As a Small/Medium business owner, your immediate reaction is to start screening (and sometimes screaming) outside of your company for cash. You are on the lookout for friends and family investments, borrowing, bank overdrafts, bank loans, capital increase, or a private placement…
Look no more, the money is often within your company’s operation.
Solution 3 of 3 – A well-funded accounting department can help you uncover the most profitable sectors of your business and control your cash flow.
Are you investing sufficiently in your accounting department? Do you have the proper infrastructure and systems to track your accounting data for better decision making?
Through your accounting system you can perform trend analysis and get early warnings for cash issues. A well run accounting system will produce periodic cash flow statements, and provide for accurate cash tracking.
Most importantly, a good accounting system allows you to analyse your business in waterfall graphs. Waterfall graphs are views of your revenues, gross margins, and cash flow by category, such as product, customer, location, sales channel, etc.
Through these graphs you will understand what your true levers of revenue and profitability are, and get rid of non-profitable categories. Some managers might argue towards keeping these categories for “strategic reasons”. One way is to move these “strategic” categories to marketing expenses and keep only the high-growth, profit-making categories within your revenue line.
This in turn will drive you into zooming in on high performance, high profitable categories.
