Accountant Inland Empire
- Posted in Accounting
- Comments 10
Why is Accounting Important to Me?
A business owners’ accounting is the fuel that keeps the engine running. Not understanding profit and cash flow can fatally injure a business and has injured many since it is optional and not required. Accounting is put off and ignored by many and there are lessons to be learned if we look at the numbers.
We all have an emotional bond with our business numbers. An accountant takes the emotion out and forces us to look at reality. Since none of us like change and many do not understand accounting, this can lead to failure to take action on a timely basis.
A business that has declining revenue normally has a hard time decreasing variable costs fast enough to keep pace with the declining revenue, accelerating the loss in many cases. Looking at profitability per client is also an interesting exercise. Some clients take more resources than others, thus costing more to maintain.
Lifetime value of a customer is another important subject. If the average accounting firm client stays 7 years and the annual revenue is $5,000 that client has a lifetime value of $35,000, which would be looked at differently than the $5,000 alone. Another important accounting related item you should know about your business is what are your key performance indicators? The things that indicate health or lack thereof. If our firm’s average billable rate is increasing we are becoming more efficient. If the opposite, then why, and what can be done about it. Each business has its own set of KPIs, all businesses need to know their numbers, as there is a saying “we can only manage what we can measure!”
By: Stephen C. Williams, CPA – Partner
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