Category: data analysis

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Why is asset management important to a business?

Why is asset management important to a business?

Knowing how efficiently you manage and use business assets to drive revenues and generate earnings is essential to understanding how to increase business value.  While various dashboard reporting tools and solutions designed to monitor receivables, payables and cash flow are helpful in addressing daily decision-making needs, the question asked most frequently by business owners is actually one of overall business value and how to increase it.

chartBusiness value is generating sustainable cash flow.  If you run a highly efficient business, the more top-line growth you deliver, the more cash flow you enjoy.  For capital-intensive businesses (either through the need for capital equipment or working capital), growth can actually lower your cash flow and diminish your business value.   To understand which side of the equation your client resides, accounting professionals will often look at the return on total assets calculated over time, dividing the operating income for each period from the P&L by the appropriate period values of total assets from the balance sheet.  The resulting metric describes how efficiently assets are applied to creating earnings.

Understanding the return on total assets helps business owners understand whether or not the business has to spend more money in order to grow the same volume of earnings.  A higher number indicates the business uses its assets efficiently and effectively to drive revenue, while a lower number demonstrates a higher cost of growth.  Accountants and business advisers should be monitoring this metric for their clients, helping to identify which path to profitability and growth makes the most sense for that particular business.

The numbers will vary with different business types, so comparing client performance to others in the same industry can provide a great deal of strategic insight.  The “return trend” may also be benchmarked against the competition and peer businesses.  If the business is utilizing assets more efficiently than competitors, it can represent a significant business advantage.

Accounting professionals need to take a proactive approach to working with clients, and make use of the historical information they’ve developed to deliver business insight and intelligence to help them more profitably move forward.  While every business needs a tax return completed, they also need help understanding how to increase profitability and overall business value. Knowing that there are several ways a business can increase profitability, you can help your client understand that driving more sales and improving margins is only part of the story.  Businesses can also improve cash flow and their return on total assets metrics by decreasing the base of business assets, disposing of excess equipment, or simply by doing more with less.  By doing this, business owners will drive up their business value and create more options for their future.

Make Sense?
Joanie Mann Bunny FeetJ

Special thanks to Matt Ankrum of BodeTree for helping me get this right.  We don’t all have the years of experience or expertise to “just know” what the right answer is, and sometimes we know the data is telling us something new, but we’re not sure what it means or what to do about it.  BodeTree is the tool advisors and consultants can use to not only identify items that need more attention, but to understand what actions to take to make the necessary adjustment or improvement.

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QuickBooks Accountant Niche Practice Specialties: Tools for Accountants Working With Contractors

QuickBooks Niche Practice Specialties:

Tools for Accountants Working With Contractors

For accounting and bookkeeping in a small business, Intuit QuickBooks is still the “go to” solution.  QuickBooks has functionality needed by most businesses, and some editions of QuickBooks offer more in-depth process support for specific industries and business types.  Accountants and bookkeepers working with QuickBooks may rely on essential bookkeeping and reporting features to get basic accounting done, but supporting the processes and offering the functionality business owners and managers need – processes and functions which are specific to the business type and how it operates – is essential to developing a solid business management and reporting system.

Accounting and bookkeeping professionals can be instrumental in developing these systems for their clients, and can use the data collected within these solutions to provide more detailed reporting and actionable advice relating to business activities and trends.  Creating a niche practice and specialty means knowing how to address the needs of the niche client and having the tools to make it happen, so accounting professionals working with QuickBooks clients should seek to leverage the Intuit partner network of developers and QuickBooks-connected solutions and extensions to orient their services to the needs of specific industries and client business types.

The most obvious example of applying an industry-specific orientation of QuickBooks is to use the Premier Industry offering of QuickBooks desktop edition.  With the Premier Industry editions, additional functionality and reporting for specific industries is addressed directly within the application.  Industry editions exist for non-profit, manufacturing, and contractors, among others.  A lot of practitioners have met the additional needs of their business clients by using these industry-specific editions.

With QuickBooks Premier Contractor edition, for example, businesses can go beyond general accounting and address specific needs of a contractor or construction business, including tracking and reporting on job costs and profitability, handling estimates and change orders, and billing clients by time and materials, job phase, or percentage completion.  Accountants and bookkeepers working with construction businesses can help their clients more accurately and efficiently address the unique requirements of this type of business by offering the user functionality which is relevant to their daily tasks, such as making deposits, entering and tracking bills, and reporting on the progress and status of jobs.

Contractors may also have unique payroll reporting requirements, most of which are not adequately addressed within the QuickBooks solution directly.  It is in this area of compliance and complex reporting where the accounting professional may be of particular value, ensuring that these additional business requirements are met and that the data is complete, accurate and timely.

By utilizing the Intuit partner-developed application from Sunburst Software Solutions to extend the functionality of QuickBooks, contractors and the accountants who support them are able to create comprehensive and accurate prevailing wage payroll reports, including the most frequently required WH-347 Payroll Certification Form and the WH-348 Statement of Compliance Form.  Further, the solution also provides reporting for nearly all municipal, state, and federal paper forms required in each state. The solution even includes electronic certified payroll submission, compatible with LCPtracker, Hill International {formerly TRS Consultants}, Elation Systems, and other agencies.

QuickBooks has the framework for holding information about customers and jobs, tracks estimates, progress invoicing from current accounts receivable and work complete, and a means to accurately record and track retainage payable and/or receivable.  To complete the requirement for AIA billing and other construction business-specific needs, Sunburst CAPS application for QuickBooks holds additional project information, architect information, retainage method data, and billing forms to print in linked records.  CAPS also provides a mechanism for percentage of completion calculations with full accounting for stored materials.  The information is then merged together from both programs to generate the final billings – ready for signature, notarization, and mailing.

Addressing this additional level of complexity and compliance for contractors is a critical element, and an essential benefit, of working with accounting professionals who understand the needs of construction businesses and employ the tools and applications to meet those needs well.  It is through specialization, and knowing how to address the unique requirements of (and to capitalize on the opportunities presented in) the client industry and business, that accountants and bookkeepers will demonstrate and retain their value in today’s challenging economy.

Make Sense?

J

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Trends Impacting Every Business | Forbes.com

Trends Impacting Every Business | Forbes.com

You think good accounting isn’t a big factor in getting business credit?  Consider this tidbit from Intuit’s CEO Brad Smith, from a recent article on Forbes.com:

Two-thirds of Intuit’s QuickBooks customers were declined a loan due to poor FICO scores and other credit measurements. In the Loan Finder trial, a business could opt-in to allow banks to use QuickBooks data to evaluate if a prospect was a credit risk. As a result of this additional data, the banks provided several hundred new loans with an average of $10 million dollars.

Accounting professionals… isn’t this something you could be helping your clients with?

Read more about helping make small businesses bankable 

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J

  • Read more about how accountants need business intelligence, too
  • Read more about how there’s no fear and loathing in accounting
  • Read more about the pressure on accountants to deliver more value and intelligence to their clients
  • Read more about Data Warriors: accounting in the cloud
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Using Structured Workflow to Manage Offline Clients | Intuit Accountants News Central

Using Structured Workflow to Manage Offline Clients | Intuit Accountants News Central

The demand today requires that accounting professionals be more attentive and, yes, aggressive, in terms of “attacking” a regular flow of processing client information rather than batching it at period end. This drives a great need to structure and organize the work, and workflow, so that the repetitive and regularly performed processes may be streamlined and made easier to manage on an ongoing regular basis. It is no longer good enough to wait for clients to deliver the information and request the resultant reports. We must proactively request and gather the required information for processing, especially with offline clients, in order to get the work done more frequently.

Read the entire article at Intuit Accountants News Central

J

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Dashboard Reporting Tools: Gauging Accounting Relevance

Dashboard Reporting Tools: Gauging Accounting Relevance

Dashboard reporting tools can be of great assistance when accounting professionals want to help their clients understand how the business is performing.  In most cases, these tools do a good job of showing owners the details of the profit and loss or cash flow reports, presenting the information in a way that non-accountants can understand.  Many accounting professionals have turned to these reporting solutions to increase the value of the accounting work performed.  After all, if the client can’t really understand the P&L and the Balance Sheet, then the reports won’t do them much good.

While simplified graphical reporting solutions are beneficial to the business, providing more insight into historical business performance, they don’t do much for the client on a daily basis if the accounting data isn’t up to date.  Accounting professionals should recognize that these dynamic reporting solutions, tools which can provide business owners with real-time information on business activities and performance, can go a long way towards increasing the relevance of the accountant’s involvement in the client business.

Accounting professionals today are fighting battles on several fronts, and remaining relevant to the client is one of them.   This isn’t too surprising, given that many accounting professionals see their clients only at year-end when the tax return needs to be prepared.  In some cases, the business owner doesn’t even remember the name of their accountant – they just know they went there last year at tax time.  This arm’s length relationship between the accounting professional and the business clients leaves a lot of opportunity on the table for both parties.

When accounting professionals aren’t closely involved with their clients, they risk losing the client to a more attentive, consultative professional.  Many firms believe that the low profitability of bookkeeping and processing daily work for clients means that they should focus only on “higher level” opportunities, yet business owners will tend to seek advice from those who work with them on a regular basis, and who understand the issues that challenge growth and profitability.

Accounting professionals who recognize the value of providing regular bookkeeping services to their clients also recognize the value of working closer with the client, providing useful and actionable information rather than historic data long after-the-fact.  These professionals are more likely to reap the rewards of “higher level” engagement opportunities from the client, because they help to identify the need and are able to support it with real data and insight earned through regular involvement with the business.

Make Sense?

J

  • Read more about how accountants need business intelligence, too
  • Read more about how there’s no fear and loathing in accounting
  • Read more about Data Warriors: accounting in the cloud