Most individuals involved in business realize the importance of having accurate tax returns and financial statements. It is important though that they keep in mind that these documents are showing the story of what the business has been and not where it might be going next!
The majority of the business owners with whom I speak tell me that what they are truly seeking is a good combination of both detailed financial expertise and big-picture strategic thinking. They want simple access to those reports which they can easily read and understand. They also want to hear about any business growth options in a manner that they can easily comprehend so that they can then make proper and sound decisions.
Taking into consideration the limited time and resources that most growing businesses have available to them, this is why it is so important and so beneficial that they put to use the planning capabilities and financial analysis of their accountant. Outside of your management team, he or she is one of the only people with an understanding of your business challenges and in a great position to offer assistance. Take a look now at a few suggestions how better you can use your accounting professional:
1) With A Break-Even Analysis, Test Growth Options
Your accountant will get you started by assisting you in setting a budget up and in forecast reporting. Set those goals you would like to achieve over the next 12 months and put into use some simple graphs and charts so you can see if your assumptions are going to pan out. This reporting by an accountant needn’t be complex and difficult. The important thing is that you can see how you are doing month by month so that you can make better growth decisions advancing forward.
Going over these accountants reports will enable you to easily see just how your variable costs (shipping, manufacturing, inventory, labor, etc.) and your fixed cost(administration, rent, etc.), compare at different periods with sales volumes. This helps you to determine whether market conditions, seasonality or any other factors might have an impact.
After you have an idea of just what over time that your period expenses and revenue are, you can put this information to use in creating a break-even analysis. This is a great help in understanding the market conditions needed for you to enjoy a profitable growth of your business.
2) Assist In Finding Your Business Key Performance Indicators
You want to begin with a few KPIs or key performance indicators that are of importance to your business and move forward from there. For example, in construction, it may be job costing. In retail, inventory turnover may be the thing.
In the manufacturing business, you can be able to focus on products that are more profitable by reviewing your direct costs involved. In our service business, it is very important to understand revenue per hour and also billable hour realization percentage.
The truth is that there are key performance indicators in every business and so that you can make the best decisions moving forward, your accountant can be of great help in setting up that KPI reporting so important in gauging performance over time.
3) Know And Truly Understand Cash Flow Projections
Right out of your accounting software, you can create financial reports that will assist you in knowing what KPIs it is important you understand so you can best manage cash flow. Also, to offset any future surprises, it is so important you know just how cash flow may be impacted by a new location, adding employees, increased direct costs, or expanding product lines.
4) To Compare Your Numbers, Use Industry Benchmarks
For some of our accounting clients, to see just how they compare to assorted other companies in their field, we offer them a report after we use some financial benchmarking analysis tools or many subscription-based sources.
A great starting point is in knowing what for your KPIs are the industry-specific standards. Is your performance worse or better? Are your cost ratios within the norm or too high? And just why is that?
Going over with your accountant these and other questions is a great way to open a conversation whether the bottom line can be positively affected by changing one or more things.
5) Today, Know The Value Of Your Business
It is so important for whatever future it might be that you are seeking, that you know and understand just what the value of your business is today!
The truth of the matter is that life events or opportunities truly happen very fast and it is so important you be always ready for them by knowing the worth of your business.
Having this knowledge allows you to put thought into succession planning moving ahead and just who may take over key positions in the future.
All of these considerations are just so important in maximizing the value of your business and even the eventual sales price of it.
6) With Your Accountant, Create An Advisory Board
In my thoughts, when it comes to a business advisory board, there is truly nothing more valuable. And your accountant will undoubtedly be familiar with other professional accountants who serve others like you but who also have areas of expertise that can benefit you greatly.
The truth is that advisory boards are such a great tool and a cost-effective one that allows you, in a secure environment, to bounce ideas off of other professionals and get their feedback.
Depending on the stage/size of your business, try and formulate the right mix of professionals to best assist you. Finding peer groups with other business owners is also something I recommend.
Just as you do, I need those other owners of businesses who have experienced the challenges I have and who can be trusted and objective business advisers that can offer positive assistance and suggestions.
It is so important that accountants assist business owners in things like cash flow management, forecasting, budgeting and overall business analysis so that they can remain fiscally healthy and strong.
Thank you so much to Ribeyre Chang Haylock (http://ribeyre.ca/) for this professional write-up. They’re local to Coquitlam if you want to ask any questions about accounting or business.
Accounting Coquitlam – Ribeyre Chang Haylock
2071 Kingsway Ave, Port Coquitlam, BC V3C 6N2
Just a couple of minutes away from Coquitlam Centre: