Plenty of challenges will come in between your business and success. In fact, the New York Times recently identified the top ten reasons small businesses fail:
- Poor accounting
- Out-of control growth
- Inadequate demand at a profitable price
- Owners who cannot get out of the way
- Lack of cash cushion
- Operational mediocrity
- Operational inefficiencies
- Dysfunctional management
- Lack of succession planning
- A declining market
You’ll notice that there’s a recurring theme throughout each of these ten reasons for business failure: Almost all of these mistakes involve financial or accounting missteps.
This means that with just a little foresight and upfront strategic thinking, each of these problems can be significantly mitigated or avoided altogether. All it takes is an understanding of smart financial and accounting strategies for your business.
Strategy 1: Accurate and Timely Financial Reporting
Every business needs accurate and timely financial reporting. The success of your business relies on your ability to understand your business’ financial big picture. To get there, you need a reliable business accounting services. But which service or system do you implement?
With today’s technology, it’s true that many of the online accounting services on the market are easier to use than ever before. But they are still sophisticated systems; they can deliver incredibly sophisticated data – but only if you have the skills to use the system to its fullest potential.
Most businesses owners simply do not have the experience or skills needed to use these systems as they are intended to be used. You need the highest quality information in order to run your business. Therefore, we suggest accounting outsourcing solutions and virtual CFO services. A professional will put the information you need into your hands.
Strategy 2: Maximize Product Line Profitability
Successful business owners know how to exploit their opportunities. But to do this, you need to know where your business’ inefficiencies lie.
Start by looking at the mix of services and products your business offers. Ask yourself two questions:
- Do you understand the existing – and potential – profitability of each one?
- Where are you focusing your time and company resources?
It’s easy to become distracted by sales figures. And absolutely, a high-selling product or service can mean terrific things for your business. But looking at sales without understanding the profitability of each item you’re selling is misguided and will limit the potential profitability of your business.
Strategy 3: Maximize Operational Profitability
This focus on profitability doesn’t stop with your product and service lines. Manage your vendors, employees and customers with an eye on profitability and efficiency at all times, too.
You’ve heard the saying, “Numbers don’t lie?” Your CFO or accountant can point out potential performance issues ranging from operational performance to financial performance, all through the careful analysis of your business’ data.
This performance and pricing analysis can give you the information you need to successfully negotiate contracts with vendors, provide performance reviews for employees, and identify your best customers. Without this information, however, the best you can do is to make a best guess.
Strategy 4: Benchmark Your Performance
Knowing how well your business is doing is only half the battle. You also need to know what your competitors are doing, to put your results into perspective. You might be thrilled that your company is growing by 10% each year. But if your competitors are growing by 20%, you’re actually losing market share.
In fact, looking at what your competitors are doing can be an eye-opening experience. Compare your data – especially profitability KPIs like expenses as a percentage of sales, operating efficiency ratios and financial ratios – against industry benchmarks. You’ll quickly identify areas that could improve your cash flow and your profits.
Strategy 5: Create a Sounding Board
Business decisions that are created in a vacuum are seldom good decisions. Whether you’re trying to increase sales or reduce costs, these decisions can and should be analyzed before you make them to determine their impact on your profitability. You need a reliable and readily accessible sounding board to help you identify and assess your options and ensure that the strategic decisions you make are sound and well-thought-out.
Your CFO or accountant can act as this sounding board for you. In fact, many times a good CFO or accountant will identify areas of opportunities and risk before you even know about them.
Call us at 630-780-1042 or email firstname.lastname@example.org for more information.
Optimas Financial & Accounting Solutions’ (http://www.optimasllc.com) mission is to give business leaders the timely, accurate financial and operating information they need to manage and grow their business. Optimas provides outsourced accounting departments and virtual CFO services to small businesses. Our clients gain access to resources previously available only to large businesses, all at a cost that fits a small business’ budget. From bookkeeping to CFO services, whether the need is one hour a week or every day of the week, our clients are growing and reaching their strategic goals with the help of Optimas.
5 Strategies for Business Success