Accounting – Do You Have the Whole Picture?
In this article your certified chartered accountant considers the health of your business, via the main accounting indicators.
View from the dashboard: Do you have the whole picture?
We have so much information literally at our fingertips these days. As individuals, our days and nights are punctuated with the ping of social media updates. Businesses receive streams of layered information from news feeds, message boards and email. As a business owner you may now view your transactions on dashboards on a daily basis.
But just because it’s in front of you, are you actually taking it all in? If you’re on the go the whole time you might just be hitting the highlights. In the flood of information, you may be lulled into missing things that are important for your business.
Let’s say your income figures are running at an all-time high. Well done! Celebrate your wins! But before you break out the bubbly and book a holiday, here are some questions to run by so you can make sure business is as good as it looks from the dashboard.
What do the figures show when you take all your expenses into account? If your income has gone up have your expenses increased too?
What happens to the picture when you factor in operating costs such as rent and salaries?
If your income has increased, have your inventory/stock purchases increased for ongoing higher sales? Keep an eye on inventory levels. If you have a lot more than you need to run your business that’s when extra costs such as holding costs and write-downs may arise.
What’s your margin between revenue and cost? Has it grown, shrunk or stayed the same while your income increased?
What have you put aside?
What other costs will you need to take out of your business? You don’t want to stymie your cashflow by being unprepared for a tax bill.
What are your current debt levels and projected repayment periods? Is it possible to knock back some of your business debt? You might gain some real traction here.
What are your plans to grow the business further and your time line? What’s your wish list here? Sketch in what you think it will take in terms of investment.
If you’re living right up to your business income, you could be trading yourself into a hole. If you’re spending your income as fast as you make it, any unexpected cost or drop in sales could hit hard. And to keep your business growing, you need to fund your plans for the next step up as well as keeping business debt manageable and meeting your tax obligations.
Talk to us if you’d like another perspective on the health of your business. We can help you keep your business tuned up.
Let us help supercharge your understanding of these key business health indicators quickly and efficiently, so that you have more time to spend time getting business results. Phone today on 022 043 1199.
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