Spencer Sheinin, an Entrepreneurs' Organization (EO) member in Vancouver, Canada, is a CPA, speaker and founder and CEO of Shift Financial Insights, provider of simple accounting solutions and financial insights for growing businesses. As a serial entrepreneur who understands the bookkeeping challenges of entrepreneurs, we asked Spencer which specific accounting data business owners must know about their companies. Here's what he shared.
If January is for establishing New Year's resolutions, February is for implementing the strategies and intentions that will make 2019 your best year ever. What's in store for your business? Let's hope it's a year of closing big business deals, skyrocketing sales, better systems and processes, excellent team morale and dialed-in accounting.
Wait?what??how did accounting get on that list?
For many business owners, accounting is about as much fun as getting a cavity filled. Though you know you need to do it, you continuously avoid it by finding other "more important" things to do (like alphabetizing business cards collected at your last trade show).
Here's the thing?not getting your financial house in order is literally costing you money. Imagine how many more empowered decisions you'll be able to make about your business when you have your finances organized. You could transform your company with the insights you gain.
Tony Robbins says that the quality of your life is determined by the quality of the questions you ask. His idea resonates strongly with me, and is one that also applies to cleaning up your books.
You can remove most of the pain of accounting by getting answers to the right, simple questions from your accounting team, whether they're in-house or outsourced.
Unsure if you're asking the right, high-quality questions? Start with these:
1. Am I making money? Specifically, am I both profitable and cash-flow positive at the level I expect to be?
While this may be an obvious first question, the crux is to determine whether you're making money in an ongoing and sustainable way, or if your profit (or loss) is the result of one good (or bad) month.
2. Where am I making money? What aspects of the business are doing well?
The goal here is to gain clarity on what is going well so you can keep doing it and even do more of it. You need to understand which customers, projects or product lines are generating the most profit, which costs are under control and which are spiraling, and whether your growth is healthy and sustainable or is costing far too much money.
3. Where am I not making money? What area of the business is causing problems?
Time to zero in on areas in your business that are struggling. Are your costs out of control? Are you not generating enough sales, or are you generating the wrong kind of sales?
4. What can I do about it?
Once you've got solid answers to the first three questions, the critical follow-ups become easier to figure out.
- If you have a low profit margin, ask, "What can we do to improve our margin by five percent?"
- If your costs are out of control, ask, "How do we reduce overhead costs?or labor costs, material costs, whatever costs?by three percent?"
Rather than getting caught up analyzing detailed accounting reports, bring it back to the high-level information you need to run the business: Task your accounting team with calculating that information and explaining it to you in an easily understandable way.
I get it. Many entrepreneurs don't have their books in order enough to answer these questions or, worse, don't have the financial support they need to get answers. If that's the case, then your first question needs to be:
5. What action do I need to take to get my books in order to answer the critical questions?