5 Reasons why quarterly goals can benefit your business

5 Reasons why quarterly goals can benefit your business

How did a 33-year-old recruiter from Silicon Valley compete in the halfpipe skiing event in the winter Olympics despite having none of the experience, training, or talent of an Olympic athlete? Because people who set goals are more successful.

Elizabeth Swaney had a clear objective: competing in the Winter Games. Through short-term goals and creating actionable to-dos, Swaney was able to reach her target and accomplish her end goal.

So, if goal-setting is the key to making people more successful (and turning average athletes into Olympians), shouldn’t the same logic apply to businesses and their employees?

Yes, as long as that list of goals is more than just a list: goals must be clear to everyone in an organization and include a plan of action that aligns with the business’ annual (or overall) goals.

Here are 5 reasons why setting strategic, quarterly goals is not only important but beneficial to your business’s productivity and success:

Quarterly business goals increase accountability

Setting measurable quarterly goals helps increase accountability and encourages departments and teams to put processes in place to support the achievement of those goals. Each department within the company should have attainable quarterly goals accompanied by a clear plan of action that helps them meet those goals.

Quarterly business goals require metrics to be relevant

Using the metrics of your quarterly goals to make strategic business decisions helps ensure that your company is being responsive to what is working and proactive about making changes where adjustments are needed. Your team will also be able to use the data to change and update existing goals, measure success, and show the lasting impact each member has on the company’s overall vision.

Achieving business success requires managing people and understanding how the metrics of those people’s performance support your company’s overall objectives. Long-term goals continually evolve throughout the life of the company, and short-term goals need clear metrics to be effective.

Quarterly business goals help maintain sustainable growth

Quarterly business goals encourage sustainable growth by setting measurable checkpoints throughout the year. For example, business owners may set goals to add new customers each month while retaining current customers or to increase sales in a specific vertical in order to reach their quarterly business goals.

To achieve sustainable growth, your leadership team needs goals that keep them focused on the critical processes that build success. Creating quarterly goals ensures that productivity, growth, expenses, and processes don’t go unaddressed in the hustle and bustle of running a business.

Quarterly business goals increase employee performance

Setting quarterly goals help employees prioritize their tasks throughout the year and allows managers to track progress within their teams. Creating quarterly goals also gives managers better visibility into each of their employee’s performance and overall productivity. Individuals who can see the results of their efforts are more likely to continue to perform at a high level and be increasingly accountable, productive, and engaged.

Setting realistic, short-term business goals helps employees along their path of professional development. For example, quarterly employee bonuses or incentive-based programs are tied to quarterly business goals and will increase their motivation to perform at a higher level. These goals can be anything from surpassing a quarterly sales goal to reducing departmental expenses. As long as the goal is specific, measurable, and attainable, it can supercharge productivity. Acknowledging employees who consistently meet their goals inspires future goal aspirations and creates a culture of celebrating success from within. In turn, this will also boost employee engagement and increase loyalty.

Quarterly business goals help everyone visualize the big picture

Setting quarterly goals helps make those bigger, longer-term goals feel attainable not only for the leadership team but for everyone on the team. Everyone from leadership to managers to employees are more apt to achieve success when they have a clear understanding of how their goals help drive the success of the company.

Signature Analytics provides the kind of high-level business advisory services that can help you set financial goals that support your company’s overall business objectives. If you need assistance creating or improving the accurate financial visibility needed to achieve success and drive your business objectives, contact us today to talk to an expert.

Controller vs CFO: 3 Key Differences

Controller vs CFO: 3 Key Differences

The CFO’s and controller’s roles are closely adjacent to each other. In many businesses that have grown quickly, these roles may be poorly delineated. Controllers can be found tasked with doing the forward-facing strategic work of a CFO, and CFOs can be saddled with the day-to-day operational accounting oversight work of a Controller. Though the CFO and the Controller work closely together, they have significantly different roles and responsibilities within a company. In this article, we outline key differences such as strategic versus tactical, executive versus director, and we take a look at the tasks and responsibilities that come with each.

CFO vs Controller: Strategic vs. Tactical

The CFO is the strategic financial leader, pushing an organization forward and advising key stakeholders about important business decisions.

The controller ensures that the day-to-day operational functions of the accounting department are being accomplished to the highest standards.

When a CFO and controller are at their best, they are working in tandem, supported by staff accountants and rigorous finance and accounting processes.

Strategic planning is at the core of the Chief Financial Officer’s role in a business. A CFO is able to look at the historical and operational data, identify potential upcoming risks to the business, and make appropriate decisions to mitigate those risks. Once the CFO has identified potential threats, it is the role of the controller to implement tactics to prepare for those eventualities by strengthening the company’s accounting processes and procedures.

How CFOs Support CEOs:

CFOs are often the financial and data insights engine supporting CEOs’ ideas.  By presenting data to support the newest initiatives, together, CFOs and CEOs can make a compelling case for new directions and ideas to move the business forward.

CFOs develop efficient and effective strategies to increase profit margins, employee productivity, and cost savings, measuring results against the company’s goals and, finally, reporting the data back to the C-Suite.

With a strong relationship between CEO, CFO, controller, and accounting staff, there can be company-wide accountability, productivity and profitability.

Read More: The benefits of CFO-level business guidance.

Daily Responsibilities of a Controller:

Although both CFO and controller roles oversee the financial aspects of the company, they have very different day-to-day responsibilities. Here’s a look at the difference between the two:

A controller has four tiers of accountability, each with its own set of responsibilities. These include:

Management

  • Implementing and maintaining accounting procedures, processes, and policies
  • Supervising all accounting department operations
  • Overseeing control of accounting within subsidiary companies

Transactions

  • Maintaining an up-to-date data storage system
  • Ensuring accounts payable and receivable are on time
  • Ensuring payroll is on time
  • Supervising bank reconciliations
  • Keeping an updated chart of accounts

Reporting

  • Preparing relevant and timely financial reports
  • Preparing the company’s annual budget and annual report
  • Suggesting ways to improve company performance
  • Generating and reporting financial operating metrics
  • Reporting budget variances to management
  • Generating financial analysis for management decisions

Compliance

  • Monitoring debts and compliance
  • Providing information to external auditors
  • Providing financial information for tax filing

The Daily Responsibilities of a CFO

A CFO is less directly involved in the financial department’s day-to-day operations than the controller. The two tiers of accountability that a CFO has are:

Financial Strategy and Forecasting

  • Reviewing and comparing the company’s past and present financial data
  • Generating forecasts for the company’s financial future
  • Reporting on where the company is most financially efficient and where improvements can be made
  • Predicting future scenarios and analyzing the best direction for the company’s success

Treasury Responsibilities

  • Deciding the best ways for the company to invest money
  • Analyzing and overseeing the company’s capital structure
  • Determining the best options regarding debt and equity

Read More: What Should Small and Mid-size Businesses Expect From Their CFO?

Hierarchy: Director vs. Executive

The accounting department may be missing critical opportunities if there is no one in the role of the controller. Not only that, but the CFO may be working overtime to get all the information they need to make accurate decisions. Likewise, without a CFO, the larger fiscal picture may get lost, and the company may not have an accurate forecast of future financial health and growth opportunities.

The combined efforts of the CFO and the controller can help your company realize your CEO’s vision.

Does Your Company Need a Controller or a CFO?

If you’re struggling to decide whether your company needs a controller, a CFO, or both, here are some things to consider:

Controller


You may consider hiring a controller if:

  • Your company is growing rapidly, and you require accounting records based on Generally Accepted Accounting Principles (GAAP)
  • Your accountant can’t keep up with all the financial data
  • You need to develop a budget and cash flow forecast
  • You need financial management reporting

CFO


You may want to consider hiring a CFO if:

  • You need more than just accounting records
  • You’re in a transition stage, such as going through a merger, acquisition, or industry-shift
  • You need financial forecasts for your company
  • You need someone to help you make decisions on investments

Outsourcing your business’s accounting and financial advisory roles: 

At Signature Analytics, we can work with your existing team to lead or support with controller guidance, accounting, and transactional support or CFO-level business advisory services. 

Outsourcing allows businesses to gain insight, structure, and improved processes at a scalable rate. Contact Signature Analytics today to find out how we can help you optimize your company’s financial future.

Your Guide To Financial Modeling And Scenario Planning

Your Guide To Financial Modeling And Scenario Planning

Strong leaders are always thinking about the future. Forward-thinking is an essential part of business leadership to guide your employees and steer your company in the right direction.

In uncertain times, it is important to understand many different outcomes that could take place. Trying to build a model based on multiple possible outcomes is challenging.  You may find that you need help.

Finance and accounting leaders within an organization frequently need assistance predicting their cash needs, drawing a mental picture of potential profitability, and learning how to make better data-based decisions for the company.

To plan for the future effectively, a leader must develop a financial model whose aim is to forecast a business’s results over a set time frame.

Read More: Financial Tips From Successful Leaders

Given the current environment, we recommend creating a nine-month cash flow forecast to support your business through whatever comes your way.

We recommend keeping three possible business scenarios in mind:

  1. Your original plan
  2. A probable case based on current data
  3. The worst case

To help you, we suggest brushing up on those Excel skills to create more elaborate and complex financial models. These models will enable you to modify assumptions giving you the ability to see the outcomes immediately. If you are not an Excel guru, don’t worry, even a simple financial model will provide you with better insights into your business.

3 Scenarios And What They Tell You

  • The original plan scenario should be your current strategic business plan and budget for the year. If you do not have a budget, you can create this model, as outlined below. This scenario acts as the baseline for the other two scenarios.
  • The probable case scenario is what you expect to happen based on current information. For some businesses, this could mean growth, and for others, it may mean a reduction in revenue.
  • The worst-case scenario should depict what the business would look like if revenues drop, are delayed, and/or unforeseen expenses occur. This scenario reflects the most serious or severe outcome. In this scenario, forecasting in this way is critical, so preparations can be made to ensure the business can still operate under adverse circumstances.

Read More: How to Develop a Strategic Financial Plan for Your Business

Original Plan Scenario

The best approach to building these scenarios is to start with the original plan. Your original plan scenario should be the easiest to forecast, and you might already have it if you created a strategic business budget for the year ahead. The numbers used in the original business plan will act as the baseline for creating the other two scenarios.

A quick way to get started building the financial model is to calculate a monthly average of the last 12 months for each expense category. At Signature Analytics, we recommend companies break down their expenses into categories or buckets to understand their business expenses better.

Once you have that data, use this average as the baseline amount for each expense account. Then ask yourself, is this baseline still a reasonable estimate to help forecast for the next nine months?

Depending on your income channels, revenue can be forecasted using the 12-month average. If you have more accurate data, then, by all means, use it. For both revenues and expenses, look back at the same months in the previous year to see if any seasonal patterns or trends should be reflected in the forecast and make adjustments where necessary.

Lastly, if you never created a strategic business plan and budget for the year, there’s no time like the present to get that started, so you are not flying blind over the next several months.

Read more: Download our Strategic Budgeting eGuide

Probable Case Scenario

Once the Original Plan has been created, determine what percentages (these would be increases or decreases) of revenue and expenses should be applied.

Manual adjustments can be made to any of the monthly numbers based on knowing future activities within the business. Think through possible disruptions to your employees, your supply chain, and your clients.

Worst Case Scenario

The final scenario is weighing in the negative impact of disruptions to your employees, your supply chain, and your clients. You might approach this as a broad decrease in revenue (15%, 25%, or even higher) to understand how that would affect your business and your liquidity.

Scenario planning should bring to light any warning signs that can trigger major strategic pivots to decrease a company’s risk.

One other helpful tool in scenario planning is to utilize storytelling. The Wall Street Journal reports that “data-driven stories enable a team to picture the various futures the organization might face; strong narratives challenge conventional wisdom and management’s assumptions, but should be logical and plausible.”

Remember, forecasts by nature are not factual; but, having the ability to use available forecasts to develop scenarios can provide some relief.

Final Thoughts: 

Simple scenario analysis allows you, as the business leader, to work through the assumptions and influences that directly affect your business. This creative and focused thought process can support you in times of high stress when making thoughtful, yet data-driven decisions for your business beyond that “gut feeling.”

If you need help with creating different financial models to support various scenarios, Signature Analytics has a full staff of CFOs and accounting experts to support you and your business. When you are ready, contact us to get started.

Analyzing Employee Utilization Rates to Drive Profitability for Professional Services Firms

Analyzing Employee Utilization Rates to Drive Profitability for Professional Services Firms

How utilized are your employees? What percent of their time is being spent working on projects that are not billable to the client? How much is that costing your company in productive capacity? If you do not know the answer to these questions, you could be missing out on potential revenue benefits.

For service-based organizations, analyzing employee utilization is imperative. Knowing where and how employees are spending their time enables professional services firms to:

  • Appropriately set their rates
  • Properly assess how much to invoice clients accounts
  • Decide what to pay their employees
  • Determine if they are over or understaffed

Calculating Employee Utilization Rates

The resource utilization rate is a balanced relationship between billable hours and working hours available and is a key metric of employee productivity.

For example, if there are 168 eligible working hours in the month of May and Penny spends 100.80 hours on billable client projects then Penny’s utilization rate is 60%.

Billable Hours / Eligible Working Hours = Utilization Rate

Now let’s say that Penny’s annual salary is $50,000, or $4,167 per month. In the month of May, she spends the remaining 40% of her productivity time on business development efforts (10%) and general and administrative (G&A) tasks (30%). That would mean the company is paying Penny $1,250 in May to work on non-revenue generating processes.

Monthly Salary x Time Spent on G&A (%) = Employee Cost

If this general and administrative time is benefiting the company then it may be worthwhile. Otherwise, this time could be used for other work, clients, or spent attending networking and other events to help grow the productive capacity of the business.

If Penny were to increase her utilization from 60% to 80%, her general and administrative employee cost would decrease to $417 per month – increasing efficiencies AND generating additional revenue.

Improving Employee Utilization Increases Profitability

From a revenue perspective, let’s assume that clients are billed at an hourly rate of $150. At 60% utilization the company is making $15,120 in May; however, 80% utilization would bring in $20,160, or $5,040 of additional revenue. Furthermore, if you have 5 employees who can each increase their employee utilization rate from 60% to 80%, you could generate an additional $25,020 of revenue per month.

Higher Utilization = Increased Profitability

Using Utilization Rates to Guide Business Decisions, A Case Study

Earlier this year, Signature Analytics was hired by a professional services firm in San Diego to provide outsourced accounting services. In addition to performing monthly accounting maintenance and bookkeeping services (preparing financial statements, balance sheets, income statements, cash flow statements, etc.), we put together a Utilization Summary Report so the client would have visibility into their employee utilization rates month over month.

The metrics report revealed that in the month of January the company’s average utilization rate for billable employees was 60% resulting in a $95k loss for the month. In February, average utilization was 63% indicating a consistent low utilization rate for the company. To show how utilization rates impacted the bottom line, we also compiled an “if-then” summary report which revealed that increasing average utilization to 75% would generate a profit of $130k for the month.

Using this utilization percentage information, the company decided to make personnel changes in the month of March that would increase their profitability. This included letting go of an underperforming non-billable sales associate. They also replaced a billable-time employee with consistently low utilization with a new billable employee whose skills capacity could be better utilized by the company. Additionally, the firm set personal billable utilization goals for every employee to help encourage the staff to improve productivity and maximize billable projects and hours.

Following the changes, average employee utilization increased to 76%, resulting in a profit increase of $230k for the month of March.

Read another case study: Unknown employee utilization causing unknown or inaccurate client profitability.

Improve Your Firm’s Utilization

At Signature Analytics, we have helped several professional services firms use utilization rates to make key strategic decisions that drive profitability. Preparing utilization summary reports and “if-then” analyses are one way we enable our clients to visualize the effect of increased utilization rates. We are also able to show the company key metrics for unbilled general & administrative time by applying utilization rates to salaries and separating these wages on the financial statements. Furthermore, we have helped clients implement time tracking systems – which is the first step in determining utilization rates – and assisted with the development of company policies to ensure time is accurately entered by employees.

Want to learn more about using utilization rates to drive profitability for your firm? Contact us for a free consultation.

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Do you know your numbers?

10 Tips to Help Improve Your Company’s Cash Flow

10 Tips to Help Improve Your Company’s Cash Flow

As a business owner, you run the risk of bankruptcy if you’re not on top of cash flow management. A full 82 percent of business failures are caused by poor cash management, according to a US Bank study.

So, is it easy enough to bring in more money than your business is spending? Although it sounds simple in theory, having a positive cash flow encompasses much more than profitability. Even if your company is currently profitable, it is still at risk for negative cash flow. One common example of this is if you have obligations for future payments that you cannot meet because you’ve mistimed incoming funds.

By maximizing your company’s cash flow, you can help your company receive profits faster, meet targets in a shorter time frame, and lower your operating expenses. Wondering how to improve cash flow in your small business? These 10 tips can help you improve cash flow for your company.

1. Anticipate and Plan for Future Cash Needs

Keeping accurate, timely, and relevant (ART) accounting records allows you to build a forecast for your business based on historical results. At the very least, businesses should be reviewing their cash flow monthly.

Being proactive with your cash flow enables you to forecast your anticipated funds and help prepare for historically painful periods or seasonal trends.

For example, if you find that you are anticipating a future need for extra cash, you may want to start talking to lenders about a bridge loan to help pave the way for future financing. Similarly, if you can anticipate large expenses ahead of payout, you’ll be able to plan your other obligations accordingly to avoid cash flow surprises.

2. Improve your Accounts Receivable

By actively managing your accounts receivable, you can stay on top of outstanding invoices and decrease the time it takes to get paid.

One way you can do this is by encouraging customers to pay early. For example, if your payment terms are net 30 days, consider offering a slight discount for customers paying net 10 days.

Are you currently waiting for checks to arrive? Offering a variety of payment options will make it as easy as possible for a customer to pay you, such as ACH or credit card payments. While these options may come with processing fees, getting money faster is better for your business if cash flow is tight and eliminates time & labor spent on collection. These options can help prevent you from stacking up credit card debt to cover expenses.

3. Manage your Accounts Payable Process

Establishing and organizing your accounts payable process will be essential to improving your company’s cash flow. If your accounting department doesn’t already use software to help manage your accounts, it is a good idea to invest in one. Next, you should communicate with your team which invoices are most important so they can be paid first. Remember, do not let unpaid invoices slip through the cracks.

Another tip? Try to get to know your vendors and extend payment terms as long as possible. Most vendors will ask businesses for net 30, but once you build up a positive relationship, they may be more inclined to offer net 45 or net 60. After all, the longer you have to pay, the more time you have to get money in. You can use a simple payment agreement template to help you when creating your financial contracts.

4. Put Idle Cash to Work 

Another way to improve business cash flow is by putting idle cash to work. Your idle cash is money that is not earning any income.

Chances are if you have large balances sitting in non-interest-bearing accounts, you can find a better place for them to live. You could consider moving them to an interest-bearing account that may earn .5% or 1% APY. Another option is to invest the money in expanding your business, use it to decrease your debts and lower your interest payments, invest in new technology, or prepay some expenses.

Read more: 5 barriers of growth every company hits and how you can break through them

5. Utilize a Sweep Account

Most commercial banks offer a sweep account, a type of account to help maximize earnings on your income by automatically transferring money from your business checking account to your savings account. The sweeps happen at the close of business each day, and you can set the amount, typically in $500 increments.

Should your checking account dip below your minimum requirement, the funds will be automatically transferred back into your checking account to cover the outlay. This risk-free option makes it easy to build your savings for a rainy day or your next major investment.

6. Utilize Cheap and/or Free Financing Options

If you are looking to invest in your company through low to medium-cost purchases such as upgrading your computer system, buying new furniture, or replacing your company vehicles, you should take advantage of financing options that have low or no interest for the initial period of the loan.

Using this strategy for a business loan will help you save money by cushioning the cash hit to your business. If you pay off the full loan upfront before the interest rates kick in, you will save even more, therefore, making the most of your investment.

7. Control Access to Bank Accounts

To maintain positive cash flow, it is crucial to protect your assets. The best way to eliminate fraud and unauthorized use of your company bank accounts is to make sure the proper safeguards are in place.

Common safeguards include keeping the number of people who can access these accounts to a minimum, securing your IT infrastructure, frequently updating passwords, protecting your credit and debit card information and bank accounts, and using a dedicated computer for banking.

8. Outsource Certain Business Functions

It’s not necessary to hire full-time employees for every business function. You should evaluate your business needs and identify areas where it may be more cost-effective to outsource. IT management, human resources, accounting, payroll, and marketing are all functions that could be outsourced.

There are many firms, including Signature Analytics, that specialize in providing experienced professionals to handle specific business functions and manage cash flow issues. Outsourcing can save your business money, offers a flexible staffing model during the ebbs and flows of your business cycle, and it can also increase your efficiency.

9. Renegotiate Existing Service Contracts

Another tip to increase business cash flow is to review service plans and contracts regularly. Start by looking at your internet, phone bills, copiers, software support, and janitorial/building maintenance contracts to pinpoint opportunities to save.

Improved technologies and increased market competition have driven prices down on many services, so it’s worth taking the time to shop around for a better deal.

10. Maintain a Weekly Rolling Cash Forecast

A rolling cash forecast is a good practice for improving cash flow overall. You don’t need expensive programs to do this; Excel will easily allow you to project a weekly rolling cash forecast. You should include all estimated inflows, such as customer receipts, and outflows, such as vendor payments and payroll. Record this data on a weekly basis at least.

Your rolling cash forecast will help you plan staffing needs, commit to new vendors, and ensure funds will always be available to make payroll and vendor payments. As a bonus, your forecasting will help you estimate and understand your company’s sales cycle.

Read More: The Top 5 Financial Reports Every Business Owner Should Review

How Signature Analytics Can Help Your Company 

By implementing these strategies when managing cash flow, you will quickly get the upper hand on your company’s finances and learn how to increase cash flow within your business — so you will soon reap the benefits.

At Signature Analytics, we have a team of expert accounting and financial professionals including accountants, controllers, financial analysts, and CFOs; all dedicated to providing the best level of service at a price that makes sense for your business.

For additional assistance with cash flow management, developing detailed financial projections, or identifying capital requirements, contact Signature Analytics today for a free consultation.

When Should You Consider Outsourcing Your Accounting Operations?

When Should You Consider Outsourcing Your Accounting Operations?

  • Do you spend late nights and weekends struggling to keep up with your company’s accounting records? Or worse, does this time intervene with the time spent running the operations of your business?
  • Are you unable to assess the profitability of your business or perhaps have difficulty understanding the cash requirements for the next 60, 90, or 365 days?
  • Do you feel your margins could be improved but aren’t sure how to evaluate them when looking at your financial statements?
  • Would some assistance in projecting your business operations over the next few years help you establish priorities with your employees?

If you answered yes to any of these questions, then you are in good company. Many business owners and executives feel the same way and there are ways you can get the support you need to move your business ahead.

Free Download: Discover how outsourced accounting can provide more visibility into your business

The first step is acknowledging that, although operations are the most key aspect of any business, accurate financial information is vital to making important business decisions. Having visibility into cash flow and knowing where your margins can be improved will enable you to take your company to the next level.

Now the next step is determining if hiring a full-time accounting resource to get your company’s financials in order makes sense from a cost and expertise standpoint.

  • Is there enough work for a full-time accountant? For many companies, a 40-hour a week accountant would be in excess of the time required to perform the basic accounting functions they may need, e.g., monthly close process, issuing invoices, entering and paying bills, performing payroll, etc.
  • Is there too much work for your current full-time resource? And are you asking them to do things beyond or below their skill set? This is a very common occurrence with any role in a growing business. This is a lose-lose situation for everyone involved and can lead to internal turnover.
  • What level of experience will they need to have – CFO, controller, staff accountant? If you are not in a position to support the costs of more than one accounting resource, will you hire a CFO and then over-pay them to do basic staff-level accounting? Alternatively, you could hire a staff accountant and task them with CFO responsibilities; however, both of these options can cost your company significantly and lead to ineffective decision-making.

If your company needs the resources of a complete accounting team but is not in a position to support the costs and management time of that entire, full-time team, then outsourcing your accounting functions is a very viable, flexible, and turn-key option for your business. 

Read more: 3 Ways Outsourcing Accounting Can Improve Your Business

Outsourced accounting companies such as Signature Analytics provide you with flexibility in terms of the number of hours of service to receive, provide a higher level of experience through oversight by more senior-level individuals, and ensure efficient service by experienced accountants (staff accountants through CFO level expertise). The accounting teams at outsourced accounting companies work with multiple clients so they have identified time-saving methods that allow them to complete challenging tasks in significantly less time than a typical bookkeeper.

In addition to acting as the financial arm of your business by providing the resources of a highly experienced accounting department on an outsourced basis, there are a number of other situations in which hiring an outsourced accounting company to handle your financial information might make sense for your business:

Preparing for a financial statement audit or review

Many business owners believe that a financial statement audit is a healthy process for their business and provides confidence to their investors in the financial information; however, most do not realize the resource drain that an audit can have on their business due to the significant number of requests for supporting information and the technical accounting expertise which must be applied to the financial statements. Due to independence restrictions, audit firms cannot assist in performing the accounting functions at the companies they audit and therefore must rely on management to determine proper accounting rules. These issues tend to cause significant overrun bills from the audit firm due to the inefficiencies experienced and can be extremely costly for a business. Engaging an outsourced accounting company can provide management with the peace of mind that they have a team of accounting experts – most of which have previous experience performing audits – that understand what audit firms are asking for and know how to produce that information in a timely manner.

Investors requesting financial projections

Investors love to see what the future of their capital will produce so that they can assist in both financial and operational decisions; however, many business owners do not have the expertise to prepare financial projections and therefore may provide information at a level not detailed enough for the purpose or may be missing significant costs which need to be considered. Outsourced accounting firms that provide support with cash flow management and projections have CFO-level experts who are experienced in understanding a business operation in a very timely fashion and can translate such information into the future potential results of the organization.[gap height=”10″]

Missing out on potential tax savings

When a tax provider receives your financial information they may not search into all of the accounts to find tax deductions. If transactions have been classified to incorrect accounts, tax preparers may not be aware of their existence and therefore not consider simple deductions. A simple example would be meals & entertainment expenses, often a deductible expense, in which some transactions may end up recorded in office expense categories or supplies or miscellaneous. Unless the tax preparer knows that such expenses may be improperly classified, the deduction will go unreported resulting in higher income tax. An outsourced accounting company can organize accounting information and work directly with tax professionals to help identify as many tax savings as possible.

Looking for capital investment from financial institutions

Perhaps you have a capital requirement in the near future and plan to approach different financial institutions. Providing financial information with obvious errors, inconsistencies, or lack of organization could severely impact your ability to raise capital as it may be challenging for the lenders to truly understand the results of the business without transparent financial information. When hiring an outsourced accounting company, you can be confident that the financial statements are timely and accurate. Furthermore, they will provide you with a high-level financial resource that can assist in preparing analyses of the financial information in a professional manner making the lender proposal process less arduous. These statements may be used as a resource to assist in conversations with those providing capital assistance to ensure a complete understanding of the business’s results of operations.

Free Download: Discover how outsourced accounting can provide more visibility into your business

If you think your company could benefit from outsourcing your accounting services, contact Signature Analytics for a free consultation.

 


 

Discover how outsourced accounting can provide more visibility into your business