What’s a great technique to find all kinds of ways to transform your business, map out a plan you can easily follow on your journey to success, and get fast access to financing for expansion? One simple word – accounting.
Let’s face it though. Most people don’t start a business to worry about accounting and bookkeeping (unless you’re an accountant that is).
The fact is, however, that at some point you do have to start thinking about your numbers and business finances. At the very least, you need to have them in order to file your taxes at the end of the year to hopefully get a big refund or lower your tax bill as much as possible, but that’s really just one reason to think about getting your numbers in order.
Other threats to your business.
So what other kinds of problems are you going to face as a business owner that a solid accounting framework can help you deal with?
Click here to watch a video that outlines 5 threats to growth minded business owners and 3 time tested secrets to overcome them. You’ll see that financial discipline and strategy really is the same as business strategy.
With a great financial system in place you really will be laying the groundwork to completely transform your business and achieve new success.
Do it yourself? Or find an expert?
You CAN set up your finances by yourself, but be honest, wouldn’t you rather be working ON your business than IN it? Yes, it’s cliché, but your first priority as the owner should always be growing sales and turning your business into a well-oiled machine.
So, what should you do? The Pareto Principle says that 80% of your results come from 20% of your efforts. You should either eliminate or outsource work that isn’t producing results for you. We’ve already established that at a bare minimum you need to keep up with your financial records for tax purposes, so eliminating that task is out of the question. So…you guessed it! Outsource the bookkeeping and accounting!
Bookkeeper, Controller, or CFO?
An investment in an accounting pro will give your business a boost in a few ways. It will save you time, help you protect your business from fraud and theft, and show you new ways to operate more efficiently and profitably. Specifically, an accountant can offer bookkeeper, controller, and CFO (Chief Financial Officer) level services. Each of these three levels of service offer different types of value to your business ranging from saving time to advising on how to allocate your resources for a strategic expansion plan. So let’s dive in and see exactly how these 3 roles can help you!
First off, as a Bookkeeper, your accountant is handling the more mundane aspects of data entry. In this role they can:
- Make sure your bank account and the cash on your books balance. With so many financial transactions, customer invoices, and bills from vendors it’s inevitable that occasionally these won’t equal. An accountant makes sure that doesn’t happen.
- Record all the bills from your suppliers and vendors. As an entrepreneur, is this kind of data entry really something you want to be doing? No! You need to be focusing on sales and growing the business.
- PAY all the bills from suppliers. Ok so this is an extension of the last point obviously, but surely, we all know sending out checks or paying by credit card or wire transfer has to happen at some point. The accountant can make that happen, with your signed permission after reviewing everything of course.
- Send out and record invoices to customers. Another mundane administrative task. You definitely want to bill your clients and customers but is spending time doing that and then recording the numbers going to help you generate more revenue?
- Monitor and record cash collections from your customer/clients. Payments are coming in. Great! You want to make sure your books reflect that and be aware of who is paying and who isn’t.
- Record depreciation for your equipment. Equipment, or fixed assets, in accounting speech, declines in value over time. This declining value is called depreciation and it’s very important to see the impact it can have on your business.
- Payroll, payroll, payroll! If you’ve got any employees you have to make sure they get paid, and that all the correct taxes are taken out, sent to the government, and recorded as well. Your accountant has you covered on this.
- Track your loans. When you take out a loan for equipment or property, each payment you make is partially interest expense, and partially for the principal. But the tricky part is that these two components are different each period because of a concept known as amortization. Don’t worry about that because accountants LOVE amortization tables.
- Track your inventory. Not every business has inventory, but for those that do, there are several different options for booking the purchase and sale of each new unit. A great accountant is going to know not just how to do each but the best method to reflect your business operations.
- Help with tax forms. Probably one of the least compelling parts of life as an entrepreneur is paying taxes. Who are we kidding? No one likes this! But the fact is that most businesses will have to fill out and file different reporting forms throughout the year that aren’t a part of your final tax return.
As a Controller, they’re going to be diving into more analytical tasks, helping with software and systems, and keeping your money safe. They can:
- Generate a full set of financial statements. Once all the financial transactions are recorded the next step is to crank out the financial statement. There are 3 and each one demonstrates different things about your business. They are:
- The P&L or Income statement – This shows all the revenues and expenses for a specific period of time. It’s split into different categories to show different levels of profit after certain expenses.
- The Balance Sheet – Also known as the statement of financial position. This shows all your assets, liabilities, and net equity for one specific point in time.
- The cash flow statement – This shows where cash is spent and earned. If your business records transactions using the accrual method, the cash flow statement is especially useful to see what went in and out of your bank account for operating, investing, and financing transactions.
- Explain the financial statements in plain English. To a lot of people, the financial statements look like Greek. Your accountant can quickly breeze through them and give you a great summary on your business results that you’ll understand.
- Generate specialized reports or analysis. The financial statements are the first thing you look at to get an understanding of your situation and also what all serious would-be investors and banks will want to see before giving you money. But digging into the numbers and modifying them to create special reports that show different details can help you make even better business decisions.
- Help you understand loan documents and financial aspects of other contracts. Most of the time when a bank or other institution decides to lend you money, you’ll get a stack of paperwork with all kinds of information about rates, terms, dates, and contingencies. Other business transactions with contracts often have this same financial jargon as well and understanding this is crucial to making a decision to accept or not.
- Recommend accounting and other software. It’s imperative to keep all your data in a great software system these days. Both for efficiency of use and security reasons. A good accountant will know the best solution for you and also what other software solutions may help streamline your operation and help to make better decisions.
- Set up a system to prepare finances for tax time. Many of the standard bookkeeping and accounting methods are different from the way revenues and expenses are tracked for tax purposes. Things like mileage on vehicles and equipment depreciation have special tax rules and an accountant can make sure they are tracked correctly.
- Reconcile any differences on your financial statements and other systems. Oftentimes many different systems will be used to record sales and expenses like a point of sale system at a store or a sub ledger that records all bills from suppliers. When there are differences between these systems and the main financial reporting system the accountant can fix them.
- Record expenses and revenues that haven’t been booked. While the majority of expenses will be captured through your sales system and accounts payable, many transactions only have partial documentation and don’t get recorded. The accountant knows what kind of analysis needs to happen to make sure these are all accrued and reflected in the financial statements to get a full picture.
- Create procedures to prevent fraud and maintain financial security. Whether we like it or not, there are bad people out there who will steal your money given the chance. A great accountant understands how to put at least a few simple security measures in place to separate responsibilities so that none of the people working for you will be able to easily steal money if that is their intention.
Finally, at the CFO level, the accountant is more of a strategic business partner. They’re going to be able to bring a lot of value because they can help you find ways to increase your bottom line and business value. They can:
- Look at trends in your financial statements over time to find strengths and weaknesses. It’s one thing to put the numbers together and explain them, but it’s another to look at them and see how you can unlock more value in your business. The CFO is constantly analyzing trends over time in expenses, revenues, assets, and liabilities to see what’s working and what isn’t. Then you can focus your efforts on strengths.
- Benchmark your business against your competition. Have you ever wondered what kind of decisions your competitors are making or what their financial statements look like? Your accountant can actually compare your numbers to theirs and see how your strategies are different! With that analysis you can then adjust your plans.
- Build a budget to show planned costs and revenues. In life when you write down your goals, you’re much more likely to achieve them. The same is true in business. A budget or financial plan is a great tool to use for controlling your expenses and allocation of funds so that you can achieve your best outcome.
- Help you decide whether to make purchases with credit or cash. Leverage and financing can be a great way to expand and grow quickly, but it’s not necessarily always the best move. There are many factors at play when you decide whether or not to use someone else’s money to pay for investments or other operating costs. The CFO can determine which method will yield the best results.
- Determine the ideal capital structure. Your business’s capital structure is the mix of debt and equity that you have invested for the purposes of expanding. Some industries are better suited to being financed more heavily by cash directly from the owner while others grow more quickly when leveraged with a loan. Your CFO can do some industry analysis and help you get this right.
- Provide guidelines for managing working capital. The most common definition for working capital is accounts receivable + inventory – accounts payable. The timing on which payments come in for receivables and go out for payables is important for managing your cash levels. Managing this also includes determining when and how much inventory to order. Getting these all in the right mix will ultimately help your profits and the accountant should be able to provide insight.
- Determine the right amount of labor costs. Do you want to pay for more payroll and contract labor costs than you have to? Didn’t think so! Depending on your projected sales volumes, you ideally will want to increase or decrease your head count so that you have just the right amount of people. After looking over your numbers, the CFO can give you some guidance on how to adjust.
- Find better suppliers. After doing some benchmarks against your industry, it will become very obvious if you’re spending too much on certain costs compared to the competition. While it may be part of your strategy to pay more for some things, others can easily be replaced with a more affordable option and the accountant can do some quick research to find cheaper suppliers.
- Create a cash flow forecast to determine cash needs. Part of planning for the future is determining if any big costs or investments will drive your business into a negative cash position. Projecting your financial statements into the future will reveal what impact your decisions will have. Then you can decide to either change your plans or seek financing the fill the need for cash.
- Help you apply for a loan or credit from the bank. When you feel it’s time to apply for a loan or some credit from the bank, getting everything together can be a little daunting and confusing. The accountant CFO speaks the same language as the bankers and can hold your hand through the process so you can be certain you have everything you need for the application.
- Determine the effectiveness of your pricing strategy. How quickly are your sales growing? Is your inventory turning fast enough? What do your profit margins look like? 3 separate issues that can often be explained by 1 thing – the price of your goods or services. By doing some analysis the CFO can determine if you can improve those numbers and your bottom line just by doing some adjustments to your pricing.
And there they are. 30 ways an accountant can give you more time, organize your business, and help tweak your strategy to increase profits! Think about where you are on your entrepreneurial journey and what steps you could take to reach your goals faster. How could partnering with a financial expert who can do these 30 things bring you value and make your life easier? You could try to handle these yourself, but you might end up spending way too much time on them and lose out on potential sales. Why wait when you can start taking advantage of an expert today?
If you know you’re ready to partner with an accountant now and you want to schedule a free consultation, Click Here to get started and see how you can take control of your business and financial future!
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