How Good Financial Oversight Makes You Money In Your Business

Alan Cleaver via Compfight

I was reviewing a client’s year end financial reports yesterday and found $18k to add to his bottom line. IOW, the CFO financial operations and analysis work I did for him ADDED $18,000 in profit to his business.

And talk about return on investment (ROI): he DOUBLED his investment with me and this was just after our very first call!

Indeed, I have long held that cleaning up and keeping on top of your tracking and reporting increases a business’s profits. And now I have proof!

This is so great because this puts the lie to the traditional notion that accounting and finance are expenses to be kept to a bare minimum because they don’t bring in money like sales and marketing.  In other words, accounting is a “cost center” while sales is a “revenue center.”

While sales and marketing bring in money to a business (and don’t get me wrong, they should), a hefty top line isn’t the be-all and end-all.  It’s really all about how much you keep at the end of the day. 

And just as important is good recording and accounting for those expenses.  Money spent on good systems and financial oversight is an investment and adds to the bottom line.

So, as you look over your profit and loss statement (P&L) at year end, be on the lookout for any balance sheet transactions that got mistakenly applied to the P&L.  Some common ones are:

• repayments of loans,
• owner draws,
• income taxes (except if your company is a C corporation or taxed like one).

A good way to spot these is to look at year over year (YOY) reports.  That is, this year and last year side by side.  And I’m assuming here that last year’s numbers are clean.  Any discrepancies will jump right out at you.  For example, last year you had $500 in payroll taxes and this year you show $11,000.  That’s a big jump if you didn’t hire anyone so those taxes shouldn’t be going up that high.  A closer look reveals that income taxes that should have been recorded as “Owner Draw” (because you’re not a C corp) were recorded as an expense. 

This outcome is why I love what I do.  Crunching numbers is not boring or dry or dull.  It’s exciting because of what good number crunching does: it clears up confusion, promotes peace of mind and makes money!

Need some help figuring out if your books are clean?  Are you ready for the tax man?  Would you like to see how much money you might have on the table?  Let’s talk and see how getting your financial systems in shape will have a positive impact on your bottom line.