Take an Active Role in Your Small Business Financials and Reap the Rewards
Many people hire an accountant in order to get away from the numbers or abdicate their financial responsibilities. There is a lot more to small business financials than tax forms – best practices dictate that a focus on metrics makes for a more successful business. Successful businesses say – “What gets measured matters!” Profit is a building block goal of any business. Making a profit helps you be there next year, helps you employ more people, help more clients and grow the economy. How do you get there and how do you get better are questions every entrepreneur should ask themselves.
In his best selling book Smarter Faster Better, Pulitzer Prize winning author Charles Duhig argues that a focus on metrics breeds success. Duhigg gives numerous examples where when success metrics were made tactile it allows production staff to experiment, to see what works and what didn’t and boost productivity. The focus on timely and manual figures worked to turn around several businesses. Duhigg provides an example of a low performing school where teachers were forced to spend one hour per week in a data room focusing on their numbers – the improvement was staggering. Duhigg also illustrates a top performing tele-sale team that gave their staff freedom to experiment and quickly adapted their procedures to capitalize on their findings
Your Small Business Financials Need to be Current
A business that understands their current financial position makes more informed decisions for their business. Taking the time to understand your small business financials lets you learn a lot about how your business functions. Understanding where the money comes from and getting to know which products and services are profitable and which are less so keeps the money rolling in and avoids wasting time on unprofitable jobs.
Expenses can grow unchecked if you don’t keep an eye on them. Have certain expenses increased in cost since the last quarter? Why are we spending so much on utilities? What are these miscellaneous expenses? Keeping an eye on your expenses means keeping tight controls and understanding how your sales and expenses tie together to affect your bottom line.
It’s important to note that information must be timely if its to be of useful for making decisions. The older your financial statements get the less accurate and useful they are. That is why we recommend keeping your small business financials updated on a monthly basis. Keeping your reconciliations and reporting updated monthly means that all the data is fresh and reliable. Small business financials data that is three months old is not going to help you make a decision today. As an added bonus, keeping up on your accounting monthly also means much less of a scramble when it comes to the quarterly and year filings.
This all sounds great, but where do you start? We’re here to help. Whether it is your monthly bookkeeping or increasing your understanding of your financial statements, we at James Abbott CPA & Associates can help you increase your financial literacy and help you thrive.
James Abbott, CPA and Associates