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Advice from Outside the Square

Category Archives: Accounting

6 Steps To Improve Your Finance Functions

Your finance functions those functions in your business that look after your finances. They include all your book-keeping and record-keeping as well as sales and buying functions. Often small businesses leave everything to one person - a book-keeper, or perhaps the business owner "keeping the books" after hours. Yet, efficient finance functions save you money and provide all the early warning information that could move your business from also-ran to successful. Here are 7 ways to improve the performance of your finance functions. 1. Set a goal Set a goal of what you want to achieve. What do you want to be done and when by? What reports do you want to be produced and how often? Which parts need improvement and by how much? There is no point in starting to improve your finance functions without knowing what you want to do. 2. Look at all your finance functions Don't just restrict your reviews to one part. Keep an open mind and look at all finance functions to see what can be improved. For example, if you restricted your review of improvements to debtor collection, you might miss the fact that customers are paying late because the customer sign on process doesn't effectively discuss payment terms. 3. Take the...
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Setting Up Your Accounting System

While our focus is on advice to you after the accounts are prepared - on issues like your future-proof strategies, how to grow sales, making your business efficient - nevertheless we base our advisory work on numbers. So naturally we care very much how you set up your accounting systems. Whether your software or manual system, and your system around it is appropriate for you, whether the information is accurate (garbage in - garbage out), whether it is secure, whether it is efficient - all these details affect what our ongoing advice might be. Whether you are thinking of starting your first or new business, or whether you are dissatisfied with how you "keep your books" at the moment, it is important to set up your accounting system correctly. In order to help you we have prepared an extensive, free checklist on setting up your accounting system. (more…)...
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When do you start making profits?

One of the key pieces of information for any business is - what is your break-even point? This is the point of sales volume or revenue, that is required to cover all your costs, being both fixed costs as well as variable costs. At this break-even point your total profit is nil. Before you reach that break even point, you will be making losses. After that break even point, you will be making profits. In order to generate sales, you have to incur costs. You need to know how much you must sell in order to break-even. You can get our free break-even point calculator here. It is an Excel spreadsheet that you can use to calculate your break-even point. So, how do you calculate your break-even point? (more…)...
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8 Financial Ratios To Measure Your Business Performance

  As a small business owner, you work hard to make your business a success. You record your financial transactions, and whether you use your own software, or you ask your accountant to prepare them, from time to time you print a financial report and look at your business' financial performance. However, those reports, commonly your Profit & Loss and your Balance Sheet, can only tell you so much about your business. They will give you clear information about the dollars at play, but how is your business performing really, from year to year? That's why it is important to review financial ratios from time to time. Financial ratios are the relationships between key numbers in your accounts. Some financial ratios tell you about the profitability of your business. Others inform you about your liquidity, and yet others will tell you about the efficiency of your financial assets. An example of a financial ratio providing information about your profitability is your Return on Equity, or the rate of return on the investment you have made in your business. If your Return on Equity is 6% and bank interest on an equivalent investment with no risk is 2% you need to ask yourself if the extra 4...
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