As a business owner, you may view your accounts as the end point of the financial process – a scorecard that shows your yearly or monthly profits, or a document that puts a full stop on the financial year.
But, in fact, the numbers in your accounts are an incredibly informative and useful pool of information regarding the health, efficiency and potential future success of your business.
Getting your accounts done is the beginning of an incredibly valuable business process. It’s a starting point that reveals the truth behind your enterprise and, when used well, accounts can be the driving force behind powerful, informed business decision-making.
So, how do you begin to utilise these additional benefits of your accounts? And how do you use these numbers to not only look backwards, but forwards to where your business is going?
Your accounts tell you where the business is going
It’s far more interesting (for you and for us) to talk about where your business is going, rather than where it’s been in the past.
We can be a sounding board for your future business ideas, support when there are financial challenges and a guiding hand as you make critical decisions about your vision and long-term objectives. We love it when people ring up with ‘random issues’ that aren’t necessarily accounting related, but which require our strategic or commercial input.
For example, if you’re a new start-up, you may want to know if now is the right time to hire someone for an urgent new role in the business. We can help you see the wider picture, analyse whether your revenues can justify a jump in payroll spending and also give you our opinion on whether this role is a vital component of your growth, or a ‘nice to have’ further along the line.
And it’s this ability to be your objective adviser that helps us add genuine value as your company evolves and expands over time.
Drive your decisions based on solid numbers
So, how can your accounts – and the goldmine of financial data contained in them – be used to aid the decision-making process and guide you in the right direction?
Here are six ways to use your accounts to drive those decisions:
- Get the accounts done early – the earlier in the period you get your accounts produced, the sooner you can start reviewing the numbers, looking for the financial challenges and opportunities and changing the path of your business model.
- Ask your accountant before making big decisions – we’re here to help, so come and talk to us at the start of any new project, or before you make a big financial commitment. Our commercial experience and deep understanding of your numbers mean the decisions you do make will be more informed, more confident and grounded on some extremely solid financial planning.
- Review and analyse the data in detail – Don’t just focus on the big numbers like annual profit or sales revenues. Drill down into the financial detail and analyse all the available data in your accounts, so you start to see the trends, patterns and underlying drivers in your company’s financial model.
- Put clear KPIs in place – Following your detailed analysis, pinpoint the key numbers you need to know, and set up clear key performance indicators (KPIs) in your accounts. Measure these KPIs over time and get a real overview of the overarching health of the business.
- Use forecasting to see the future – Take the data from your key numbers and project these figures forward. By extrapolating these important numbers into the future, you get a view of where the business will be in six months, a year, or five years down the line.
- Review your numbers regularly – Don’t just look at your accounts annually. Review your numbers at least once a month and keep abreast of your performance. One option for improving visibility of your accounts is to use a cloud accounting package, such as Xero online accounting, where you have a real-time view of your key numbers and KPIs at any point in time.
Be prepared, and plan ahead
You’ll always be better off having your accounts completed, and clear in your mind, before making any important decisions about the longer-term future of the business.
With a proper view of those all-important accounts, you have a historic view of your performance and how successful, or not, you’ve been in attaining your core objectives. But far more importantly, you can also see the status of the business as it is right now – and, with the benefits of forecasting, how it may look six months, or a year into the future.
This increased awareness of your financial health and performance is vital as you move through the business cycle. For example, an increase in sales may lead you to believe you’ll see an equivalent rise in profits – but that’s not necessarily the case. You need to know your profit figures, but also understand the make-up of your profit margin, the underlying costs and overheads in the business and how both of these impact on your regular cash-flow situation.
Equally, it’s prudent to know your tax liabilities and the size of the tax bill you’ll be required to pay over the course of the year. With a clear view of the tax you’ll be paying in the future, you can plan ahead, get a clear tax strategy in place and put the right money aside to cover these tax costs as and when they arise.
Know how you’re performing
One key element that your accounts add to is your underlying motivation and confidence in the business. It’s nice to know how you’ve done, how the figures are stacking up and how the business as a whole is performing.
There are a number of options for increasing the visibility you have of your important numbers, using a variety of software tools. And with faster and more convenient access, you do get an improved view of your spending, budget tracking and performance over the course of the business cycle.
If you feel you don’t have a proper handle on your accounts, or need guidance and support to make your next big business decision, please do come and talk to us.
Give your local Saint & Co office a call to arrange a meeting and start getting back in control of your business’s accounts.
