The History of Small Business Finance

Once Upon a Time, Numbers Were Simple

At one point in the history of business, things were simple enough that we didn’t need accounting. We knew where our money was coming from and where it was going. Things were simple and straightforward. Many business owners only had one or two clients and a few really clear expenditures.

Over time, as businesses got bigger, finances became more complex. We are now dealing with businesses that may have less than $1 million in revenue but have customers across multiple states and employees or operations in multiple states as well.

Back in the 1950s, they didn’t have computers like we do today. What they did have, however, was a decent understanding of accounting. There were paper general ledgers that people used to track where the money came in and where the money went out. If you pay attention, you’ll see them in a bunch of mobster movies when they talk about how someone kept a second set of books. Basically, they were accounting for some but not all of the money.

Then, with the wave of computers, we moved from writing everything down to typing everything up. At first, only the major corporations could afford programs like Lotus 1-2-3, a precursor to Microsoft Excel and Google Sheets. Spreadsheets revolutionized the finance and accounting industry. As software evolved, specialized accounting programs were built. Again, mostly for larger corporations that could afford to spend the money on development.

In the 1980s as the personal computer became more common, QuickBooks created an accounting software for small businesses. There were a lot of other programs that were released around that time as well and the accounting industry became more complex. It’s almost 40 years later and we are still, more or less, using the same accounting tools and there are many of the same players in the space using their very old technology.

Accounting Hasn't Changed Much, but Our Data Has

Accounting hasn’t changed significantly, so why should the tools we use? Because the data being tracked by the accounting systems has changed significantly. Freelance contractors, employees in multiple states and revenue coming from all over the place significantly complicates our businesses. We live in a digital world, and even if you own a brick-and-mortar store like a jewelry shop or restaurant, many of your advertising dollars are spent online and some of your workforce may be remote contractors.

More complex businesses can mean wildly fluctuating revenue, payments and complex timing of cash flow. Your clients may pay on the date you asked them to or intentionally (or unintentionally!) take weeks or months to pay their bills. This is the nature of the small business, though there are some things you can do to get your customers to pay more quickly if you are paying attention to the data.

So how does the small business owner keep up in this complex and constantly changing world? By using a new financial tool that’s meant to help them plan for tomorrow.

Sure, you can always use Excel or Google Sheets if you want to. However, these tools are not as interconnected as the world we live in. The data you import into them becomes stagnant the minute it arrives in the spreadsheet. And don’t forget about the time it takes to pull and format the data. With Excel and other stagnant data resources, updating the data, building forecasts and looking at key figures (especially if you need to format them to share with a third party) is extremely time-consuming. 90% of the time and energy is put into downloading and formatting the data. That leaves very little time to actually understand the implications of the data and what to do about it.

The modern world needs live, real-time data streams while the tech stack for small business owners is constantly evolving. Welcome to the world of real-time financial data and live, easily updated forecasting.

AutoCFO is software for a new era of small businesses.