3 Things to Talk to Your Accountant About Today

We hear about collaboration in business often these days. Collaboration can take on different forms. You can collaborate with fellow employees across various departments in the same company, or with people and organizations external to your own.

As a small business owner, you probably don’t have an internal accounting department, so you use an external bookkeeper to keep your books and records. Your bookkeeper probably does a pretty good job at processing your accounting transactions, but you benefit when transactions are processed, interpreted, and discussed promptly.

You should see how your numbers are tracking against your business financial goals. To do this, you need an accountant who will work with you to understand your business and the numbers behind the company. Unfortunately, processing transactions doesn’t facilitate this understanding or discussion.

When you’re are ready to move beyond the processing and are committed to working on growing your business, you should look to an accountant to help gain further insight from the numbers.

3 Things To Discuss

Once you’ve decided to move beyond the processing of transactions, there are three things you should discuss with your accountant now. Note that not one topic matter is about taxes. While taxes are essential, they are over-emphasized in small-business.

1. ASK ABOUT THE CASH FLOW STATEMENT

Unless your business is sitting on enough cash, so you don’t have to make another sale for the next seven years, you need to worry about money.

Ask your accountant why the cash flow statement is more important than your profit and loss statement and have your accountant include the cash flow statement with your monthly financial statements.

The cash flow statement tells you where your money is coming from or going to in three broad buckets: operations, investing, and financing. You should focus on cash flows from operations; this number tells you if you’re making money running your business, which is necessary to be successful.

2. Cash Forecast

Once you understand whether your operations are generating cash or not, you'll need to have a tool to help you predict where the money will come from and, where it will go. You’ll need to forecast your cash position weekly or even daily depending on your cash reserves.

To forecast anything, you need to make assumptions and have a deeper understanding of the business, operating environment, and internal and external factors affecting cash. You can’t forecast when you are only processing transactions because you have no deep understanding of the numbers behind the business.

3. Create a Plan to Increase Cash

Knowing about cash from operations (cash flow statement) and predicting the cash inflow and outflow (cash forecast) is a good start to figuring out where you can improve your cash position. You should brainstorm with your accountant on how to improve the cash inflow.

Here are some of the questions that you should explore the following when developing a plan with your accountant:

  1. What is the turn on accounts receivable / accounts payable?

  2. Can the turn on accounts receivable be improved / accounts payable?

  3. How can the turn on accounts receivable / accounts payable be improved?

These sample questions are just one of many ways that you should be collaborating with your accountant on a regular basis. This type of collaboration can’t be done when your relationship with your accountant or bookkeeper is purely a transactional relationship.