You’ll have heard this before from many accountants and bookkeepers – hire me and we’ll help you grow your business! You are probably thinking how on earth can a bookkeeper or an accountant help me grow my business? And if the majority of the online ads (on all social media sites) are to be believed, growth is only possible by throwing all your money into digital marketing – so why on earth would you worry about your financial accounts?

For all businesses, small or large, your financials are the backbone and if you are not tracking your accounts on (at least) a monthly basis, in at least a similar level of details as you are your online ads and SEO performance, then, believe it or not, you really are missing opportunities to grow your business.

There are 3 key financial statements – your Balance Sheet, your Cash Flow Statement and your Profit & Loss (P&L) but, sadly, not all of the answers you need to grow your business are obvious in these 3 reports alone.

Not that we’re dismissing these reports as they are the foundation point to getting the right answers and, before we go into what you really need to achieve the promised growth, let’s start by looking at what information you should be getting from these – at a very high level:

  1. The Balance Sheet gives you a “snapshot” of your company’s financial position at a specific point in time showing what your business owns as well as what you owe to others along with the value of your investment in your business. If you need to secure additional funding, say from your bank or potential investors, they will pay particular detail to your balance sheet results.
  2. The Cash Flow Statement looks at the actual cash flowing in and out of the company so, for example, your revenues may look great but if your customers are not paying you then you’ll be suffering from poorer than expected cash flow. Cash is king so tracking the fact that you are consistently generating more cash income than the amount of cash going out of your business is critical.
  3. The P&L Statement details out your revenues and expenses during your financial year. All related revenue and expenses for a particular accounting period need to be matched so you have a clear view on the money you are making (or losing) during the period being reported.

NOW, here’s an important point to note – your P&L will show you your bottom line profit but, in isolation of further analysis, it will not tell you the detail of what component of your business was profitable or what area of your business is draining those profits.

So, crunch point, what do you actually need to really be able to grow. All of the above will give you a heads up over your competition that are not reviewing these financial reports and perhaps you are getting some ratio analysis on the data within these but if you are truly looking for insights that will enable business growth then you need to be covering the following as well.

1. Look Internally

Customer Analysis (though this same analysis is also valid for your Products and Services). Drill down into your customer profitability so you know exactly where your profits are coming from and those customers who are draining them, so you can focus on the right customers with the right solutions so you increase your business profitability and your competitive advantage. Armed with this level of analysis, there are 4 key things that you can put into action:

  • Once you know who your most profitable customers are, you can focus your marketing spend on winning more of them and not waste your dollars on retaining unprofitable customers. Likewise, you need to make sure you are not spending money on retaining loss making customers.
  • Based on customer profitability you can review any discounting policies you may be offering, or even consider offering, to improve your bottom line.
  • One of the key reasons that customers are unprofitable is because the cost of working with them, post sales, is out of step with the profit they have generated at the time of the sale. This can be anything from customers continually calling in with queries or, conversely, your sales people calling too frequently on customers or prospects that have limited potential to convert. Introducing online self-serve sales and service channels could be an option to eliminate the overhead time and money. And if you don’t have that level of business to justify these types of sales and service channels, explore other ways to reduce the amount of time you are having to spend on these customers.
  • Many customers fail to generate you good profits as they only place small orders but they do this regularly but the cost to your business of fulfilling the smaller orders means you are making a loss. Reviewing minimum order quantities can go a long way to keeping the cost of doing business with a customer is aligned to the amount of business they give you. Alongside this, you can also look at incentivizing your customers to change their behavior to buy less frequently but with a level of business that does mean you can generate the right level of profits for your business.
  • Profitability analysis shouldn’t be difficult to time consuming as you likely already have most of the data you need so if you are not going to this level of detail within your financial accounts then you are missing an opportunity to make decisions that will truly impact and improve your bottom line.

    2. Look Externally

    Benchmarking your business against your industry norms, or even your direct competition, will give you insights as to where you stand today and identify areas where you can improve your business performance for both growth and your bottom line – beyond those identified from your internal analysis.

    There are financial metrics – taken from the 3 key financial statements that are universally important – Profit Margin, Liquidity Ratios, Turnover Ratios such as how long it takes to collect cash from invoicing and how long it takes to pay suppliers, and others that are industry specific.

    And it’s not enough to do this just as a one-time exercise – you owe it to your business to look into this regularly.

    Comparing your business to your competition and industry peers once a year is suboptimal. Your top competition and your industry is always changing and evolving even if your business isn’t. The more frequently you can benchmark, the quicker you’ll see trends and be able to take action that improves your bottom-line.

    So, how do you go about getting the answers for growth that you need? Sadly, a recent report from NSA’s 2016-17 Income and Fees of Accountants and Tax Preparers in Public Practice Survey Report showed that CPA’s main income stream (57%) comes from tax preparation and only 6.2% of their time is spent on financial statement preparation and bookkeeping advisory services so it really is highly unlikely that you will be able to get the level of attention that you need for this type of analysis that will help you grow your business. Instead, you need Management Accounting services from companies that specialize in what you actually need.

    The rise of cloud accounting software has provided the automation required to process the key financial statements with close to minimal effort so, with the right partner, experienced in management accountancy, you can get the analysis required by outsourcing these services. Going in-house for a small business doesn’t make sense as you will incur unnecessary overheads, such as payroll expenses and employee benefits. With outsourcing, you will have access to deeper expertise, up to date insights into the latest technologies that will further automate your business processes and a partner who is committed to your success – after all, their success is completely couples with yours!

    Call us now on (310) 465 9248 or email us at to learn how to get on the growth path for your business starting today!

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AllCents Consulting, LLC,
Phone: (310) 465 9248