5 resolutions for better accounting
Sometimes it’s the little things that make a big difference. While many business owners find accounting to be a chore and a necessary evil, making some micro-resolutions can result in a huge difference in your ability to run your business effectively.
Micro-resolution: a commitment to small changes in behaviour that produces immediate and observable benefit
Here are five micro-resolutions that could make the difference for you.
Resolution 1: Turn your monthly management accounts around quickly
Getting your monthly management accounts completed within four days of month end means you can make better and more relevant decisions based on that data.
A typical scenario might be getting your month-end accounts, say, 10 days after month end. While you may receive some resistance from your bookkeeper in relation to turning this around in less than half the time, rest assured it is possible.
So what would need to change so that it was possible?
- All invoicing would need to be done on time. This requires a commitment from the sales team to get the information in ASAP.
- You may need to speak to your suppliers to get them to send their invoices earlier.
- Your bookkeeper or accounts person will need uninterrupted time in the first three days of the month to make this happen.
- You’ll need accurate stocktake records on the 1st of each month.
There may be other processes you need to alter. The key to turning your management accounts around more quickly is to base it around the exact inputs you use for pulling the account together and then making the changes.
Resolution 2: Understand the numbers
Today’s accounting systems are so powerful that there’s a temptation to believe that as a business owner, you have all the information you need when you run your month end reports. The problem is, you might have all of the numbers, but if I asked you to explain what they meant, could you do that?
A recent survey concluded that the number one issue for SMEs was understanding and interpreting their numbers. It’s a strong point worthy of serious consideration.
If you are not a numbers person, seek some assistance in this area. Your accountant could be a huge help. They live in numbers land and can provide an external perspective that you might find invaluable. Have a conversation with them about how they can help you understand your numbers so that you can make better management decisions. It could be one of the best investments you make in your business.
Resolution 3: Do monthly stocktakes
This won’t apply to all businesses, and if you don’t carry stock, you can skip to point 4.
If your business does hold stock, there is no point having wonderful accounting systems if you don’t carry out monthly stocktakes. Depending on the level of stock held at month end, your gross profit percentage could be inaccurate without an accurate stock figure.
So make this powerful resolution: mandate a monthly stocktake on the last day of each month. That way, if your margins are fluctuating, you won’t be able to dismiss the variances by saying ‘it’s probably the stock movement’ and you’ll be forced to identify the real reasons for the unexplained ups and downs.
Resolution 4: Implement approval processes
Too many businesses suffer because there are no approval processes or systems. They rely way too much on trust, and unfortunately, even if you think you’re running a family environment in your business and you trust your team implicitly, the temptation to push things a little too far can be too much for some people.
A couple of areas where you could resolve to tighten up your processes are:
- Expense claims: What are your travel policies? Do your team members understand them? Is there a process for obtaining approval before reimbursements are made?
- Discounts: Do you have a maximum level of discount that you are prepared to offer to secure a sale? Many businesses do not, and where that’s the case, it’s not uncommon for discounts of 15 or 20 percent to be applied. Some salespeople, by their nature, will do anything to get a sale. For a business with $1 million in revenue averaging 15 percent discounts, if you reduced it to just 12 percent by implementing a maximum discount policy, there is $30,000 to your bottom line right there.
(In case you’re worried that some sales would not close, in reality, it would be rare for a 12 percent versus 15 percent discount to make any difference in the volume of sales closed.)
Resolution 5: Use MYOB add-ons
If you’ve not already moved to MYOB’s cloud solution, then I seriously recommend that you do so. You’ll find you have much more flexibility to access and share your accounting file.
As an added benefit, you’ll be able to access a rapidly developing ecosystem in the MYOB Add-On environment. Add-ons are typically cloud based applications that connect to your accounting system, allowing you to connect your numbers to systems that give you even more power to run your business effectively. Browse through what’s available for your industry or type of business to find a solution that makes that big difference you’ve been seeking in your business.
Making a commitment to a few micro-resolutions can have a major impact. You might not do all five of these things, but I challenge you to choose one or two, make that commitment, implement quickly and measure the results. Best of luck with it.