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Salt Lake City Bookkeeping Blog

Utah Financial Reporting And Outsourced Bookkeeping Service

Posted by Joe Mazur on Jun 26, 2013 6:33:00 AM

Outsourcing your bookkeeping has plenty of benefits such as offering financial checks and balances, freeing up valuable time for owners and managers, and keeping the business out of harm's way with the IRS.  But what about the other
important end results of bookkeeping that often get overlooked such as financial reporting management?  There are a decent amount of start-ups in Utah and financial reporting should be a key component to making sure goals are met on a regular basis.   It's always great when both the owner and bookkeeper are keeping a close eye on all margins.  Having an accurate Accounts Receivable and Balance Sheet is a great way to make sure Cash Flow is always accurate and easy to produce.  Getting your bookkeeping system set up is half the battle, making sure to maintain and utilize the system is the other.  

Micro Manage Margins

OK, you have a great bookkeeping system, all accounts are reconciled, and everything is dialed, now what?  Its time to dive into your financial reporting.  If 12-15 time periods of your Profit & Loss are available you should be in good shape to build a model Profit & Loss for said period.  I say time period because this could mean a month or a year to a business that has somewhat consistent trends while another business might utilize quarterly reporting because of seasonal bookkeeping fluctuation.  From this info, build a model time frame.  Then take that model report and start comparing.  This is where having an expert bookkeeper comes in handy.  All accounts should be combed over to find changes in profit margins and expense margins.  The smallest shifts in these areas can mean major changes in dollars.  It cracks me up when I hear a business say that they aren't too worried about a change of 2%-4%.  If a retail shop is doing a million dollars a year in revenue and their Gross Profit Margin lowers 3% due to poor controls on their Cost Of Goods Sold, then they are missing out on $30,000.  What owner wouldn't want that built into their bottom line, or better yet, their paycheck or end of the year bonus?  Keeping a close eye on credit card processing fees, meals and entertainment, fuel, etc. all can result a hefty increase is profits if micromanaged.

Keeping an eye on payroll expense margins is a very important area to monitor on a weekly/monthly basis.  Any successful restaurant knows that watching payroll labor vs. revenue margins is key to staying profitable.   Since payroll can sometimes include managers and owners, I tend to dump the outsourced payroll data into Excel and build a custom report that truly shows non-management payroll against revenue to watch for consistency.  Again, if these margins fluctuate, the business can take a massive financial hit.  If an entire quarter goes by and payroll labor margins are at 32% and they should be at 25%, then the business can be losing out on $70,000 annually.  

Even though these are broad numbers, it's not hard to see the benefit of having a dialed bookkeeping system that can help hold everything and everyone accountable.  Micro-managing margins isn't hard if the proper time is taken to get the systems set up.

Know Your Cash Flow

Any small business owner should know their cash flow at all times.  Is there enough money to get through next payroll?  Is there enough to stay open for 4 months if things slow down?  Will there be enough money to pay the investors?  These are all simple questions that should be easily answered if the bookkeeping system is built to produce these answers in the first place.  A few pieces that are needed to answer these questions are reports such as Accounts Receivable, Accounts Payable, Balance Sheet Compare, and a model Profit & Loss.  Knowing that your AR Report is a 100% accurate allows you know the pattern in which you customers pay.  Having consistent terms set up with your vendors allows you to know how much money is owed to who, and when.  Balance Sheet Compare allows one to know the amounts that are due each period to investors, banks, and other lenders.  Once these reports are in hand, then up to date Cash Flow reporting only takes a few minutes.  

 Having an accurate grasp on you cash flow and micro-managing your margins can make your business run like a well oiled machine.  As an owner, the benefits can be directly realized and the next thing you know you can buy you and your right hand man matching tennis outfits.

 

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Topics: QuickBooks Advisor, Outsource Bookkeeping, Bookkeeping Help, Restaurant Accounting