[IMGCAP(1)]From expenses and timesheets to estimates and invoices, it can be overwhelming for clients to condense an entire year of business into one single meeting with their accountant.
Wouldn’t it be great if accountants were with their small business clients all year long monitoring their figures, catching red flags and advising them every step of the way? We think so, and that’s why business owners should take the opportunity while their accountant is not bogged down in taxes to have a fierce conversation. Go beyond taxes, and discuss these five things to run a business more efficiently.
1. Cash Is King
Cash flow is the lifeblood of a company and must be monitored closely to keep operations running smoothly. Many small business owners don’t understand the importance of cash flow or how to monitor it, and that’s where an accountant can come in handy. Clients should talk to their accountants about the following:
Review the budget to identify what unnecessary costs can be cut and how to make better purchase decisions.
Evaluate pricing policies according to industry averages; the business may be undercharging and leaving money on the table.
Discuss collection policies to get cash from sales faster and more easily.
2. Lock Down Expense Control
Managing expenses is easier said than done, but one of the best methods for approaching expense control is the mirror technique. This approach examines the growth or decline of sales over a specific period of time and adjusts operating expenses accordingly. For example, if a company’s sales were to decrease by 25 percent during the projected period, operating expenses should also decrease by 25 percent. In order to remain sustainable and flourish into the future, business owners must work with their accountants on a recurring basis to manage these expenses properly.
3. Take a Stance on Mis-financing
“Mis-financing” means borrowing short-term capital to pay for long-term assets. Purchasing equipment, leasehold improvements and other fixed assets with a short-term line of credit drains the cash out of a business and reduces the amount of time the asset has to pay for itself. Correctly matching the term to the useful life of an asset increases the company’s cash flow and frees up the line of credit for seasonal working capital needs. Working with an accountant in the early stages of mis-financing can help to mitigate the debilitating effects it has on a business, saving time, stress and money in the long run.
4. Review Inventory Management
With so much focus on growing revenue, business owners often lose sight of the gradual increases made in their inventory levels. This phenomenon is more apparent in today’s economy due to the extended growth that occurred in the prior 10-year period. Business owners should meet with their CPA to streamline inventory tracking methods, prioritize time and resources, realign with industry standards and create a back-up plan for emergencies. All of these steps will help businesses find the right balance between inventory and sales, which can drastically increase a business’s available cash.
5. Ask about New Technologies
Accountants typically have access to a number of SaaS, or Software as a Service, programs that go beyond traditional desktop software. Whether it’s a service offering industry average comparisons, online loan applications or expense tracking, the benefits of utilizing new cloud solutions are worth asking a CPA about. These programs enable accountants to quickly identify red flags, pinpoint risk indicators and provide an ongoing plan for improvement, giving business owners the tools they need to succeed and grow today.
James Walter is CEO and co-founder of Seattle-based Finagraph, a provider of automated financial intelligence tools that provide advanced analytics and data verification to financial institutions. He can be reached at firstname.lastname@example.org.