Auckland Accountant – Managing The Bottom Line For Business Success

Few people go into business to become financial managers yet that is one of the most important skills to have in business.  Even if you personally do not have the skills, then your business must have tools and reports in place to manage the finances.  Simply, if you don’t keep track of how much money you’re making, you have no idea whether your business is successful or not. You can’t tell how well your marketing is working.  That does not just mean you should know the amount of your total sales or gross revenue. You need to know what your net profit is. An Auckland accountant can help.

If you want your business to be successful, you need to make a month-by-month financial plan and check your progress against the actual results on a monthly basis, then take immediate action to correct any problems. It is much easier to make changes 11 months from the year end than two months.

Here are a few examples of actions you can take according to an Auckland Accountant.

1. Develop an annual forecast of sales, costs, profit and most importantly, your projected cash-flow. Unless you know how much cash you expect to have in the bank on a monthly basis, you do not know if you can afford to pay your staff, suppliers and other bills.

2. Be prepared for losses. It is inevitable in some areas as you will never be 100% accurate in your forecasts and assumptions.  But, by having regular reports, you can take action quickly.  So if one campaign or product does not sell as well as you had hoped, you can take immediate action to stop or improve.  Quick action gives you more time to make up the short-falls.

3. Once time has passed, it never comes back and it is the same with profits. If your profit was lower than forecast for a month, you cannot reclaim it. Stay on top of your profit figures.

4. Make adjustments right away. If revenues are lower than expected, boost your marketing and sales effectiveness. That does not simply mean throw more money at marketing but make it work better. If your overheads are too high, make cuts in expenditure or negotiate better rates with suppliers.

5. Even if you have plenty of cash, be rigorous in assessing your spending. Once you have spent cash, you cannot get it back for a more profitable use. Think before you spend. When considering any new business expense, including marketing and sales activities, evaluate the increased earnings you expect to bring in against its cost before you make a purchase.

6. Measure your business based on profit, not revenue. It can be easy to increase sales by discounting prices, giving extended credit and a variety of other tactics that reduce your profit. Your revenue is to a large extent irrelevant. And there are many examples of business making far more profit with lower total revenues than competitors. If you costs are similar or even higher than your income, then life can be very tough. Business history is littered with examples of companies selling millions of dollars worth of goods but they go bust because they did not control their expenditure.

If you are unsure about how to set up or manage these different financial management tools, then contact your accountant who will be happy to help you.  For more information, find an Auckland accountant.