Essential Business Info
Many business owners operate completely in the dark, with no meaningful business information upon which to manage, let alone improve, their businesses. As trusted advisers (and with so much knowledge of our clients’ businesses) it’s our job as accountants to empower and enable business owners to get control of their businesses by giving them the tools to find out whether they’re making or losing money, growing or contracting and what they need to do to succeed.
So what sort of business information does a typical business owner need? These are the more common types which I normally recommend:
Easy or Difficult
|Monthly or bi-monthly interim financials||Can see whether you’re making money and can plan and react quicker to improve plus can minimise IRD interest||Piece of cake but if you hold inventory you need the month end inventory figures|
|Perpetual Inventory||Can keep a track of all your inventory and what cash you have invested in inventory plus identify old or slow moving stocks||Difficult in manufacturing businesses where you use common items for different products but otherwise you just need good systems|
|Job Costing||Can see whether you’re making money on individual jobs||Not too bad if you’re keeping keep timesheets for labour costs and can record the allocation of inventory items to individual jobs (specific purchases for jobs are very easy to allocate) which means probably keeping perpetual inventory|
|Divisional Reporting||Can see which parts of the business are losing or making you money||OK if you can allocate overheads between divisions and can allocate inventory usage to individual divisions|
|Budgeting||Can manage by exception, can identify over-spending and highlight sales shortfalls||Easy if you have accounting software|
|Break-Even Point Analysis||Probably the most important thing you should know about your business. Knowing whether you’re covering all your outgoings (including drawings and tax) is absolutely vital.||Easy but you do need to know recent overhead levels and your latest gross profit margin which can slip when things get tough|
|Cashflow forecasting||Can forecast cash crises and get peace of mind when expanding||Easy. If you find it difficult to predict your sales work back up from overheads using your gross profit margin|
|Gross Profit Margin Analysis||Can see just where you’re losing or making money||If you keep inventory you probably need to maintain perpetual inventory or it’s too difficult|
|Key Performance Indicators||Can focus on the key things in the business, those factors critical to success||Easy if you have accounting software and good systems|
What information do you have available in your business? Are you still just using the traditional measures of what cash you have in the bank and comparing turnover with that achieved in previous years? All this really useful information is easily available with good systemsand some decent accounting software, so come on, get up to date by contacting Nick on 0800 ASK NICK or email firstname.lastname@example.org.