By Ruan Lerm, Managing Director: Destinata Accounting
Having a business' balance sheet, income statement and cash flow statement in good order is the cornerstone of a well-run business. But, what many businesses don't benefit from is the value of the information held within these records. The detail held within the financial accounts provides a treasure trove for management accountants to help business owners grow their going concerns.
When management accountants first start working with a business the process usually starts with the budgeting process. By analysing past performance and market trends, management accountants can start predicting potential future performance and set goals and targets for the business to reach.
This information is then used to begin consulting with the business owners to start either refining, realigning or reworking a company's strategy. This is where the data that is gleaned from the financial statements comes into play. Analysing this data allows for a variety of solutions to be created and gives management the opportunity to make decisions backed by a reliable source of information. Progress is then consistently measured against these goals to track performance. The management accountant is then able to identify where the business may be lagging and build solutions with the owner to either reallocate resources or to find non-financial solutions.
Reducing business costs that are not at the expense of a business's ability to grow, but rather to use its financial resources more efficiently is an imperative part of an accountant's role. It's about understanding where costs should be cut to reduce any financial strain on the business.
Looking at where a business should invest to facilitate either growth or stability is possible when costs are contained, resources are allocated to promote efficiency then the management accountant is able to start risk-proofing.
All businesses come with risks, be they external or internal. Risk mitigation is part of a management accountant's role. Identifying potential risks that could affect the health of the business is a vital tool that business owners need to consider. It isn't simply about mitigating risks, but also identifying how these risks could affect the company's financial standing.
These risks could include sharp increases in input costs, a decrease in demand, the effect of an external event either within the business' local geography or an international incident. Internal risks could include fraud, a sudden decrease in staff or gross negligence leading to damage within the business.
But, of all the benefits that a management accountant provides, it is being able to advise the business on how it can potentially decrease its tax contribution by using sound legal practices. Many traditional accounting practices are not well versed in how tax legislation that has been created to support businesses should be implemented.
For more information on how a management consultant can assist a business to not just secure its financial footing and reduce its tax burden, but also identify growth opportunities, contact us by clicking on the button below:
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