Who is driving the profitability at your firm? That’s a great question because I’ll bet a lot of owners have no idea. Remember, we’re not talking about sales, we’re talking about the bottom line. Companies are in the business of making a profit for their owners – so who is responsible for driving profitability?
In major corporations, the accounting department functions as a business partner. They share the company’s goals – their workflows and processes generate metrics that lend transparency to the company’s financial performance and communicate this throughout the organization.
It’s not only keeping score, but communicating what the score is. How are we doing against our goals and objectives? And if we’re missing those, how far are we off and how can we get back on track? It’s a collaborative effort.
Here’s why you don’t have that same set-up in your firm:
1. You underappreciate accounting
In his book Scaling Up, Verne Harnish states that, “The number two weakness of growth firms is accounting. It’s seen as a necessary evil.” But you can bet the Fortune 100 firms don’t see it that way. We need to change our view of the accounting function and what it can contribute to the organization in terms of looking forward.
2. You don’t have the right people
You don’t ask your landscaper to rewire your electrical panel, right? So you shouldn’t expect your bookkeeper to design metrics, analyze trends and also plan for your business’ financial results. You need to have the right people with the right skills to take your company forward.
3. You don’t have the right tools
Are you meandering through the year just hoping that this month’s results will be better than last month’s without doing anything about it?
That’s like wandering through the wilderness without your map or GPS. You need planning tools to guide you: a budget; a strategic plan; a succession plan for you and your organization; an exit or transition plan for you as you move out of your business. These tools can help create or increase the profitability of your business.
Let’s face it, there’s nothing strategic about losing money. If you’re ready to increase your profitability by upgrading your accounting function, let’s talk.