How To Grow A Small Business With Management Accounting

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How To Grow A Small Business With Management Accounting

When most people think of management accounting they think of a ‘big’ or corporate business. However, management consulting is not just for the big end of town, it is important for all businesses.

At its core management accounting is a way to look strategically at all of a business’s financial decisions. Applying planning and analysis to your incomings and outgoings will transform your business from one operating in a reactive space, to a proactive one by setting up goals for the future.

Cost And Profit Analysis

One of the most valuable things that a management accountant does for their clients is understanding the relationship between your costs and how much profit you take away from them. While we all know you need to spend money to make money, if you are spending too much, your profit margins are only going to decrease over time.

Our founder PK shares some insights into this process in this short video. He looks at a fictional café to understand their profit for the month and where the money has come from.

Budgeting Analysis

A budget is key to understanding how much to spend and where. A management consultant helps you understand not only where to spend your money, but where it can work best for you. For example, if a café has a budget for cakes supplied externally and at the end of the week there is too much unsold cake, then a management account would look at decreasing the spend on the cake. They would look at moving that budget spend to other areas such as staffing or more profitable menu items to grow the business.

Inventory and Pricing Decisions

Your overheads and stock must be a sustainable level for growth. A management accountant understands the importance of inventory control and will help you apply inventory management techniques. It is important to establish and apply the appropriate approach for long-term pricing decisions. Your prices must be in line with what the market can sustain and also create enough profit to allow your business to grow.

Short-term and Long-term Decision Making

The decisions we make today help build our tomorrow. If we don’t know the future goals we are working towards, it is very difficult to make the decisions today that lead to that future.

This is where the management accountant truly provides value. They can help you set your business goals and vision for the future. And then outline the financial decisions that need to be made today to make that future come true.

Get In Touch

If you have any questions on how a management accountant can help your business, please do not hesitate to get in touch. We are always happy to help.

Book in a time here for a free chat!


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Secrets Revealed: How Your Accountant Prepares Their Own Business For EOFY

Your accountant is there to support your business and help it grow. But how does your accountant prepare their own business for the end of financial year?

We will take you behind the curtain and reveal the tips and tricks that accountants use to get their business EOFY ready!

Plan For The Future

Accountants are not just interested in the bottom line; they strive to make business owners goals and dreams come true. They believe that with the right planning anything is possible.  They plan for the future and then set plans in motion to make them happen. And this means setting clear goals and plans to make those dreams come true.

Here are a few things to consider when setting your goals:

  • Specific – be clear about what you want to achieve, and go into detail about what that is
  • Measurable – make sure the goal can be measured, so you know if you’ve achieved your goal
  • Achievable – be realistic, is the goal something you have the time, money and resources to meet
  • Relevant – ensure your goal is relevant to the direction you want your business to head in, for example, increasing profit, employing more staff, increasing brand awareness
  • Timely – set a realistic deadline for completing the goal.

Make Sure Their Clients are Better off

An accountant will review not only their P & L’s (Profit and Loss Statements) but their clients as well to ensure that their businesses are growing and going in the right direction. When a business is growing it is more important than ever to understand where and how to invest their profits. Growth is expensive and it can make or break a business.

Some things to consider when planning for growth:

  • Primary objectives (PO) – What are your 2-3 highest priority objectives for growth? One of the things that derails growth is too many goals and objectives. Most business can only focus on a couple of initiatives at any give time. As we mentioned previously you need to set goals for the future, and then prioritise and only focus on your top 2 or 3 objectives.
  • Revenue streams (RS) – How can we create more streams of revenue? There are only three ways to grow: add more customers, increase the average transaction size, increase the number of purchases per customer. It is easier to sell more to existing customer than find new customers. How can you package or promote products or services together? What new markets or segments could you enter?
  • Strategic relationships (SR) – What relationships do we need to develop? This is often over looked by business owners who want growth. What marketing partners could be motivated to promote and co-market your business? What joint ventures would allow you to discover new work? What vendors or suppliers could help you grow?
  • Key indicators (KI) – What metrics impact our growth most? Most businesses know how much revenue they did last month and how much money they have in the bank. But by focusing on things like number of leads converted, business acquired via referral and the cost to acquire a new customer it helps you to know where to focus your energy. Knowing the path of least effort when acquiring new business allows you to take control of the things that actually impact your growth.

Ensure They Are Compliant

All accountants ensure that they are compliant at the end of the year. This means that all tax obligations have been met and they know what the owe to the ATO. This is something that is imperative when creating financial plans for the next year. This allows you to start off the new year knowing your true financial position.

If you owe money you can make a plan to clear the debt. Or if you have money coming back make new investments to continue to grow.

If you have any questions on your end of year planning, please get in touch. We offer free consultations, book in here.


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4 Tips for Business Owners To Plan Your Down Time

Summer is here! It is a time to slow down after the busy holiday season. Take valuable time off for yourself and plan for the year ahead. While revenue can be affected by these slower months it is important to not get scared by the slow down. Use your time effectively and be sensible with your planning and budgeting. We recommend the following four tips to get you through the slow season:

Give Your Staff The Option to Take Unpaid Leave During Slow Times

Don’t assume that your staff have all of the time off they desire. Many full and part-time staff members would treasure a few extra days with family and friends this time of year. Be sure to ask in the slower summer months if they have plans and not enough leave. Let them know you are happy to provide additional unpaid days.

Send Invoices Promptly To Avoid Getting Paid Late

No matter how busy you get during the lead up to summer, be sure to keep on top of your invoicing. Many businesses and their bookkeepers are on skeleton staff and this may result in late payments over the summer months. To ensure late payments don’t negatively affect your cash flow be sure send invoices on time or even a bit early if you know your clients will be on leave.

Plan Your Outgoings

If you need to delay ordering new stock to ensure your cash flow is strong it is better to wait than to push through an order you can’t pay. If your invoices or cash flow is tight it is better to wait until you can confirm you have the cash coming in before you spend it. It is always better to stagger your outgoings rather than committee to a large spend all at once.

Review Your Data

Have a look at your profit and loss statements over the years to understand your business’s patterns. This will help you to budget in the coming months, so you can plan accordingly. If you don’t have an online accounting system that does this, we recommend taking advantage of these quiet times to put a new system in place. We recommend cloud-based software such as Xero or MYOB for most small businesses.

Questions?

We are always happy to provide a free consultation if you would like more information on how to use the summer months to plan and get your finances on track. You can book a time with us by emailing enquires@360accountingservices.com.au or call us on 1300 360 749.