A business is as good as your decisions and how you implement them. The key difference between a successful and unsuccessful business is financial management. Many startups run out of money in the early stages because they spend aggressively without keeping a tab on the cash inflow and the profits. An accountant gives your business the power of accurate financial information to help you make informed business decisions. This article will discuss the various services you can approach professional accountants for.
1. Preparing a Business Plan
The core of any business is to make money. Having technical and operational expertise with some of the best product offerings is insufficient. The business should be able to monetize it efficiently. When preparing a business plan, you have to handle cash conservatively, as the company may lose money in the early stages. A business plan should take note of these risks and make some measurable and realistic goals they want to achieve over time.
Breaking down these goals into smaller goals and steps would be best. No business is 100% successful, so you should leave room for failure.
Skilled accountants can help you prepare your business plan focusing on profitability. They can devise a system of key performance indicators (KPIs) to make the outcome measurable. They will also help you prepare realistic targets for these KPIs and set up an alert if the business crosses the target range. For instance, you may keep the operating expense target between 20% and 50% of the revenue or the debt target of 2-3x the operating profit.
If the business consistently breaches this target, it is time to return to the drawing board and revisit the business plan. Accountants can help you troubleshoot, monitor and review the business strategy with measurable numbers, keeping you informed at all stages.
2. Help Make Informed Business Decisions
Let’s say you are already running a business and plan to expand. You will encounter decisions like adding employees, buying or renting equipment, and taking loans to process the orders.
All these decisions are strategic and financial and should not be taken in haste. You must set up a payroll system even if you hire one full-time employee. More employees mean more administrative work. An accountant can help you set up and monitor the payroll system regularly to ensure smooth functioning.
Accountants can help you with all the paperwork and guide you on better, more cost-efficient options depending on the business requirement. For instance, if you want to buy equipment and hire several full-time employees for a considerable order, which may not be regular, you could consider leasing the equipment and hiring contract workers. Such decisions will preserve the capital and help you buy equipment when the orders are assured and with business profits instead of a loan.
3. Set Up Business Software for Efficient Working
Several business softwares are available for systematic record-keeping and data analysis. An accountant can set up technology at various levels, from invoicing to accounts payables, inventory management, KPI tracking, payroll, bookkeeping, accounting, staff scheduling and time recording. They can train the staff on recording the transactions and compile the reports for daily and monthly monitoring, making data accurate and the workflow efficient.
4. Manage Cash Flows and Accounts Receivables
A business has to set specific systems and policies as they scale. They have to analyze their cash flow. Some months may see high cash inflow, and some may see low cash inflow. But your fixed cost has to be paid. An accountant can analyze the revenue trends and help you allocate cash efficiently between cash reserves for working capital, shareholder dividends and future expansion. Planning your expenses can help you make timely payments and enjoy favourable credit terms from suppliers.
Another important aspect of managing cash flow is ensuring invoices are paid on time. Again, the accountant can help you set up an account receivable system detailing the terms of payments, reminders, invoice accuracy, and how to tackle unpaid invoices.
On a strategic front, the accountant can monitor the cash flow and alert you when cash falls below the accepted levels. This way, you can address the issue before it becomes a problem.
5. Apply For a Loan or Manage Debt
A business may need external funding to grow or sustain in certain situations. Accountants are well-versed with what investors and lenders want. They can help you prepare financial statements and loan applications as the banks and investors require. They can also suggest alternative funding options.
Accounting services can also extend beyond taking debt. If your business suffers too much debt, a skilled accountant can help you prepare a realistic repayment plan, restructure debt, forecast and prepare for contingencies.
6. Budgeting and Forecasting
An accountant also helps you prepare a detailed budget and adjust it according to changes in financial situations. An accurate budget can keep your expenses in check and help you improve operational efficiency. Budgeting and forecasting go hand in hand. The budgets are prepared based on expense and cash flow forecasts. An updated forecast and budget can help you plan your expansion systematically.
Accumulating too much cash reserve is also not healthy, as it reduces returns. At the same time, spending aggressively could reduce your financial flexibility to handle crises. Forecasting looks at not only internal factors but also the business and macro environment and can guide you on when to invest and when to keep a reserve.
Contact the Accountants at McCay Duff LLP in Ottawa to Help Manage Your Business
Talk to a professional accountant to discuss their various services depending on your business requirements. To learn more about how McCay Duff LLP can provide you with the best accounting and business consulting, contact us online, or by telephone at 613-236-2367 or toll-free at 1-800-267-6551.
