| As an accountant and consultant, I generally try to challenge my clients, so let me ask you a question: “What are your New Year’s resolutions for your business?”
You’re probably thinking, “It’s February. Isn’t it a little late for New Year’s resolutions?”
On the contrary; this is the perfect time, February is typically the month when most businesses have completed their books for the prior year and are getting their information ready for tax preparation (if you haven’t completed this, I have your first resolution for you). I want you to take perhaps the most important five minutes of your business year and write down a few business resolutions you will accomplish this year. I have a few that I recommend to my clients to get you started.
Understand your financials. Most business owners don’t spend enough time on the “business aspect” of their business. They feel operations are where they need to be or they evaluate the current situation by looking at their checkbook. If the checkbook shows cash, then the business is doing well; if cash is slim, then it is doing poorly and they react or over-react accordingly.
Every business owner should understand the three basic financial statements: profit and loss, balance sheet and cash flow statement. These are like report cards, reflecting on past performance. But they tell more of the story—look closer; they contain details on revenues, expenses, assets, and liabilities, along with sources and uses of cash. With this information you can extrapolate out useful ratios such as return on investment, receivable aging, profit multiples, to name but a few.
These matrixes are the compass of every business, whether understood or not. My most successful clients understand and evaluate their business metrics constantly, such as profit margin by product, total product cost, inventory turn, etc. In these economic times, reviewing your expenses to evaluate appropriateness, setting a budget and periodic evaluation are fundamental business practices.
Communicate with your accountant. It may sound cliché, but it is true: Your accountant should be viewed as a trusted advisor, providing business guidance and offering more than tax preparation services. If you view your accountant as only a tax preparer and are not engaging him or her in consulting dialog related to your business, you are wasting a valuable resource.
Generally your accountant has a deep understanding of your business and is able to offer different and objective views, so their perspective should provide valuable insight. Plus accountants are involved with other businesses and will share their experiences and knowledge with you.
Periodic meetings to discuss important business matters with your accountant are imperative. These meetings force you to focus on business, reflecting on the past, understanding the present and planning for the future. If you don’t have a good consulting relationship with your accountant, talk to them or get a new accountant.
Goals and alignment. This year set attainable measurable business goals. Items like total revenue, net profit, profit margin, head count and, maybe most important, take-home pay (net of taxes of course). What could be more important than the direction you are heading? Decide on a course of action that will help you reach your goals, assess your goals regularly against your current activity, and adjust for factors unknown at the time of goal-setting, such as the economy, capacity or other opportunities.
Once you have your goals, communicate appropriate goals to every person in your organization and make sure they understand the part they are to play; this is called alignment. Making sure every person in your organization knows, understands and executes their function as efficiently as possible should add to your success. The importance of alignment is often overlooked or worse, business owners presume that each person understands the common vision, understand how they are to implement that vision and how they impact the process. Working together in a cohesive team environment with common perspective is the foundation for a prosperous organization. Think everyone in your organization is aligned perfectly? You’re fooling yourself. Ask each person what the company mission is if you don’t believe me.
No matter what the newspaper is saying or the economy is doing, someone, somewhere is prospering. Are these people any smarter than you? Do they work harder than you? Probably not. They succeed because they take the time to step back, evaluate current and future opportunities, and focus on what will make them successful, and then make resolutions and act upon them.
So for you, starting today, become one of those people. Commit your resolutions to paper, get your management team involved (even if it’s only your spouse), call your accountant and start acting on your resolutions. You may find your business a few pounds leaner and your wallet a little heavier this time next year.
George W. Bohlé Jr. is a managing partner at Blair, Bohlé & Whitsitt, PLLC, a CPA firm that provides accounting, assurance, tax compliance and planning services, in addition to strategic planning and tax minimization strategies to privately held businesses. Contact him at 704-841-9800 or visit www.bbwpllc.com.