It’s official, your taxes are filed and your accountant has taken a much deserved vacation. What’s next? If you don’t want your most trusted advisor to stay on vacation, we suggest you give them something to think about so you can get more value out of the relationship. Better yet, if they are close enough to your business operations and proactive, they likely already have great ideas that would add value to your business for the balance of the year.
Here are a few “spring cleaning” essentials you should consider to prepare you for the next quarter:
1. Toss Expenses That Don’t Deliver Value. It’s easy to fall into a routine and do things because you’ve always done them. However, when was the last time you evaluated the tools or resources you use on a daily basis? Are they still providing value to your company the way they did when you first acquired and implemented them? This is a great time of the year to work with your CPA to review and evaluate the expenses that are not driving profitability.
2. Review Your Debt to Equity ratio. The debt to equity ratio gives a comparison of how much of your business operation was financed through equity and how much was financed through debt. Too much debt can put your business at risk and may indicate difficulty in meeting interest and principal payments. Too little debt could indicate that you are not taking advantage of opportunities and realizing the full growth potential of your business. Maintaining a debt to equity ratio in the range of 1:1 to 4:1 (i.e. a maximum of $4 debt for every $1 of equity) is a good business practice. Your specific needs will be impacted by individual business dynamics and industry circumstances as well as lender requirements and should be reviewed with your CPA.
3. Dust off Your Strategic Plan. A lot of energy goes into making it, so don’t let it sit in the corner and gather dust until everyone gets back from summer vacation. Now is the perfect time to take out your strategic plan and review it to see how you’re doing. In addition to tracking how you measure up against your goals, you may also need to revise a few of those goals based on first quarter business results and marketplace changes. Your accounting firm can help you check off some of these goals in ways you may not have considered in the past. For example: they can help you establish a system for computing internal financial metrics; and they can help you with financial forecasting and projections.
4. Organize and Prepare Your Growth Opportunities. Your CPA can provide forward-thinking ideas that generate opportunities to help you with other critical areas of your business. For example: have you had a discussion with your CPA about succession planning recently? Are you in the market to buy or sell equipment, property, or perhaps even your business and do you need help assessing these opportunities? Likewise, do you know how your company is doing compared to industry benchmarks? Benchmarks are a quick and easy way of comparing the performance of your business with industry averages. If your business does not perform as well as you might like, benchmarks may help spotlight areas in your business that may need some tweaking. Your CPA understands your business and can then help you put the resources in place that will enable you to elevate your financial performance and fulfill your dreams.
Think of this focus on these priorities not as a continuation of your time spent on compliance tasks with accountants, but as a way to capture the opportunities that are highlighted during and following those meetings. Doing so can help set the tone for an even better year next April. Happy spring cleaning!
Article Provided By Kathy Davis, CPA, CGMA MKS&H Managing Partner.
McLean, Koehler, Sparks & Hammond (MKS&H) is a professional service firm with offices in Hunt Valley and Frederick. MKS&H helps owners and organizational leaders become more successful by advising them regarding their financial, technology and human capital management needs. Please visit www.MKSH.com for more information.