Four Ways your Accountant can Improve your Bottom Line
“Only 40 percent of Americans possess a basic understanding of economics and personal finance.” National Financial Capability Study
While you may only be slightly surprised by these stats, it is concerning that so few Americans understand their finances or the economy as a whole. Although, it’s easy to understand why. Calculating risk. Inflation. Compound interest. Maybe we should’ve spent more time on these topics in school. Of course, none of us had money then, so it probably wouldn’t have stuck.
The point is math, personal finance, and business accounting are hard. It’s difficult to wrap your brain around, and sometimes that difficulty causes you to throw your hands in the air and walk away. But if you are a small business owner, you should have a solid understanding of where your profit comes from and where your money goes.
Matthew Patrick, founder and owner of Whirks and Patrick Accounting, explains it this way, “You do not understand your business until you understand how the cash flows through it.”
And the best person to help you understand your business’ finances is an accountant.
Although sometimes your favorite number cruncher uses nerdy math jargon that you may not understand. And occasionally, they will request information a certain way and you don’t know why and end up sending something else. Your accountant might ask you to submit your tax documents two months before April 15, and you have no idea what the rush is.
So this article will give you the whys behind all these seemingly nit-picky things your accountant does, says, or asks for. Communicating openly, asking questions, and answering squarely to your accountant’s requests will help you earn and keep more money. Consider your accountant as a financial consultant who will guide your business’s growth and success.
Fiscal formatting saves time and money.
For accountants, formatting is life!
For most accounting and payroll processing firms, the biggest challenge isn’t the calculating, the balancing or reconciling, or even meeting government-mandated deadlines. It’s getting the necessary documents in the appropriate, requested format from clients.
There are specific reasons behind the particular format of a requested document, most of which are related to the needs of the accounting software or the IRS.
When you’re asked for a bank statement, they want the exact document your bank sent you, not the information on the statement, but the actual bank statement. Same thing with loan documents or credit card statements, send them the actual paperwork the financial institution sent you (PDF works too).
Please don’t respond to your accountant’s email with the amount due on your loan or the total amount of the loan or anything else you think they are asking for. For the love of Pythagoras, scan the paper the bank sent you and send it securely to your accountant!
Formatting is just as important as the information contained within the document, according to Matthew Patrick who has 25 years of experience as a Certified Public Accountant.
Data is super duper important to accountant types. They are typically nerdy people who work hard to ensure your financial statements are reconciled accurately and your taxes are filed on time. Nerds do not like to be wrong or late! It gives them even more anxiety than they already have!
So help a nerd AND yourself by following those seemingly insignificant, possibly annoying document requirements. It’ll save everyone time and frustration, plus it will allow your accountant to focus more on helping you meet your goals.
What’s with all these financial deadlines?
For most Americans the only important tax date is April 15. For employers, it’s April 30, July 31, October 31, and January 31 when quarterly employment taxes are due. But for an accountant, each calendar year is one long relay race dependent on the delivery of client data.
While the government deadlines are significant to your accountant, they are only a dot in their giant connect the dots of credits and debits, payables and receivables, taxes and deductions. When your accountant asks you for documents by a certain day or week, take that as gospel, especially if you want to review financials statements in a timely matter or want to avoid tax penalties.
Much like those wild string theories portrayed in crime shows connecting murders, victims, and suspects, accountants have set up an elaborate workflow calendar based on internal, external, and statutory deadlines. Their processes involve a thorough review process and quality control to ensure your company financials are precise and correct.
Remember that just like you have a towering to-do list coming in from all directions, your accountant has reconciliations and tax filings and analyses to complete from dozens or hundreds of clients. Do yourself and your accounting firm a favor and meet those deadlines.
Confess your expenditures to your numbers’ people
The more information you provide, the better equipped your accounting team will be to determine the exact state of your company’s financial wellbeing.
“Our default is we would rather know everything and let us filter through what is necessary than not know anything and miss something.” Mike Shaeffer, Chief Operating Officer Whirks/Patrick Accounting.
Let’s say you trade in your work vehicle for one with fewer miles and heated seats. If you don’t mention this to your accountant, they may see the new monthly payment added to your credit card statement, but they don’t necessarily know what you bought. Nor do they know which vehicle you got rid of or what the value of that car was, both of which impact your inventory and assets. And did you mention if you paid sales tax on the trade-in? Because sales tax is deductible.
Accountants see things from a nerdy perspective and may point out a consequence of the purchase you hadn’t considered. Or, they may know a way to structure the purchase that is more advantageous than buying it outright.
Where you saw fewer repairs and toasty buns during winter, your account sees the financial impact on your company’s bottom line. And who isn’t interested in protecting their bottom line and their buns?!
So tell your accountant ALL. THE.THINGS. Financially speaking, of course. Tim, your tax guy, doesn’t need to know about that memorable trip to Vegas or your kid’s failed spelling test, although he probably wants to, it just won’t help your profit and loss statement.
Ask the questions you are afraid to ask.
“People are afraid to ask the right questions. Or ask questions at all.” Matthew Patrick
Accountants do NOT want to come off as condescending when explaining your financial documents to you. Accountants tend to use nerd words, and you need things explained in English.
Please ask clarifying questions. Ask until you truly understand the cash flow in your business or how deductions are calculated in payroll. Don’t feel stupid or embarrassed. It’s your numbers and your financials that you use to make decisions.
The reason for monthly financial overviews is for a business owner to use that information to make good, timely decisions. If you don’t understand the basics, the executive summary won’t be of much help.
I promise your accountant won’t use you as a party story if you ask them to explain your general ledger to you. It’s what you’ve hired them to do. And if they are condescending, it’s probably time to find a new accountant.
Return on Investment
“We really do believe that it’s our team’s job to educate our clients about the financial implications, specifically from an accounting standpoint, of what’s going on inside of your company,” Shaeffer said.
Your accountant should be giving you insights into your monthly statements. Review those documents and ask questions. Your accountant should be a teacher. They should help you understand how you think you make your money and how you actually make it.
Accountants can make your business run better and more simply.
Patrick notes, “You understanding your numbers improves your business, which means you’re hitting your goals, and that’s our goal. We want to help you get one step better every day.”
Your accountant wants to know where you want your business to go and how you want to get there. An accountant will not only provide helpful info about your (analyze trends/create strategies) cash flow, revenue, and expenditures but will help you figure out how to improve and grow your business.
Getting One Step Better
The moral of this story is to take full advantage of all your accountant has to offer. A big part of having an accounting firm improve your business is meeting their deadlines, providing the exact documents they ask for in the specific format, and confessing all your purchases to them.
And remember, everything an accountant provides to you is yours; it is the state of your business’ finances. Ask them any and every question you have. You will only improve your bottom line by understanding all those numbers.
Or find out how Whirks can partner with you to increase your bottom line by scheduling a 15-minute call.