Your Accountant Knows Your Business Almost as Well as You
If you are pursuing a growth strategy, your accountant should be the first person you sit down and talk to.
Achieving growth is a core aim of the majority of small businesses. Increasing sales, either through expanding the customer base, the product range or geographical reach is key to greater stability and a more healthy bottom line.
This is a familiar topic to one accountancy company in Peterborough that works alongside small and medium sized businesses across a range of sectors every day. Here, we look at how they help their clients to achieve the business expansion they crave.
Testing growth options
Ask your accountant to put together some budget and forecast reports. You can start by establishing goals for the next 12 months, and use basic graphs and charts to test your assumptions and projections. You don’t need anything terribly complicated, it is just a case of having a handle on performance month by month to make more informed growth plans.
Use the reports to understand how fixed and variable costs correlate with sales over different periods. This will give you a picture of how market conditions, seasonality or other factors might come into play.
Over time, your accountant will be able to gather all this data and turn it into a break-even analysis, helping you to understand what conditions you need to achieve profitable and sustainable growth.
Identifying the KPIs
So just how well is your business doing? It’s a simple enough question, but to answer it in a meaningful way, you need some key performance indicators (KPIs) to work with. Exactly what these will be depends on the company and the industry. In retail, for example, turnover will certainly be one, while in the construction sector, costing will be important. Service companies, on the other hand, will be more interested in billable hour percentages.
Your accountant will have experience of working with businesses in your sector and will understand which KPIs are the ones you need to focus on, as well as how to monitor them and work to improve their performance. All this will contribute towards better-informed business decisions.
Making some cash flow projections
With the KPIs in place, your accountant will be able to create financial reports straight from your accounting software that will be focused on the KPIs and help you manage cash flow more effectively. It is important to know how particular aspects of expansion, such as more product lines, escalating direct costs, a growing workforce or new facilities can affect cash flow. That way, you are less likely to come face to face with any unpleasant cash flow surprises.
Knowing how well your business is performing in a vacuum is one thing, but to understand its place in the market, you need to know how it compares to the competition.
Accountants can access various subscription-based sources along with financial benchmarking tools and these will give you a proper view of how you compare with the best performers in the industry, using those self same KPIs you put together earlier.
Knowing where you are strong and where you lag behind will help you identify those changes that could make bring some big wins to your bottom line.