small business financing – Page 8 – Cooper Mann Consulting

January 29, 2013October 28, 2015

An Educated Guess is Not a Crystal Ball – Forecasting the Future

If every business could peer into the future to see how they will perform, there wouldn’t be a need for historical data and performance benchmarking. Unfortunately, nobody has a crystal ball, so it becomes necessary for business owners to plan for the future. By making educated guesses with valuable information gleaned from the past, companies can establish the path they will take to growth and profitability.

Accounting professionals are great at producing accurate historical financial performance information. The value in this historical data is only partially found in the periodic reports and financial statements generated. The primary value, the insight delivered from this historical data, is the information it reveals about the business operation over time. It is from this historical data that certain trends are identified, providing a basis for making the educated guesses necessary to learn how the business will look in the future.

Forecasting is very important for businesses, as it provides the framework for laying out your expectations for the business. In essence, it is a way to (hopefully) predict what your business finances will look like in the future based on forecasted growth. And, armed with the forecast, you can now more confidently build a reasonable plan to reach your stated business goals. While there are myriad approaches to creating a business forecast, it makes sense to simplify the process and focus on the area you likely spend most of your time attending to: sales. Use your sales goals and projections as the basis for establishing a forecast, setting realistic goals for the current year and for a few years after that. Once you’ve forecast the new sales goals, you can more easily appreciate what it will take in personnel and other costs to support that growth.

Recognizing that the forecast is simply an educated guess, it is important to regularly compare actual performance to the forecast to see if the business is on the right path to reach the established goal. If sales are not growing as projected, then the business may need to make adjustments in terms of personnel hiring and other plans to ensure that costs don’t outpace sales. Without a path to follow, business owners will not necessarily know if the operation is “on track”, as there is no track to be on – there is nothing to measure success against. Certainly, profitability is the goal, but it is a matter of degrees of success, and the business will not know whether it is being as successful and profitable as it might be.

Accounting professionals should help their clients create realistic forecasts, along with organizing the information and formulating a plan for the business owner to follow. On an ongoing basis, the accounting professional’s involvement delivers continued value by helping the business owner recognize and respond to changes in the business, adjusting plans as necessary to keep the business on the right path. And, no crystal ball is required.

Make Sense?

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.

Business 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?
J

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.

January 18, 2013

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?

Read more about using QuickBooks to serve a niche or specialty practice – Not-For-Profit and Retail
Read more about the pressure on accounting professionals to deliver more value and intelligence to their client businesses

January 14, 2013October 28, 2015

Re-defining the role of the accountant, or going back to the good old days?

I grew up in a small town in Oregon where my parents ran a “business accounting office”. Many of the businesses in and around town were my dad’s clients, and we all got to know each other pretty well. Dad, you see, wasn’t simply the accountant, and the people working for him weren’t just bookkeepers. Dad was the business advisor, purchasing negotiator, collections agent, and anything else the client needed that he could provide. He fought for lower worker’s compensation insurance rates, got better prices on truck tires, and in general helped his clients with just about every aspect of running their businesses, including getting more customers and managing growth.

I had always believed that this approach, a consultative approach where the professional was intimately familiar with the business and proactively worked from inside the organization, was what all accounting professionals did. This proved to not necessarily be the case. Over the years, I have found that many accounting professionals focus primarily on the historic reporting of activities in the business, rather than actively helping to improve client business operations and performance on a daily basis.

According to one source, describing the differences between a CFO and an accountant: “CFOs are focused on working inside the business helping it generate wealth – ensuring proper capitalization, fostering the right banking relationships, addressing compliance issues – focusing on the company as a whole. Often CPAs tend to be more focused on specific tasks. Is the year-end audit done? Is the tax return done? …While both are vital to a business, a distinction we see is that the CPA’s dominant focus is historical – looking back to prepare tax returns and financial statements. The CFO, though, needs to be a forward-looking, integral part of the management team”.

It has become a reality that many accounting professionals are somewhat disconnected from their clients, a result perhaps of removing themselves from daily bookkeeping and other tasks. Recognizing the disconnect, many firms are now taking steps towards rebuilding those intimate client relationships by offering services which address more operational and strategic aspects of the business. These firms are offering “CFO Services” to their clients in addition to the standard offerings of financial statement and tax preparation. They have recognized the need become closer to the client business, delving deeper into the intricacies of the operation in order to find areas where improvements may be made and necessary controls instituted.

Accounting professionals seeking to increase the value of the services offered to clients should give strong consideration to what the client recognizes as valuable. Historic reporting is necessary, but finding ways to fund budgets, controlling expenses, helping to guide cash investments and taking steps to improve profitability are how a consultative accounting professional delivers real value to the client, building up the basis for long-lived and mutually beneficial business relationships like the ones my father once built.

Make Sense?

Joanie Mann Bunny Feet J

Small Business Owner to Accountant: Make Accounting Valuable to ME

January 7, 2013August 9, 2013

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?

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

December 13, 2012March 26, 2019

Small Business Owner to Accountant: Make Accounting Valuable to ME

Accounting services should be useful to a business owner, providing valuable insight into the business performance and activity. Accounting professionals believe their services have value, but find it difficult to express that value when selling their services to prospective clients.

The problem is that most professional accounting firms believe that what they sell is accounting: accounting services, tax preparation, audits, etc. While this may be the essential list of functions they perform on behalf of business clients, accounting, per se, is not what the professional should be selling – at least, not if they want business owners to buy.

You see, accounting is dumb and boring – a necessary evil of doing business for most business owners. Accounting is what happens to paperwork at the end of the month. Business owners don’t want to know about accounting. They want to be able to sleep at night. Business owners want to be able to know what they need to do to keep the business moving along. They don’t want to have to check the bank account balance every morning. Business owners simply want to know what they need to do to get the results they’re looking to achieve.

Accounting professionals – don’t talk to your clients about how great your accounting is, or about debits and credits. They don’t know and don’t want to know. Good accounting is expected from you; it isn’t a selling feature. Talk to your clients about the picture the data paints about their business, and about how you can help them to meet their needs and help them achieve their goals. That’s a value proposition that says something.

Make Sense?

Joanie Mann Bunny Feet J

*Note: this short article is the result of a recent conversation with my good friend and a consummate professional, Penny Breslin of MoneyPenny LLC. Penny and I both work with a lot of accounting professionals and the “song remains the same” no matter where we look. Accounting pros continue to be challenged in communicating the value of their services to business clients, and it’s all because they continue to talk about accounting (thinking anyone cares). Go figure.

An Educated Guess is Not a Crystal Ball – Forecasting the Future

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Why is asset management important to a business?

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QuickBooks Niche Practice Specialties:

Tools for Accountants Working With Contractors

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Re-defining the role of the accountant, or going back to the good old days?

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Dashboard Reporting Tools: Gauging Accounting Relevance

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