Not Just the Numbers

I believe that every decision a business owner makes affects the bottom line. Therefore I employ a holistic approach to finance. Everything in an organization is interrelated. Accounting is just the method to report how well (or poorly) the business is performing.

Understanding the relationship between management decisions and financial results is key to improving overall performance.

Using  financial and business analysis tools, business owners need to review how each person and process directly or indirectly effects the finances of the company. If the end goal is to maximize profits, then each business process and employee has to work together toward that goal. If a bad process hinders employee performance or an employee doesn’t follow a critical business process, a breakdown is sure to follow and profitability can suffer (it often does).

Questions I often ask when working with clients:

1. What’s your marketing strategy? Aren’t you my accountant, you know, the numbers person, what’s marketing have to do with it? Poor marketing efforts often results in inadequate revenue. Or buying too much advertising in what I like to call “spray and pray” marketing can be a huge waste of cash with little or no return. A good marketing plan with strong execution and perhaps most importantly, results monitoring, is critical.
2. Do you have happy employees? And this relates to accounting how, exactly? High turnover increases your training costs, unemployment costs and results in lower productivity. Every time you have to re-train someone you lose time and money. Further, unhappy employees many not be as productive and take more sick days. Unhappy employees may reduce overall morale which could come out as poor customer service. Poor customer service may mean lost customers, therefore reducing revenue.
3. Do you have good operations policies and strong execution? Aren’t you supposed to be crunching numbers in the back office? By operating your business efficiently, you reduce costs. Efficiencies are gained by establishing clear protocols on how operations are handled. Overhead is usually a key expenditure for most businesses. By managing your overhead correctly you can maximize profits. This doesn’t always mean cutting costs though. Growing companies have to be careful when planning overhead, which is where having good operations comes into play. With too little infrastructure, your company may not be able handle any more growth. Too much infrastructure may sink your ship. Good analysis and planning can help determine where you need to be.
4. Do you know your break even point or profit drivers? Ok this sounds like your job. This is when “crunching numbers” is critical. Unfortunately, many financial professionals are too backward looking. I use historical data coupled with reasonable growth forecasts to help business owners determine the best strategy for moving forward.

By employing this “holistic” approach I believe business owners can dramatically improve their bottom line, have happier employees and a more rewarding business.