Money Management Is Possible - Even in Today's Economy
by AccountingWEB on
By Alexandra DeFelice
Most businesses these days are looking to cut spending. Accounting firms are in a unique position to not only help their small business clients trim the fat and manage their money, but to do the same for themselves.
Before any company can delve into strategic ways to save money, it must first set aside time to devote to money management. Even if a company is small, this step is crucial to a company's success – no other advice is more important.
"You have to be focused enough to dedicate the necessary time weekly, if not more frequently," said Robin Bell, CPA, member in Brown Smith Wallace Tax Services group. "Bill frequently, collect often, and stay on top of billing and receivables. Pay attention to it."
Set up a budget, then each month, compare the actual to the budget to see where improvements need to be made, suggests Patricia Schreiber, a New Orleans-based CPA.
And if you don't have the time, delegate.
Look at what you need to have versus what you want to have when determining cash outflow, whether for your clients or your own firm. Once you have what you need, don’t pay more for it than is necessary to effectively operate your business.
"Segregation of duties: Learn it love it. Otherwise, stuff walks out the door," says Chris Spivey, who has worked as a consultant to the accounting profession for several years.
If you're an entrepreneur with tons of action items on your plate and collections isn't your competency, refer it to someone else.
Bell's longtime retail clients, who are used to bulk-buying seasonal products, have recently experienced difficulties managing their cash flow. Instead of stocking up on the "hot trends" for the season, Bell teaches its retail clients not to purchase more than they need. That way, they don't have to spend money to house products in a warehouse. However, when retail companies do this, they also must pay attention to what their customers might need in the near future. This ensures the retailers' customers won't have to wait too long if a product is out of stock.
According to Bell, some retail companies survey their clients to gauge what they'll want to buy, or they beef up their marketing campaigns. This could put them at an advantage because most companies tend to trim their advertising and marketing dollars when times are tough. It's not a matter of spending more, it's just reallocating dollars to draw in more prospects, she said.
Do You Really Need That?
Look at what you need to have versus what you want to have when determining cash outflow, whether for your clients or your own firm, Bell said.
For example, look at telephone costs. If you've been using the same telephone provider for years, you might not think about changing vendors. But what about calling your provider to talk about your plan and whether it still makes sense given your current needs. You could also contact other providers to see what they offer.
Ask, "Do I have what I need, and am I paying for what I need versus paying more than what I need to operate my business," Bell says.
Other potential areas to trim include:
Employee benefits. Can you save money without raising premiums if you have a group of employees who are healthy? "Especially in really small companies, it's very easy to assess your pool and ask, 'If I raise my deductible, how much can I save on my premium?'," Bell said.
Mileage reimbursement. Encourage employees to travel less by visiting several clients on the same day who are based in the same area. Ask employees if they really need to fly nonstop or if they can fly on off hours or off days, Bell added.
While discussing money management is clearly a way to help your clients better manage their money, if they don't ask you about it, how can you broach the subject?
Brown Smith Wallace took a proactive approach by offering its clients a "health checkup," which included a five-page questionnaire that asked some thought-provoking questions. It also provided Brown Smith Wallace financial data that allowed the firm to see client trends and to learn what keeps business owners up at night, Bell said.
"Most clients were interested in seeing what we can do for them," she said.
Clients want the help, so why not broach the subject?
- Pay Me the Money: Improving Collection Rates Step-by-Step
- Five Money Management Rules for Young Small Businesses
About the Author
Alexandra DeFelice is senior manager of communication and program development for Moore Stephens North America, and a regional member of Moore Stephens International, a network of more than 360 accounting and consulting firms with nearly 650 offices in almost 100 countries. Brown Smith Wallace is an independent accounting firm associated with Moore Stephens North America. Alexandra can be reached at firstname.lastname@example.org.
Wait, there's more!
There's always more at AccountingWEB. We're an active community of financial professionals and journalists who strive to bring you valuable content every day. If you'd like, let us know your interests and we'll send you a few articles every week either in taxation, practice excellence, or just our most popular stories from that week. It's free to sign up and to be a part of our community.
2 weeks 3 days ago by claudilocks