Businesses are operating outside the realm of routine these days. As consumers’ needs and habits continue to evolve and the remote workforce prevails, new business models are emerging. And, strangely enough, business discussions have started to sound more and more like instructions for sailing… We’re avoiding headwinds, battening down the hatches, keeping our heads above water, and navigating uncharted waters. Business owners have become both seekers and developers of innovative means and methods. But an effective strategy or solution doesn’t have to be ground-breaking to yield incredible results. Start with an inward look at your existing day-to-day operations. There may be significant opportunities to improve efficiency and reduce risks hiding among your company’s current accounting processes.
To help business owners leverage these opportunities, we’re taking an independent and objective view of business accounting – from stem to stern – across a two-part article series. In Part I, the focus is the accounting process. Stay tuned for Part II in May, which will focus on accounting personnel.
Chart your course…
Fostering business continuity is essential. Companies need established and documented accounting procedures in place. Standardize your processes, such as payroll, accounts receivable, vendor disbursements, and financial reporting. Once you’ve figured out the most efficient structured methods, you want to ensure company-wide adoption and accountability.
Establish procedures that align with reporting requirements so you’re well-positioned for accurate and timely financial statements. Structure your monthly procedures to facilitate your year-end process and reporting obligations. Adopt a standard chart of accounts to use across departments, locations, and subsidiaries, so the information is easy to consolidate and extract by investors and shareholders.
Take a look at your pricing strategy to ensure it’s the best fit for your overall revenue model. And make sure both align with the standards for revenue recognition. This point is particularly noteworthy for providers of software as a service (SaaS) and other companies with revenue from license or subscription-based products or services.
Implement a navigation system to ensure smooth sailing…
Establish a close-by date for the prior month and conduct monthly meetings to review the prior month’s results. If your books and records for the prior month aren’t closed in a timely manner, it will be challenging to get a clear picture of your financial standing. Be timely with reconciliations. Whether you are reconciling bank statements, the general ledger, or accounts receivable, you are performing a prudent internal control activity. And internal controls provide accuracy checkpoints, so your financial reports are a reliable source for your company’s decision-makers.
Consider automating manual processes, such as reconciliations or payroll, to narrow the margin for error, reduce risks, and improve efficiency. Consider the ROI of cloud-based and integrated solutions, which may be particularly advantageous for companies with a large remote workforce, and the value added by software solutions that provide salient data and analytics.
Check the forecast and adjust your sails…
Businesses have to operate on a budget, and that budget needs to be backed by projections and forecasts. How do you position your business to reach the goals you’ve set, stay on budget, and be ready to make proactive adjustments when necessary? Based on your goals, identify and measure the appropriate key performance indicators (KPIs).
Comparing quantitative KPIs, such as in-store vs. online sales, can help you budget and allocate your resources effectively. Looking at data on customer acquisition costs and customer retention may signal a need to redirect your focus to upselling and cross-selling. These efforts may be optimal for increasing profit expeditiously and without breaking the bank with advertising costs. Analyze qualitative data as well, such as customer satisfaction or product reviews, to find out where you’re excelling or falling short in meeting your customers’ needs.
Benchmark your progress along the way. Develop distributable dashboard reports, so your management team can quickly assess whether the business is achieving its goals. And, if the trends aren’t looking favorable, your management team can make proactive adjustments.
Plan ahead and keep the wind at your back…
Businesses should take tax planning seriously. It’s imperative to be compliant with tax filings to avoid penalties, fees, and legal issues. But it’s also judicious to plan ahead so you can take full advantage of any tax deductions, relief, credits, exclusions, or exemptions available to you. Making the most of accelerated deductions, bonus depreciation, income deferral options, and other tax incentives can allow business owners to route their profits back into the growth of the business. Tax planning helps business owners maximize tax efficiency, exercise control in timing their tax payments, and meet their financial goals and business objectives.
The professionals at LGA can support your crew…
LGA’s business advisory, outsourced management accounting and tax teams assist companies in any stage of the business lifecycle, regardless of financial standing. My team understands your business’s accounting, financial, and operational needs are unique. I want to help your business take an objective view of your accounting process. Contact me today to get started.
by John Geraci, CPA, MST, Managing Partner
John Geraci joined LGA, LLP in 2009 and is responsible for the direction of the firm, its growth, both organic and through M&A, and its move toward providing more consulting and advisory services. Under his leadership, LGA has risen in the ranks of the Boston Business Journal’s Largest Accounting Firms from 45th in 2013 to 24th in 2021, a move of 21 positions in seven short years.
John leverages his extensive experience to advise clients with the financial, operational and cultural aspects of running a successful business and provides coaching and leadership training and consulting.