£100,000+ added to this client’s bottom line (Part 2): How proactive accounting could help grow your business

What return do you currently get from the investments you make:

🔍 In your accounting process? and

🔍 To work with your accountant?

Imagine if your return on investment was at least £100,000.

When you think of your accounting, you might think that identifying where you could reduce your tax liability is a good enough return on investment in that department.

But that’s just scratching the surface.

A £100,000+ return on investment:

With one of our clients, for example, we have helped them to add at least £100,000 to their bottom line because of our proactive approach to accounting, finance and tax.

In a previous article, we outlined the 3 simple steps for how we helped them achieve that, so you can learn from that process.

🔍 In this article, we are going to identify simple tips for you to implement into your accounting and finance process to help you understand your finances better…

…So that you can grow your business 📈 

Learn from how we have helped this client and others:

➡️ What is your break-even point?

When we initially spoke to this client, which operates in the automotive industry, they did not have clarity about how much they needed to sell to keep the doors open.

By analysing the investments they were making in salaries, rent and other overheads, we were able to help them understand their break-even point, so they knew how many sales they needed each month. 

It’s also important to keep track of this regularly as circumstances change.

That might include:

🎯 Before you hire new team members, because that adds to your bottom line in terms of National Insurance, pension contributions & salaries etc, and

🎯 Fluctuating costs, sometimes because of things outside of your control like inflation, and at other times it might mean you shop around or renegotiate with your suppliers

➡️ It’s likely to be a leaking bucket, not a gaping hole:

With most of our clients, we have noticed that it tends to be lots of little things that happen that impact your financials, not necessarily something big.

Think of a leaking bucket. 

When there are a couple of tiny holes, the water will only drip out, and you would not notice the impact on the water level in the bucket. With a big hole, you would notice it much quicker.

It’s the same with your finances. 

How closely are you, or your accountant, monitoring your financials to spot and deal with the small things before they get worse?

If you are looking to have a greater understanding of your business finances so you can grow, download our free ebook by clicking here now.

➡️ Drill into the detail, but in a simple way:

Another area we were able to help this client was by drilling into the detail and running a departmental analysis. 

By understanding the financials in each of the departments within the business, it gave them clarity about where they could: 

🔍 Make changes to improve efficiency and 

🔍 Invest to grow their business further.

As an example, the rise in inflation and the war in Ukraine over recent years has impacted the cost of parts. 

By having a view of their numbers, this client was able to react to those increasing costs and implement a strategy to mitigate those issues.

➡️ Knowledge is power:

Businesses make mistakes. We all do. And there will always be things that can impact your business.

The key is being able to either see these challenges coming or to realise they have happened, quickly.

Without that understanding of your numbers, and knowing where you are from a financial standpoint, it makes it hard for you to react.

➡️ Be proactive with that knowledge:

It’s also important to bear in mind that knowledge is only power in the moment or just after it- it’s not power in 6 months time when you get your statutory accounts and a tax bill.

Having a proactive approach to your finances allows you to act quickly when you need to, and allows you to make informed decisions, so that you have an increased likelihood of achieving your goals.

➡️ How quickly are you being paid?

An example of that knowledge is understanding your ‘debtor days’. How quickly are you being paid?

Having a report, for example, which compares how quickly you were being paid last year to this year, will help you identify and deal with issues.

This is important, because you only need one situation where things get a little bit tight, your clients pay you a little bit later than usual, and you are due to pay a large supplier, to cause you financial stress.

➡️ Having the right people in your corner:

In every area of your business and life, having the right people in your corner will help you to make the best decisions.

Whether that’s your accountant, lawyer, HR consultant or another area, you need trusted advisors that you feel comfortable with.

When we speak to business owners about their finances, we often find that they feel uncomfortable asking their existing accountant questions, sometimes because they do not want to feel stupid.

🙏 If that is you, you need to know that you are not stupid. Everyone has their area of expertise, and when we do not understand something it should be easy to ask questions.

As we do with all of our clients, from the beginning of our working relationship with this client, we sought to make things simple, and ensure this business owner felt comfortable asking us questions.

On a scale of 1-10 (where 1 is ‘not at all’ and 10 is ‘very comfortable’) how comfortable do you feel asking your existing accountant questions about your finances? 

If you are looking to have a greater understanding of your business finances so you can grow, download our free ebook by clicking here now.

What results can you expect from implementing a proactive accounting process?

1️⃣ A return on investment:

Both our team and our client estimate that more than £100,000 has been added to their bottom line, as a direct result of their more proactive accounting process.

Now of course no one can guarantee a result like this, but a proactive accounting process and a proactive accountant should provide you with a positive return on investment. 

That could be financial growth, time savings, or a reduction in stress levels. Ultimately, all three of these will help business growth too.

2️⃣ Rely on data- not only on gut feeling

By empowering this business owner with relevant information and reporting, he was able to move away from making decisions based only on gut feeling, and could decide based on the data.

As an example, when a manager left the business, he was able to identify whether they needed to be replaced in that specific department or whether it would be more financially viable to restructure the existing team without replacing the manager.

We helped him do this by looking at the margins of both departments to see what would work for the business, both financially and for the team.

Another example was when they introduced a new service in the business. 

Rather than having to rely solely on gut feeling, the data told them that while the service was a low initial investment for the customer, the potential upsells from it made it a viable new service.

Based on their interactions with customers, they had the idea to launch the new service. 

They ran an initial test for that service, and when we were reviewing the financial results of that test, and the upsells that came from it, the numbers backed up their idea.

3️⃣ A focus on data-driven growth

Working closely with the team throughout the year, including providing them with regular financial reports, has also helped them to understand their numbers more.

Having access to that simple reporting means they are naturally more inquisitive about what the different numbers mean, and how they could make even small improvements throughout the year.

When your financials are complex, you are naturally less interested in them, but when they are explained in plain English- not accounting jargon- it’s more likely that you will want to engage in conversations about what they mean and how you could improve them.

And by understanding your numbers better, you are more likely to achieve the goals you set out for your business.

You are also able to make more informed decisions, like where to invest in the business so you can continue growing. 

4️⃣ Time savings:

By relying on the data, and less on gut feeling, the owner of this business is now able to be on-site a lot less, and he’s able to delegate more responsibility to his team- who are also able to use the data to make decisions.

This means the owner has been able to reallocate his time to the areas he wants to focus on, and can spend more time working on the business rather than in it.

We estimate that the owner has got back at least half of his working week because of the systems and processes that the business now has in place.

🔍 What would you do with the added time if you could focus more on growth than firefighting all the time?

SJO Accountants was founded by Sara Otley in 2008, and with expansion, our team now has more than 6 decades of experience in the accounting and finance industry.

We primarily help business owners with at least 5 team members to understand their finances better so they can grow their business, by implementing a proactive approach to accounting, finance & tax. 

To start having a greater understanding of your business finances so you can grow, download our free ebook by clicking here now.