Understanding your numbers

Understanding your numbers?  If you are using an accounting package alone, then it is very difficult to understand much about your business.

Why?   Because traditional accounting packages, even those in the cloud, only really report on what has happened.  They simply tally numbers and throw them into columns.  Too many just accept this and continue under the mistaken belief that clumps of numbers for this year and last year is all there is to know. 

Far from it.

Any trend could start and/or stop and you wouldn’t know what the impact was.  Nor would you be in a position to do something about it. 

Trends only become clear when you look at performance ratios, solvency ratios and other KPIs (key performance indicators).  We actively use such reports with our clients.

But we do more than that.

We also use other unique software which:-

  1. Identifies issues from a high level look.

  2. Predicts the outcome of changing drivers of those weakened area.

In the last week, this tool has enabled us to discuss a matters with our clients such as:-

  • A price increase of 4.65% was required to get back to last year’s trading profit.

  • How many customers would have to be lost for a 10% price increase and yet still make the same profit (*).

  • That a $136,453 increase in sales only added $50,346 to trading profit at last year’s trading margin.  See the image below to see the graph and introductory commentary.

  • In retail where sales are harder to find, that a 1% reduction in overheads was going to save $2,853.

  • That savings overheads of $2,853 would equate to extra sales of $9,086 (at last year’s margin).

  • We separately quantified and discussed the effect of not achieving last year’s margin.

  • For customers paying on average one day early, $2,918 would be added to the bank balance. We also discussed ways to achieve this.

  • For a new client. Setting the cost of goods section correctly in their accounting ledger so they actually know what they make form each sale.

(*) This is the most stunning tool I have ever used with clients.  Time and time it both removes fear of the unknown (in this case losing customers) and the conviction to make key changes to the business.

We also presented clients a one page action plan of the steps and the outcome from achieving them.  We will catch up every month by Zoom or Skype to monitor and discuss their progress.

If your accountant just drops a set of financials and Tax Returns on your lap and says sign here, then consider what the cost to you of that myopic service is.

Not understanding your numbers?  We would welcome the opportunity to discuss your business and the ways in which we can help you.  The meeting will be free of cost or obligation, so you have nothing to lose (as against staying where you are).

 

At MRS, we will spend today planning for your success.