How To Grow A Small Business With Management Accounting

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!


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.