Crunching numbers and solid bookkeeping is part of the game when you’re running a business. When you’re reviewing your financial records — whether it’s reviewing the latest report or double-checking your accountant — it can be easy to see financial problems and start looking around the rest of the spreadsheet to see if you can crunch things together to make it all better. But the numbers don’t lie: your margins really are that small, because the parts really do cost that much. Your facilities costs really are that high, and you can’t go back on your promise to your employees. Whatever the financial challenge, it may be that there’s not another way to move the numbers around on the page to make it all fit the way you’d like. When your cash flow is tight, the quick fix seems to be "cut expenses.” But that might be a myopic mindset, and sometimes cuts just aren’t viable. You have to think more holistically.
In other words: sometimes the solution isn’t in the books.
At Nth Degree CPAs, we counsel our clients to think holistically about their finances. With the goal of long-term financial certainty, we challenge business leaders to look at their profits and losses through a wider lens — one that requires a bigger point of view about how all of the business values, philosophies, and operations contribute to the bottom line.
With that in mind, here are a few notes for you to ponder the next time you take a look at your bookkeeping and start wondering if there’s a way to increase your profits by squeezing those numbers.
- Install accountability to ensure your financial goals
Whatever your financial goals are, if you’re not hitting them, it’s time to take a look at how you’re delegating, communicating, and holding everyone accountable. While “more sales”may be the need, it’s not always the best explanation for your employees, when sometimes what’s needed is a way to optimize production to increase margins.
- Be sure your policies and procedures are up to snuff
You can’t just assume your employees will take your unwritten goals and unspoken procedures and turn it all into a moneymaking machine. As tedious as it may seem to create standardized processes, clarity goes a long way to ensure that everyone on the team is on the same page and approaching decisions with the same framework. A clear sense of how you work will have an immediate impact on the profitability of your business.
- Build a communications framework for timely, digestible reporting
We advocate for short, digestible weekly metrics for the leadership team that provides info on the operational and financial health of the business. Follow that up with full financial statements 5-7 business days after month’s end, and a full report out on all company-wide goals quarterly.
We also advocate for providing digestible information across the business on a weekly and monthly basis. If you want your team to win, they need to know the game plan and how they're performing in each game. Without reporting, how can they really improve?
- Set up standardized response times to address issues
We’re big fans of company-wide financial reporting, and making your bookkeeping accessible. But in the end, it’s really only valuable if you support it with clear pathways to respond to financial issues that arise in those reports. This is really about having a game plan for when things don't work. In business, we all want to win but most days we face setbacks. So, having a game plan to address when issues arise and then how we'll act allows the business to not spend money chasing problems. You go into a game with the plays you want to run but also the contingency plans if things go sideways.
You're not making trades for new players during the game. While it’s important to know the best practices and also define who can or should own the solution, you likely won’t see the benefit from any solution if you don’t have an automatic deadline anytime an issue pops up.
I get it: hearing from your accountant is about as fun as going to the dentist. No one likes bookkeeping all that much. But it doesn’t always have to be cavities and flossing guilt. In the Nth Degree CPAs world, we think it’s more effective and better for your bottom line if you hear from us more often for fine-tuning things than stepping in for that big fix. Achieving financial certainty is faster and more effective when you have the right policies and procedures in place to make sure you and the entire team knows how to respond to a money problem with the big picture in mind. If your accountant isn’t helping you do that, I know some people who can.