Business Owners: 5 Key Accounting Questions to Ask Yourself

By Tim Moore, EO Houston member and managing partner, TR Moore & Company, a Doeren Mayhew Firm

Most businesses could benefit greatly from having a CFO on staff, but for some, there isn’t enough work for this function to be full time, and it may not be a cost effective option. Whether you have a CFO, rely on an outside resource or manage the function yourself, there are some key accounting questions you should be asking in order to run your business by the numbers:

1. Are you getting timely financial information? You should be reviewing sales data, expense information, daily or weekly flash reports or dashboards, and financial statements on a consistent basis. This hindsight view of your financials can provide meaningful data to help you correct problems or capitalize on opportunities. And daily or weekly reports can provide indicators of how your business is doing during the month. If you aren’t reviewing this information on a consistent and timely basis, you could be repeating poor practices over a period of time or continuing to lose out on opportunities.

2. Are you getting any forward-looking information? Data that can provide you with valuable foresight includes:

• Sales numbers, which can reveal delays in manufacturing or service, management issues that need to be corrected or adjustments that need to be made to ensure profitability.
• Orders in the pipeline or backlog, which show if you have enough orders to reach your revenue goals.
• Cash-flow forecasts, which can help you predict if a cash-crunch is likely and determine how purchases should be financed or whether you will need to draw on a line of credit.

3. Are you looking at trends? Monitoring areas such as bank ratios, fixed expenses, margins and collections can help you to identify problems before they become significant issues, benchmark against your history and easily see the impact of seasonality. Additionally, the reporting graphs used for trending are easy to read, making it feasible for others in the company to make use of the information.

4. Who’s answering your high-level questions? Examples include:

• I’m thinking of adding a new business line; what impact will this have on my business’ numbers?
• If I bring on a large account at a lower margin than my typical, can I make money on it or not?
• Is it time to replace my equipment, and should I buy or lease?
• Am I making profit returns consistent with my industry?

These types of questions can give you insight you may have overlooked and help you plan financially for changes and decisions before you make them.

5. Do you have effective oversight and backup on key functions? Employees should be cross-trained on tasks such as paying bills, running payroll, handling deposits and billing customers. Additionally, it’s a good idea to have some controller-level backup. Having these areas sufficiently covered will help to ensure you continue to receive timely financial information and meet bank deadlines. In addition, if these tasks fall behind due to turnover, it could take you 30 to 60 days to get a new employee up to speed

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