I would love to have a dollar for every time I have heard a small business owner say “the accountant has the numbers”, which is then normally followed by some comment like “but I think things went well last year”.
Too many businesses use their external accountant as a crutch for managing their business, rather than as resource that can add valuable insights but ultimately have “all care and no responsibility”.
Many small businesses don’t pay enough attention to the regular production of meaningful business numbers. It is hard when there are innumerable demands on the time of an owner and only so many hours in a day. Inevitably the regular review of the results is shunted down to the end of the “to do” list. In some bizarre way, the introduction of GST in Australia together with the quarterly BAS did many businesses an immense favour – they are now forced to keep the management accounts reasonably up to date.
However, most need to be better at it. A jockey does not look up at the winning post and say “great we won, that’s a surprise”; he or she is forever reviewing their horse, the other horses, the course, the distance to run and other matters throughout the whole race. Crossing the finish-line first is an outcome of these efforts.
Such is business. You cannot rely on a “set and forget” budget. You must track how you are going through the year before getting to year end. You must see what your opposition are doing and adjust accordingly. You must know what every sale makes for you – both before making the sale and after it is completed. You also must know what is happening below the gross margin – this is where all the good work in making sales is generally lost. When an administration expense is $100 over budget, no worries. When a 100 of them are all $100 over budget, good bye profits.
These can only be tracked by diligent and timely review of accurate management accounts. You have invested in an accounting system – so use it properly. And help your accountant get on with value-adding, particularly in areas like knowing what your profit for the year will be before the end of the year.
Marshall Vann – Realistic Business Solutions
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