I like to think of myself as an anti-accountant. Instead of just dutifully checking boxes on tax to-do lists, I’m constantly peeking into the rest of my clients’ processes and actions and offering plenty of advice for how to achieve real financial certainty. For most of my clients, early on it can be a challenge to think more holistically about their finances. But as they begin working through the issues, they discover it makes for a stronger and more clear path to financial security.
A good rule of thumb for companies is to spend 2-5% of revenues on your tax and accounting support. (My company, Nth Degree CPAs, is always looking for efficient ways to keep costs down.) One of the biggest financial challenges growing companies face is making the leap that spending more money, when done strategically, can result in a long-term increase in cash flow.
But most companies remain stuck thinking of accounting in the simplest of terms: let’s do basic bookkeeping and call an accountant once a year… sometime in early April (thanks for that, by the way). At best, they’re spotting financial hiccups or issues with their finances throughout the year and thinking they’ll fix them later, maybe at tax time or at year-end. And worse yet: some companies, when they do see issues with their accounting, often think pushing through and working harder will net more profits and your
We recently started working with an e-commerce platform about six months ago. At the time, they were grossing around $600,000/month in revenues and seeing 8% profit margins — and their main goal was to be in compliance with various taxing jurisdictions. When we dug into our Roadmap process with them, we realized what they really meant was that they didn’t want tax/accounting/finance to distract them from their business. Our Roadmap takes a holistic view of the entire organization, not just financial security, to give everybody a clear picture of where an organization’s strengths and opportunities lie — and establishes a plan for hitting goals, staying healthy, and growing efficiently. We completed our process and discovered a ton of opportunities to optimize processes and systems, as well as their tax structure and accounting methods. Today, they’re hitting $1,500,000/month in revenues and 33% margins.
See, when you know you don’t know something it can become a distraction that takes your energies away from what you really want to do. This client could have trucked along and been okay with weaker processes and profits. But, ultimately, by bringing in an accounting partner that really paid attention to their whole business, they were able to improve not only their accounting, but also see ways to improve everything from how they were pricing products to how they ran social media campaigns — ultimately, allowing them to drive more traffic and sell higher margin products.
Here’s the thing: when it comes to flaws in your accounting processes, you can’t afford to ignore them. You can’t afford to settle for just being compliant when what you really need is streamlining.
So when you meet with your accountant next time, be sure to ask them the bigger questions, beyond tax issues. Ask them about your processes. Ask them to find the flaws before they become real problems. And task them with making sure you don’t ignore any of them. At Nth Degree, my team is constantly looking out for the financial security and the long-term holistic health of a company — making sure they’re not ignoring big problems that can turn into even bigger ones. It’s not your traditional accounting approach, but we — and our clients — like it that way.