Money doesn’t buy happiness, as the adage goes. And that’s true in both personal and business finances. Companies that make a lot of revenue fail all the time. People who make a high level of income aren’t inherently happy, either.
That said, the statement on our homepage says, “We Build Better Futures.” And it’s also true, that while “money” doesn’t buy happiness, there is the potential for a better future through sound accounting practices.
This article discusses how that’s possible.
It’s About the Plan and Execution (Not the Dollar Amount)
A quote from a recent Inc.com article says, “happiness is a byproduct of action.”
So while the money may not provide satisfaction, there are several things surrounding it that do including how:
- Well you manage revenue
- Effectively you invest capital back into your business
- Well you reach goals in your business
Happiness, when it comes to accounting, are things like knowing the books are clean, cash flow is positive (and getting better), and that tax season isn’t going to be stressful. So how do you attain a better future through accounting?
Here are three actionable steps.
Step One: Set Your Goals
There are business goals and personal goals here. Both aspirations typically connect together. For example, you’d like to take more time off in the summer. Well, what things need to happen in your business to make that a reality?
- A pay increase, which means more revenue or higher profitability?
- HIring an operations manager to ensure things run smoothly when you’re away?
- Making purchases or hiring a couple of employees to ensure a big project is finished before your trip?
Strictly business goals are fine, too. Maybe you’re tired of poor cash flow or want to build up cash to develop new products and services. Or you simply want to grow your business.
The two main questions to ask yourself is, “What do I most want?” and “How does better accounting tie into my goal(s)?”
Note: Try to keep it to the 1-3 main objectives, to keep things clean. If you spread yourself too thin, you run the risk of limiting your achievements.
Step Two: Break the Goals Down to Trackable Metrics
Tracking the right metrics is where the rubber meets the road to a better future. Without seeing progress and regularly thinking about your goals, they are far less likely to come to pass.
But there are hundreds, if not thousands, of metrics, key performance indicators (KPIs), and things to keep your eye on in business. Overwhelm is easy in the game of indicators. It is vital to only track things that really propel you toward your objectives.
Take the example of improving cash flow. There are metrics that relate to it, but don’t really help you improve cash flow. Cash on hand, for instance. If it’s going up, your cash flow could be improving—but it didn’t do anything to improve it.
Instead, you should track metrics like:
- Accounts receivable (A/R): So many businesses deal with late/slow invoices. Then, the owner usually has to spend time running down late money. Putting some effort into your A/R process, by switching to digital invoicing, taking online payments, or automating your follow ups improve payments and take less time.
- Tax planning: Taking the time (up front) to plan expenses, track the right things to claim credits, and working with a professional to understand how to reduce your burden means you’ll only pay what you owe.
- Revenue/Margin per employee: Tracking metrics related to how much money you make per staff member allows you to see over and understaffing issues. People metrics work for retail, manufacturing, and service businesses.
Note: It’s good to track metrics that show progress, like cash on hand. But it’s important to differentiate between metrics that propel you toward a goal and those that prove you’re on the right track. Both are useful, when understood correctly.
Ask yourself which metrics move the needle, and which show progress. Eliminate any that don’t clearly accomplish those two things.
Step Three: Keep Good Track of What Matters
You have your goal(s) and the metrics that matter. Now it’s all about implementing a plan to improve and tracking it all to ensure you’re headed toward that better future.
Accounting takes regular practice and consistent work. It’s here, a professional partner helps you to track progress and the needle-moving metrics that help you attain your goals. The professionals at Phillips Business Group protect your profits from things like overpaying on taxes.
If you’re ready to see how we can help you on your road to a better future, schedule a consultation today.