As a small business owner, improving your bottom line and increasing your cash flow is no doubt a goal, if not a top priority. But understanding where cuts can be made and where more profit can be derived isn’t always easy, especially on one’s own. At the firm of Busch CPA, our Certified Public Accountants (CPAs) offer businesses the accounting, payroll, and tax planning and preparation services they need. Our full-service bookkeeping can help your business understand its financial picture and reach its financial goals. Here are five financial variables we recommend you review with your accountant to improve your bottom line:
1. Accounts Receivable – Assets You’re Owed
Accounts receivable, often just referred to as “receivables,” refers to the amount of money that is owed to you by customers or clients for services that you’ve performed. Unfortunately, this debt isn’t always paid when it’s owed, which can have a serious effect on a business’s cash flow. Indeed, research conducted by Fundbox found that 64 percent of businesses are affected by late payments. If clients are paying late and it’s affecting your bottom line, a discussion with your CPA about how to collect on late payments–and prevent late payments in the future–is appropriate.
2. Where Revenue Is Being Generated
A profits and loss (P&L) statement should be used to collect comprehensive data about where money is coming from and where it’s being spent. It’s important that you consider where revenue is being generated, and that you’re keeping thorough track of your gross revenue (all money received before expenses and deductions). Understanding where money is coming in–and what can be done to maximize revenue–is a key component of maximizing cash flow.
3. Where You Can Cut Costs
Equally as important as an assessment of revenue generation is a look into where you can cut costs, which is only determinable after a thorough review of your expenses. Many business owners are surprised, after a review of their expenses, to learn that they are spending a significant amount on things like utilities, supplies, insurance, or even wasted time (i.e. driving to pick up supplies when the supplier offers free delivery).
4. Cash Flow
The goal of a business isn’t just to be profitable; it’s also important that a business has enough cash on hand in order to have some flexibility when it comes to paying bills, making purchases, or handling emergency and unexpected expenses. Considering financial variables like sales, investments, operating expenses, gross revenue, and more can provide insight into how to increase cash flow and the amount of cash your business has on hand.
5. Your Break-Even Point
It’s not uncommon for businesses to be operating at a loss when they are new, which means that more is spent than is received. However, at some point, you want to reach your break-even point (where expenses and revenue are equal), and then focus on making a profit. Reaching your break-even point may be more attainable than you think, and could simply be a matter of reviewing your revenue and expenses and making adjustments in how you do business.
We’ll Review Your Financial Variables Today
Business owners must pay attention to a myriad of financial variables in order to ensure financial stability and make a profit. At Busch CPA, we are ready to review the financial variables that matter to your business and help you improve your financial picture. Please call us directly or reach out to us online for all of your bookkeeping needs.