Are you using your accountant to their full potential? Accurate financial statements and tax returns are both important. But they only tell a story of where your business was and not where it could go. This is where a good accountant can step in, armed with big-picture thinking and financial expertise.
Yet, no matter how skilled and savvy your accountant is, they can only be as good as the information you give them. To see the full benefit of your accounting service you must share all your concerns, plans and questions. This is so they can not only work for you but with you. Helping to drive your business to where you want it to be. In this blog, we have outlined a few common queries you should be asking. Alongside some tips to utilise your accountant and business to their full potential.
Breakeven Analysis
Ask yourself:
- How do you know your business will break even?
- How can you track business expenses for profitable growth?
Every small business has more than likely asked themselves these types of questions. But the person you should be directing these queries to is your accountant. An accountant will work alongside your business to test growth options, through a break-even analysis. How does this work? Ultimately, they will help you set a budget and forecast reporting.
Break down of a break-even analysis:
- First things first, begin by setting achievable 12-month goals for your business. Your accountant can then use simple charts and graphs, to help you manage the progress of your assumptions.
- The reporting doesn’t have to be complex as long as it works for you and your business. The easier to understand and check the better. From here you can identify how your business is progressing month on month. Showcasing both positives and negatives. Whilst allowing your business to adapt in real-time, thus make better growth decisions.
- Over this period of monitored time, you will gain a clearer idea of your expenses and average revenue. It is with this information that you can then use to create a break-even analysis. This will, in turn, give you a greater sense of your business and market conditions. Which you will need to understand to gain a profitable growth.
Key Performance Indicators
The prospect of continued growth is the ultimate goal for every small business. But to grow you first need to understand what parts of your business perform well. This is where you need to ask yourself –
- Do I know what areas of my business perform well?
- How can I improve upon key performing areas of my business?
Understanding what areas of your business perform the best is key to finding a focus for success. Working with your accountant you can begin by recognising key performance indicators (KPI’s). Once you have selected the KPIs that matter most to your business you can build from there. Examples of KPIs vary depending on your business type and sector. For example, if you’re in retail, you might use inventory turnover. Or for construction, it might be job costing.
Using KPI’s can help your business identify opportunities of particular focus that could be for a more profitable and accurate spend of time. In a service-based business, your time is your money. Having a clear understanding of revenue per hour and/or billable hour realisation percentage is crucial to ensuring your time is valued. Knowing the cost of your time allows for a more accurate assigned bill price and time scale. Thus, jobs and/or client projects can be charged and planned to ensure a profitable increase. Sometimes it takes an outside perspective, like your accountant, to highlight areas of loss that may become harmful to your business. They can guide your business through appropriate pricing strategies, and direct focus to areas which have the most potential of boosting your business’s growth.
In every business, there are key performance indicators. Yet for some business owners, you don’t know where to start. This is where you can turn to your accountant. With years of experience, working across varying sectors your accountant will be equipped with the knowledge to and can advise on methods of setting up KPI reporting. From there you can track how each monitored area performs. This overtime will arm your business with the knowledge to make more profitable decisions.
Cash Flow Projections
Keeping a positive cash flow is the backbone of a small business’s existence. It’s also an essential skill to maintain a healthy and growing business.
- Not sure where to start or how to begin predicting your cashflow? Ask your accountant for help.
Your accountant can help analyse problems, highlight areas in need of improvement and outline a plan to better manage your cashflow. Monitoring where your money is coming from and going to is the first step to improving the cash flow of your business. This may seem like a straightforward task, but it is in fact how you utilise this information that can make the difference toward the success of your business. Your accountant can point out cash-flow tendencies that you might have overlooked. It is important to know how a change in circumstance could affect your business. Whether it be the addition of new employees, a new location or a loss in client business, these could all pose as harm to your cash flow. By becoming more aware of these tendencies you can mitigate potential negative surprises.
If you still have some unanswered questions or would like to know more about how an accountant can help your business grow, get in touch today. Our friendly team of experts is on hand and ready to answer all of your financial queries.
