FINANCIAL TIPS
by Rob West, CFO, MBA
April 1, 2023
FIVE Strategic Accounting Tips
As all of you are essentially entrepreneurs, chances are there are things you do really well like hiring good people or developing new product ideas. But, there are things that you might not do too well, like curl your tongue or close the books every month.
You like being in the store and talking to customers, but you recoil at doing accounting. Yet, everyone wants to improve the financial fortunes of their business. To that end, proper accounting controls help ensure cash doesn’t skip town and operations doesn’t get a heart attack.
Here are my five accounting tips to help:
1. Set Quantifiable Goals
Part of being smart about your business is to set accounting goals that can be easily tracked and tied back to your bottom-line. Two top accounting Key Performance Indicators (KPIs) that you can track are; 1) watching - like a hawk - your costs of goods sold (COGS), and 2) labor expense as a percent of sales.
For instance, separately identifying your cost of creams, mix-ins, paper goods, and nitrogen will shed light on costs that might get out of hand. For example, the other day, I noticed I was buying a box of paper towels almost every week, which was odd to me. After taking the time to observe, I noticed a new employee was using six paper towels every time his hands got wet! He was OCD about it. I strongly urged him to keep a dry rag in his apron and use it to dry his hands. Problem solved.
If labor as a percent of sales is greater than 30%, give me a call. Let’s review and see if we can find some savings.
2. Align Reporting with Accounting
If you want to review your business’s health on a monthly basis; that is to say, run a full set of financial statements each month (more on that in the future), make sure your books are closed monthly and upload into ProfitKeeper (easy) and all discrepancies are reconciled in a timely way. This takes some discipline, but once you’re in the habit, it’s hard to ever miss again. It’s not a fun day when reports are not in sync with accounting and you notice three months down the road that utility expense is $0 because you failed to notice that those bills were inadvertently paid out of your family’s personal checking account. Or, you are short on cash to make the quarterly Board Of Equalization sales tax payment (more tips on that in a later column). You will want to make sure your revenues and expenses show up properly in your P&L each month.
3. Collaborative Accounting is better
Having a professional accountant or bookkeeper is worth its weight in gold. Working collaboratively with your bookkeeper is a great value-add for small business owners who feel they have better things to do, like marketing activities or booking catering events. Collaboration with a bookkeeper (or an accountant) gives you access to a CFO, controller, and analyst all rolled into one with insights that can help grow your business.
4. Do Accounting on the Cloud
Accounting systems have evolved with cloud technology. With cloud technology, great bookkeeping systems are out there that are accessible to you anytime anywhere, which can improve your accounting efficiency and productivity. Desktop accounting should be upgraded to cloud accounting. Spreadsheet accounting is yesterday’s accounting. There are great products available that will fit your business needs. In selecting a cloud accounting system, make sure that it is extendable to handle ‘classifications’, taxes, loan schedules, and can handle (or interface) with a payroll system.
5. Accounting is More than Figures on a Page
Accounting is much more than just compliance or figures on a report. It helps you run your business smoother with insight. Accounting and financial data can directly generate business insights and shape budgets and strategic initiatives, such as selecting marketing spend that results in improved financial outcomes.
Having said that, proper accounting procedures and controls also serve as guardrails to make sure your business is in compliance with tax and payroll laws and that cash is not sneaking out the door.
Bonus Tip: Call me any time with financial and accounting issues or questions.
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“Know Your Numbers”