It may be a little late for a New Year’s resolution but, says Claire Emery of Elsby & Co, there’s no time like the present for adopting best practice and getting to know the numbers which drive your business.
Why should you know your numbers? Isn’t that the job of your accountant? There is an easy answer: If you make decisions based on facts and numbers you understand, your business is more likely to be successful.
It’s impossible to maximise profits if the finances of the business are not fully known or understood. This is even more relevant against the backdrop of inflation and interest rates rising at their fastest rate for years and wage inflation adding further to the cost base of businesses.
Even in the best of times, it’s hard to control numbers we don’t know or understand and a cursory glance at a year-end P&L might not be providing the detailed picture you need. There’s a whole host of questions that bring this to the fore: Do you know your break-even point? Do you know what your gross margin is, or should be? Do you know what your cashflow situation will be in a month’s time? How is the business performing on a like for like basis or versus budget?
As accountants, we produce annual accounts to meet statutory requirements. These are often prepared a few months after the year-end and therefore the information provided can be out of date for decision-making purposes. Simply relying on your year-end accounts might not be sufficient to maximise the performance of the business. By having accurate management accounts, nothing should come as a surprise when you have your annual meeting with your accountant.
At Elsby, we recommend more frequent financial reporting. It’s not quite as simple as a ‘one-size fits all’ approach – there will always be a caveat based on the size and turnover of the business, however it can be a false economy. Paying a little more for monthly or quarterly reporting provides greater visibility, allowing you to identify and remedy issues affecting the financial performance of your business.
It could make the difference between finding a problem three months into the new financial year as opposed to three months after the year-end. A lot can happen in that 12-month ‘gap’.
Knowing your numbers shouldn’t be a daunting prospect. We appreciate not all our clients share our excitement and passion for spreadsheets. We tailor a reporting framework specific to the key performance indicators relevant to your business, reviewing, analysing, and presenting findings in a format devoid of unnecessary jargon.
We go the extra mile, checking your margins, debt control procedures, aged debtors, and overheads, breaking these down to understand the areas holding you back.
We analyse a whole lot more besides with the purpose of identifying revenue growth or cost reduction opportunities. Sharing your passion for your business is what we do.
We’re all in business to succeed so don’t let ignorance of your numbers prevent you from achieving your goals.