Updated: Jan 8
As a CPA that specialises in small business profit and cash flow improvement, I find that business owners often struggle with improving their profits and cash flow.
Business owners will in most instances, engage a Tax Accountant to do their taxes and typically, tax accountants deal with the past. That is, what has happened, not what is likely to happen and that’s because they're so busy complying with all the requirements of the Tax Office, most just don't have time to do any more than that. Their task ends up being to complete the financial accounts from the information that you've provided and fill in the forms for tax and compliance purposes.
Has your tax accountant ever sat you down and said,
"Right, I'll show you the key numbers in your business that we can fine-tune, to give you an extra $20,000 to $50,000 in profit and cash flow.
If he/she did, there's a good chance that climb right over the desk, grab him or her by the scruff of the neck and scream, "Would I what!"
So, where do you find the information that will help you direct your business to better cash flow and profitability?
Is the answer to get more or better reports from your accounting system? Well, that may help you see what's happened recently, but it may not help you change or adjust what will happen in future months!
What is most important is to understand what numbers really ‘drive’ the results. If you can fully appreciate what numbers ‘drive’ the results, then you can adjust the ‘numbers’ to achieve a desired, much better outcome, before and not after you've had a less than satisfactory result.
Believe it or not, you could inject thousands of dollars into your bank account without borrowing money from the bank by making relatively small improvements to these keys numbers.
For illustration purposes, I’ve used an example of a business that had the following 8 key numbers:
No. of sales opportunities 5200
No. of actual sales made 1560
Average Transaction Value $320.51
Variable Cost of Each Sale $224.36
Overhead Expenses $100,000
Average outstanding customer payment days 44
Average outstanding supplier payment days 42
Average stock turnover days 26
It is important to note that only one of these key numbers appeared on that business's most recent set of financials received from their accountant. Overhead Expenses of $100,000
This small business had sales of just on $500,000 and was making a profit of $50,000 (numbers have been rounded) but like most owners I speak with, they wanted to be making more money for all of their time and effort that they put into their business.
I showed the owners that by simply being able to improve each of the above numbers by just 2% or 2 days, the following improvements to both cash flow and profit could be made.
Net Profit Increase $33,696
Cash Flow Increase $32,617
You can see how a very small change in each of these numbers can collectively have an extremely positive impact on the business bank account, as well as profit.
An important point to note (and it shouldn't be overlooked), is the added bonus of implementing these types of improvements. Increasing profit can also have a positive impact on the value of your business should you decide to sell at some point in the future.
Do you know your key numbers?
Do you know how to improve them?
How much are you missing out on?
"I can find any small business a minimum of $10,000 additional profit in just 45 minutes."
Request a complimentary strategy session and put me to the test.