Last week we discussed the topic of Cost vs. Value. I wanted to take some time this week to dive into the concept of value. More specifically I want to discuss what value you should be getting out of your accounting function. This is a topic that I know best and can articulate what constitutes value and what doesn’t. In dealing with many clients across a variety of industries over the years, there are 5 basic things you absolutely MUST be getting from your accounting function.
I know what you are thinking. Here comes the Quantify sales pitch. Not so fast. My goal is to educate you so that you can succeed. Everything I am going to discuss can be handled internally. Now that may not make sense and I do recommend bringing in a professional if you don’t have 100% confidence you can handle it yourself. Point being, this is not a sales pitch. However, these 5 things cannot be compromised no matter who handles it. Enough delay, here are the 5 things you need to be getting from your accounting function…
1) Accurate Financial Statements
Everything starts here. I cannot stress this one enough. If you do not have an accurate set of books as the foundation of your business, you’re setting yourself up for failure. Having your office manager record some invoices once a week is not enough. You need COMPLETE and ACCURATE financial statements. You need 100% confidence that every single number on your financials is correct, no questions asked. I know I may sound a bit dramatic right now but if you don’t have accurate financials on a consistent basis, the financial infrastructure of your business is going to crumble, plain and simple.
2) Strong Controls
According to The Association of Certified Fraud Examiners’, the typical organization loses 5% of revenue each year due to fraud. The study also revealed that companies with fewer than 100 employees lose approximately $155,000 each year as a result of fraud. Whoa. Those are some scary numbers. So how do you prevent this from happening? Controls. First, by having accurate financials, you will be able to track every penny and see if something goes missing. Second, having controls in place, like segregation of duties, will help to eliminate fraud. Fraud is real and can happen to you. Take controls seriously.
3) Where Your Business is Going
Your company’s financials can paint a picture of where your business is heading. This is really important to understand because it can affect your decision making process today. So how do you go about doing this? Setting up a budget and a forecast is a great start. Constantly compare your actual results to your budget and forecast. It will answer a ton of questions about what happened and where your business is heading.
4) How to Grow Your Business
We feel that financial statements should be used as a tool to help grow your business and not just a set of numbers at the end of the year to complete your tax return. So how can you use these numbers to help grow your business? There are many tools such as Job Costing, trend analysis, forecasting and budgeting (see above). Successful businesses use these types of analysis tools to grow and make sound decisions – learn to utilize them for your business!
5) Help with Decision Making
Every decision you make has some type of financial impact on your business. It is imperative that #1-4 above are in place so that you can quantify the impact that it will have. Some business decisions seem like a slam dunk and they probably are. But I would encourage you to at least consider the financial implications of every decision you make because sometimes the most attractive opportunities are money pits. I guarantee you won’t regret it.
Get in Touch
Hopefully this article will get you thinking about the accounting function in your business. I would be more than happy to run through a quick assessment with you if that’s something you are interested in. I love seeing businesses succeed. In fact, it’s why I do what I do. Please get in touch with me if you have comments, questions or concerns.