At the most fundamental level, good business sense is down to only two things: the big-picture strategic thinking of the business management and a detailed financial expertise. This can be briefly summarized as vision and money. A good business owner must be able to understand their business growth options and use this information to steer his or her business in the path where they are likely to get optimal returns.
Financial expertise is always key to success in the business. And this is often intricately tied up to the financial information or reports you use to make decisions such as financial statements and tax returns. While these are critical, they only tell a story of the history of past transactions. To grow your business, you need to understand not just where you have come from but also where you are headed to.
A business owner must factor in not just what has been but also their future growth options so that they can make sound decisions about the future growth of their businesses. They will need financial data that they can easily read and digest and use as a basis for prudent business decision-making.
Given these tough demands and a highly competitive business environment, it is always advisable for a business to leverage the financial and planning expertise of its accountants. Outside the management, the accountant is the one person with a rich insight, backed by financial data, into the unique challenges that your business is facing and they are often available to help for a small fee. Here are some tips on how your business can leverage the time and skills of your accountant to achieve a robust and sustainable growth:-
Get Cash Flow Projections
Don’t be so immersed into the here and now of business management that you fail to account for the future cash flow projections in your business. An accountant Melbourne professional can prepare detailed financial reports from your accounting software that will help you understand and leverage your KPIs and manage your cash flow. As you grow your business, you may have to increase the headcount, expand the product line, open more stores, increase your marketing budget and acquire more assets and it is important to have an idea on how these changes are going to affect your business cash flow. Doing accurate cash flow projections will help you avoid nasty surprises a few months or years down the line.
Find the Key Performance Indicators in Your Business
Every business has Key Performance Indicators (KPIs) and your accountant may be privy to this privileged information. The KPIs helps you gauge the success of your operation. It’s a measure of how effectively you are realizing your business objectives. Every industry has its unique KPIs. For example, in the building or construction industry, it can be job costing while in retail it could be the inventory turnover. Because your accountant works your books on a regular basis, they will have a good idea of what your KPIs are. They might also glean this information from working with other clients in your niche. Have a chat with them and let them tell you about your KPIs and advise you on where you stand. Professional accountants can even assist you in setting up KPI reporting so that you can track the performance over time and make better decisions on how to achieve your business objectives.
Use Break-Even Analysis to Test Your Growth Options
You can hire an accountant Melbourne professional to assist you in setting up both the budget and forecast reporting for your business. This can be done based on milestones and timelines. For example, give yourself a goal of 12 months and use simple forecasting tools such as graphs to determine if your projections will pan out over that period of time.
The terms “projections” or “forecasting” may seem like complex management-level decision-making tools but they don’t have to be. It is possible to use very simple reporting techniques for your growth projections. Alternatively, talk to an accounting firm Melbourne to assist you with your business forecasting for better growth decisions.
Business forecasting can give you a clear breakdown of the fixed costs such as rent and administration and variable costs such as shipping manufacturing and labour and how these impact your business cash flow. You can subsequently compare these costs against your sales volumes to get a clearer picture of how factors such as seasonality and market conditions affect your business bottom line.
Once you have collected this information on the period revenues and expenses, you can use them to determine the break-even point of your business. This can also give you a better sense of the conditions that you will need for profitable growth.
Benchmark Your Business against the Industry Performance
Professional accountants are most likely working with several other businesses in your niche using the same forecasting and reporting tools and methods. Some even use financial benchmarking tools to help businesses determine if they are performing at par with other businesses in the same market. You can leverage this expertise to compare your business against others in your field and know your industry-specific KPIs. Having this knowledge can help you know if you are performing better or worse than other businesses in your niche. By running a comparison with other businesses, you can also determine why your KPIs are the way they are and this can be a good starting point when making decisions on how to achieve better growth. Based on this comparative data, you can subsequently sit with your accountant and brainstorm the KPIs, ask questions and this could open up a conversation on whether changing one aspect of your operations could make a positive difference in your business bottom line.