Savvy Business Owners Invest in Financial Expertise to Ensure Profitability

By: Valerie Briley, CPA, Founder & Chief Business Driver, Reveal Business Solutions

Small businesses owners often assume a variety of duties and responsibilities for things outside their area of expertise, sometimes because they think it’s easy enough to do yourself or sometimes because they don’t think they can afford to pay someone else. As your business grows, however, there comes a time when that approach becomes counter-productive, particularly when it involves managing your business finances. Eventually you can reach a tipping point where not investing in financial expertise runs the risk of slower growth and reduced profits. Savvy business owners are willing to spend money to make sure they have good financial data that will guide better decision-making.

How Do You Know if Your Project Is Profitable?

To explain, I’ll tell you about the owner of a small construction company who came to us with a problem he couldn’t quite put his finger on. Based on the number of projects he was working on, he felt the company should be doing better financially than it was, but cash flow was tighter than ever. The owner admitted he didn’t have a good grasp of accounting principles and he found the industry jargon off-putting. He was good at math and used to be able to keep track of all the finances in his head, but the business had gotten too complex for that. He loved his work but felt he wasn’t equipped to deal with this side of his business, and it was stressing him out.

Our team began by conducting a diagnostic review of their existing financial records, including the chart of accounts. We found that the business operated on a cash basis system, which was useful for the tax accountant, but didn’t align revenue and expenses. Consequently, it was hard for the owner to know what the actual net income was each month. We also found the chart of accounts wasn’t set up to provide actionable managerial based reporting.

After scoping out the situation, we proceeded to clean up past transactions and then automate systems so there’d be good data going forward. Equipped with accurate data, we could measure profitability by matching revenue and expenses. Now the financial statements reflected what was happening in the business operationally, and the reports started to make sense. The owner could see he’d been losing money on some of the jobs. We also did some analysis of costs. Now he had the necessary information and guidance to make informed decisions. As a result, profits went up.

The owner and his team now have a much clearer picture of the finances and they spend less time on accounting procedures. As the business continues to grow, they’ll have an easier time scaling because they have a system to provide timely, accurate financial data to guide their decisions.

How Do You Explain a Financial Report that Doesn’t Make Sense?

While most of our clients are small business owners, we recently helped the executive director of a nonprofit who was struggling with financial updates he was required to give the board of directors every month. Even though the executive director was passionate about the nonprofit’s mission, he dreaded the monthly meetings because he didn’t have good financials to give them. When board members asked questions, he didn’t have good answers. He said monthly meetings just made him feel stupid.

The nonprofit was on a tight budget, so we provided what we call “Clean Up & Coaching” services. As the name suggests, we cleaned up old transactions in their chart of accounts, set up a system that was accurate and efficient, and trained the nonprofit’s bookkeeper on how to maintain the system. For the executive director, the results were transformative. He loves going to the monthly board meetings, feels confident about what he’s presenting and has intelligent answers for all the board members’ questions. The organization has been able to better utilize resources to deliver the most value to their community.

Financial Expertise is a Smart Investment

Whether you need help managing growth, maintaining profits, or simply need guidance to make better business decisions, investing in financial expertise is worth it. If you’d like to learn more about how Reveal’s team of CPAs can help your business, schedule a discovery call today. Find out how you can get the results you want and get back to focusing on the work you enjoy.