If the term “Accountancy” brings to mind images of a professional with a slack look wearing a pin-striped suit, which gives you bad news and fills you with sadness and despair, then I am grateful that you chose to take a look at this article!
Your accounts don’t only need to be an indicator of numbers telling you how much taxes you owe. They shouldn’t be filled with fear as you discover if your efforts for the past year are paying off or, worse if they haven’t!
There’s a lot of Management Accounting information that can be obtained from your company if you know the right place to look for it.
1. MEASURE Performance
Find out what drives your company’s performance, and then measure the results.
If you’re creating the actual product that you are selling, comparing the price of your product against the price you’re selling it at will reveal whether you’re running an overall profitable business. The breakdown of profits according to the type of product or market can give you better information about what type of business are most profitable for you and also how you can increase your profits in the future.
For many businesses that are service-oriented, time is the main element in the calculation of profit. The aim is to maximize the number of profits (not only income) that can be made in the most efficient way possible. Time.
Do you know the time was required to produce last month’s revenue? If not, create an assessment process to determine the time it takes to work on a client, contract, or other. And then calculate the cost of this time to determine whether it’s profitable. You might be surprised about which contracts or clients can be profitable for you and which you should steer clear of.
2. FORECAST RESULT
Imagine the future and the amount you are going to earn! Many companies operate through the week one day and the next without having a clear understanding of how much money they’re earning. It is not only about how much money they are likely to make but also the amount of cash needed in the short period to accomplish this.
Focusing your efforts on predicting the place you’ll be in six or twelve months. This will allow you to be able to prepare ahead of time and allow you enough time to make the necessary changes. Cash flow planning could indicate that now is the best time you should arrange for short-term funding so that you can invest in the stock, for instance, or resourcing to reach an even higher level of revenue. The most important thing you do not want is to be forced to deny business or, worse yet, to overtrade and be short of cash just as your business begins to expand.
3. Control your business
Utilize your management data to manage your company.
Specific management data that is regularly collected will embed an automated control system into your company. Think of the areas you need to be in control over to reduce risk and prevent the possibility of a business failure if it is not controlled.
So long as the control is within a set number of points, you’re operating in good order, and there’s no reason to be concerned about it. Only when the control is varying beyond a certain level is it a signal to initiate action. Ratios are an excellent example of internal control that can be utilized by companies to verify whether they’re functioning as they should.
e.g., To ensure that you’re able to keep cash flowing and flowing, determine the time it takes you to get money from customers.
Debtor days = Trade Debtors X 365
This will let you know how long it will take you to pay off your debt.
e.g., 2. The number of quality issues that are discovered during your manufacturing process can identify areas where your process is not working and whether the problem is growing or is stable in the course of time.
Quality is 100%. – The number of units that are defective percent
This is the percentage of products manufactured to exact quality from the beginning.
When you check your account, it should be the starting point for the improvement plan you have in mind for the future. It’s only going to improve, and that should bring a smile to your face!
If you’re an entrepreneurial business owner seeking assistance in building an income-generating business, please go to my site. I can help you with either individual consultations, managing your finances and resources, or through online training.