In a recent post we talked about why financials statements matter to your business, and how to leverage them properly, so today we want to follow up that post by providing some specific questions your bookkeeper and/or accountant should be able to answer about these important reports.
By choosing the right person or company to manage your books, you can ensure that they are not just keeping your financials accurate and up-to-date but that they are able to provide valuable insights that will help you further grow and develop your business. We believe you should be able to take advantage of their expertise and have a true partner in your business when it comes your financial statements.
How can we become more accurate?
Your financial statements need to be error free and as up-to-date as possible, and that requires having the right documentation and processes in place. This can be especially important when deriving a cash-flow forecast. Being accurate about your financial position at a point in the future can help you make decisions about spending and financing. Having educated discussions around what you can do as a team to be more accurate (because many departments and people might be able to have an impact on this) and setting real goals to make that happen is a great way to head your business in the right direction.
What are the best metrics for measuring productivity and profitability?
Everything about business is constantly changing. Your business evolves as it grows, and the market adapts to new needs. Accounting and reporting best practices adjust over time as well, and sometimes very quickly. That means that the metrics you were using when you started your business may not be what you need to be measuring now. Furthermore, many trade associations will publish financial and financial ratio benchmark data that can help you compare your company to industry averages. You and your financial advisors should be sure to tap into these resources in order to create realistic goals for your business.
This is especially true when it comes to the areas of productivity and profitability. By knowing what metrics you should be tracking, and then having systems and reports in place to track them, can help you build a plan and improve in both areas over time.
Do we need a financial statement audit, or will a review or compilation suffice?
By simply asking this kind of question of your CPA or bookkeeper you’ll be ensuring another level of detail and assurance that your financial statements are free from error and fraud. An audit is the most thorough and granular, while the review examines your financial statements in broad strokes, and the compilation doesn’t address error or fraud at all. A financial expert should be able to explain which report is required based on your needs and audience.
If we need to tighten our belts, where can we do that?
Unfortunately, the truth about business is that it doesn’t always go our way. You may need to make decisions about cutbacks, but you need insight about what you can afford to trim and what cuts will hurt your business exponentially. The person managing your books should have unique insight here and be able to provide recommendations that are sounded in experience and best practices, while also taking into account your unique business scenario and statements.
If we’re growing, which area deserves more investment?
On the other hand, when your business is flourishing, you want to grow in the smartest way possible. You may be considering bringing on more employees, hiring an advertising agency, buying new equipment, or expanding into new market opportunities. However, you need to understand which parts of your business are the healthiest so you can determine where you need to invest further or not. Also, in most cases you won’t want to do everything at once or grow too fast, so you’ll need a clear picture of what exactly you’re capable of spending now and what should be put on the list for later.
As you can imagine, these questions are only the tip of the iceberg but should provide some initial direction and understanding around the kinds of conversations you should be able to have with your accounting team or bookkeepers. Your financial health and reporting is not something you want to ever overlook, and having the right bookkeeper can make all the difference. What’s key is that you have someone in place who understands your industry, your business, and how to effectively manage and interpret your books and financial statements so you can have smart and valuable business conversations. We believe asking these questions is a great way to start!