Monday, November 15, 2010

Managing the Bottom Line with your accountant

Accounts, Bookkeeping and Payroll can be a burden to small business. This new series of blogs from Nottingham Accounting Solutions aims at making Accounts, Bookkeeping and Payroll a little clearer.

Managing the Bottom Line with your accountant

If you don't keep track of how much money you're making, you have no idea whether your business is successful or not. You can't tell how well your marketing is working. And I don't just mean you should know the amount of your total sales or gross revenue. You need to know what your net profit is. If you don't, there's no way you can know how to increase it.

If you want your business to be successful, you need to make a financial plan and check it against the facts on a monthly basis, then take immediate action to correct any problems. If you have monthly Management Accounts produced by your accountant then this will help you to be aware of any changes in the business, allowing you to make timely changes.

So, here are the steps you should take:

* Create a financial plan for your business. Estimate how much revenue you expect to bring in each month, and project what your expenses will be. Ensure your accountant produces Management Accounts for you on a regular basis – say monthly.

* Remember that lost profits can't be recovered. When entrepreneurs compare their projections to reality and find earnings too low or expenses too high, they often conclude, "I'll make it up later." The problem is that you really can't make it up later: every month profits are too low is a month that is gone forever.

* Read your Management Accounts (you would be surprised how many business owners don’t do this) and make adjustments right away. If revenues are lower than expected, increase efforts in sales and marketing or look for ways to increase your rates. If overhead costs are too high, find ways to cut back. There are other businesses like yours around. What is their secret for operating profitably?

* Think before you spend. When considering any new business expense, including marketing and sales activities, evaluate the increased earnings you expect to bring in against its cost before you proceed to make a purchase.

* Evaluate the success of your business based on profit, not revenue. There is an old adage that says “Turnover is Vanity, Profit is Sanity”. It doesn't matter how many thousands of dollars you are bringing in each month if your expenses are almost as high, or higher. Many high-revenue businesses have gone under for this very reason -- don't be one of them.

Nottingham Accounting Solutions Ltd offer accounts, bookkeeping and payroll services in the Nottingham, Mansfield and Sutton in Ashfield area as well as Sage sales, set-up and 1 - to - 1 training on Sage accounts and Sage payroll. So why not take a look at