: Yeah, a lot of businesses don't even realize that, you know, the increase in their payroll expenses actually absorb a lot of their additional net profit margin over time.
• 12:24
  SPEAKER_01: Scaling yourself broke.
• 12:26
  SPEAKER_00: Yeah, absolutely.
• 12:27
  SPEAKER_00: Because they're thinking, oh yeah, my business is growing.
• 12:30
  SPEAKER_00: So we just hire more people.
• 12:31
  SPEAKER_00: But really, more people means you need to actually make larger profit in order to pay for the people.
• 12:38
  SPEAKER_00: And you need to have sufficient working capital and reserves to actually withstand the additional upfront overheads like wages.
• 12:48
  SPEAKER_00: And the the last thing that you should probably ask is are sales slowing?
• 12:53
  SPEAKER_00: So you're measuring the risk here.
• 12:56
  SPEAKER_00: So it will have a look at your revenue trend and also say, look, it's not very consistent.
• 13:03
  SPEAKER_00: You probably need to have a look at your pipelines and address that issue before you run into, you know, the iceberg here.
• 13:11
  SPEAKER_01: And number five, what should I focus on next in business profitability?
• 13:17
  SPEAKER_01: What prompts would you use here?
• 13:19
  SPEAKER_01: Or what are the key questions?
• 13:20
  SPEAKER_00: Well, the key question here is what is the biggest opportunity?
• 13:24
  SPEAKER_00: And the AI will also provide you with, you know, oh, it looks like the revenue growth in this category is gonna provide you with the most profit margin, for example, it will just let you know where the growth opportunities are and what you should focus on.
• 13:42
  SPEAKER_00: Because sometimes we have different services or products that we provide and sell, and we don't really know what come what makes us the net profit and what grows the business.
• 13:54
  SPEAKER_00: So in in this case, you can ask AI to analyze that for you.
• 13:59
  SPEAKER_00: And what is the biggest threat?
• 14:01
  SPEAKER_00: Also, is the right prompt to ask.
• 14:03
  SPEAKER_00: What action creates the greatest impact?
• 14:07
  SPEAKER_00: This one is going to be a little bit more creative.
• 14:10
  SPEAKER_00: Sometimes it would just say, look, I don't really know.
• 14:13
  SPEAKER_00: And uh, but you can use the financial data to keep digging.
• 14:17
  SPEAKER_01: Now, Mai, with all this wonderful information, you were showing me today your visualization of the ultimate business dashboard for those people who just want simplicity in their life.
• 14:28
  SPEAKER_01: No different than going to a sporting game.
• 14:30
  SPEAKER_01: You look at the scoreboard, you can see the score.
• 14:32
  SPEAKER_01: What's on your dashboard?
• 14:34
  SPEAKER_00: Well, if you fancy on having that, you know, clarity dashboard yourself, you can always build it yourself.
• 14:41
  SPEAKER_00: I will attach the example on the show note for you.
• 14:45
  SPEAKER_00: However, it's quite simple.
• 14:47
  SPEAKER_00: It should have total revenue for a particular period.
• 14:52
  SPEAKER_00: So you're if you're measuring on 90 days, just say total revenue for the past 90 days, and and then what is your gross profit, okay, in dollar terms, and then your net profit in dollar terms, and then your cash at bank at the moment, and then your net cash flow.
• 15:09
  SPEAKER_00: So what you are measuring is that in that period, how much revenue you you have generated, and what are the gross profit, which is the profit that drives your net profit.
• 15:20
  SPEAKER_00: So the gross profit is quite important because it's a it measure revenue minus cost of goods sold, which is the cost that's associated with producing that that revenue.
• 15:30
  SPEAKER_00: And then you use that gross profit to actually pay for your operating costs.
• 15:35
  SPEAKER_00: So if you are actually able to drive your gross profit up, your total net profit will increase quite substantially because your operating cost doesn't really move very much.
• 15:47
  SPEAKER_00: It doesn't vary.
• 15:48
  SPEAKER_00: And it's like rent, you know, wages.
• 15:51
  SPEAKER_00: So if you actually generate more revenue those, operating costs don't really vary it either.
• 15:56
  SPEAKER_00: And then the next one is really important cash at bank is to have a look how much cash you actually have in the bank.
• 16:04
  SPEAKER_00: And so net cash flow is important because then you need to have a look if your net cash is positive or negative.
• 16:12
  SPEAKER_00: So that measure, you know, your average net cash per that period for you.
• 16:17
  SPEAKER_00: To have these five key data on your dashboard, you can tell the financial health of the business on one page.
• 16:27
  SPEAKER_01: Could you add to that or can you ask Jax, how much tax do I owe?
• 16:31
  SPEAKER_00: I believe you can.
• 16:33
  SPEAKER_01: That's a calculation.
• 16:35
  SPEAKER_00: That one I haven't tested, so I will just have to update you on that one because yeah, I don't know if it would calculate the tax for you.
• 16:44
  SPEAKER_01: Well, my I'd have to say this has been one of my most exciting episodes.
• 16:49
  SPEAKER_01: Being a person who can talk and didn't go to accountancy school like yourself.
• 16:54
  SPEAKER_00: Yeah.
• 16:54
  SPEAKER_01: I was a plumber by trade, so this is a wonderful moment.
• 16:57
  SPEAKER_01: Give us our wrap-up for today.
• 16:59
  SPEAKER_00: Yeah, so I want to encourage business owners out there, big and small, to build your one-page financial clarity dashboard and review them often, say every at least once a month.
• 17:11
  SPEAKER_00: And use the AI tool like Jack's to help you investigate the numbers faster, identify trends earlier, and make better decisions.
• 17:21
  SPEAKER_00: Use the AI tool that is available now to enhance your financial clarity.
• 17:27
  SPEAKER_01: And one thing I will add, because I agree with you here, you're asking Jax who's in your zero.
• 17:33
  SPEAKER_01: When you ask chat GPT, it's not connected to all the numbers.
• 17:38
  SPEAKER_01: That's a big difference in this AI.
• 17:40
  SPEAKER_01: Another wonderful addition I look forward to next week, where we discuss every dollar needs a job.
• 17:46
  SPEAKER_01: My Harris, my accounting of Oundage.
• 17:49
  SPEAKER_01: Thank you for joining us.
• 17:50
  SPEAKER_00: Thank you, Lee.