Crunching numbers 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 promises 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 to 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's 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 books and start wondering if there's a way to increase your profits by squeezing those numbers.
1. 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 what you 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.
2. 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 them into a moneymaking machine. As tedious as it may seem to create standardized processes, clarity can go a long way when it comes to ensuring 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.
3. 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 send out a full report 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?
4. Set Up Standardized Response Times to Address Issues
We're big fans of company-wide financial reporting. But in the end, it's really only valuable if you support it with clear pathways that allow you to respond to financial issues that may be reflected 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 that helps you address issues when they arise can help you avoid spending money chasing problems. You go into a game with the plays you want to run and also contingency plans, just in case things go sideways. To help make sure any issues that arise are prioritized appropriately, it's generally a good idea to establish standardized response times. After all, even the strongest solutions can lose their effectiveness if they're not implemented at the right time.
I get it: Hearing from your accountant is about as fun as going to the dentist. But it doesn't have to always be cavities and flossing guilt. Achieving financial certainty can be 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.
For more insights by Dan Nicholson, check out his contributor page.
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