by Jennifer Mailhes, CPA, Consulting Partner, TR Moore & Company
Most companies could benefit greatly from having a CFO on staff, but for some closely held businesses, there isn’t enough work for this function to be full time, and it usually isn’t a cost effective option. Regardless of whether you do or don’t have a CFO, there are five key accounting questions you should be asking yourself:
- Are you getting timely financial information? You should be reviewing sales data, expense information, daily or weekly flash reports or dashboards, and financial statements on a consistent basis. This hindsight view of your financials can give you meaningful data to help you correct problems or capitalize on opportunities. And daily or weekly reports can provide indicators of how your business is doing during the month. If you aren’t reviewing this information on a consistent and timely basis, you could be repeating poor practices over a period of time or continuing to lose out on opportunities.
- Are you getting any forward-looking information? Data that can provide you with valuable foresight includes:
- Sales numbers — These can reveal delays in manufacturing or service, management issues that need to be corrected in order to hit your numbers or adjustments that need to be made to ensure profitability.
- Orders in the pipeline or backlog — This will show if you have enough orders to hit your revenue goals.
- Cash-flow forecasts — These can help you predict if a cash-crunch is likely and determine how purchases should be financed, whether you will need to draw on a line of credit, etc.
- Are you looking at trends? Monitoring areas such as bank ratios, fixed expenses, margins and collections can help you to identify problems before they become significant issues, benchmark against your history and easily see the impact of seasonality. Additionally, the reporting graphs used for trending are easy to read, making it easier for others in the company to make use of the information.
- Who’s answering your high-level questions? Whether addressed by your CFO or an outside resource, the following types of questions can give you insight you may have overlooked and help you plan financially for changes and decisions before you make them:
- I’m thinking of adding a new business line; what impact will this have on my business’ numbers?
- If I bring on a large account at a lower margin than my typical, can I make money on it or not?
- Is it time to replace my equipment, and should I buy or lease?
- Am I making profit returns consistent with my industry?
- Do you have effective oversight and backup on key functions? Employees should be cross-trained on tasks such as paying bills, running payroll, handling deposits and billing customers. Additionally, it’s a good idea to have some controller-level backup. Having these areas sufficiently covered will help to ensure you continue to receive timely financial information and meet bank deadlines. In addition, if these tasks fall behind due to turnover, it could take you 30 to 60 days to get a new employee up to speed.
As the Consulting Partner at Doeren Mayhew firm TR Moore & Company, Jennifer Mailhes guides Houston business owners and their management teams in areas such as strategic planning, accounting analysis and CFO support, and business advisory services. For more information, contact us.
