Public accountants, also known as CPAs, help businesses and individuals with all things related to accounting and auditing. Accountants may prepare financial statements, analyze budgets, assist with financial planning, and prepare tax returns.
Small businesses should have both a bookkeeper and an accountant for tax preparation.
What many small businesses would also greatly benefit from are the services that an accounting professional who has a depth of experience working in the small business sector can provide. We all these professionals “business accountants”. Their position is considered to be of a higher value professional service level than that of a bookkeeper. These accountants provide the financial analysis that CFOs and company leaders need to make business decisions.
For many small businesses, staffing a full-time bookkeeper and accountant, let along CFO, is cost prohibitive. To assist organizations in having the financial expertise they need, Resolution Accounting offers affordable accounting services for businesses in the Philadelphia PA area, with a staff of experienced “business accountants”.
Accounting vs. Bookkeeping
Accountants are highly trained professionals that understand industry best-practices like the Generally Accepted Accounting Principles (GAAPs) and ensure your finances are conducted in an organized, transparent fashion. As the more highly qualified professional, a business accountant oversees the work of a bookkeeper to make sure the general ledger is in order, invoicing is done properly, accounts payable and receivable are in order, and more.
Whereas a bookkeeper is generally entrusted to enter financial data promptly and systematically to generate accurate numbers, an accountant is expected to review those numbers, interpret them, and advise leadership on the company’s financial situation accordingly.
When it comes to reconciling accounts and producing accurate monthly financial reports, the buck stops with your accountant..
Accountants Track Performance Metrics
In addition to overseeing general accounting operations and best-practices, skilled accountants keep an eye on several key performance metrics that can help guide decision making at your company. Here are some examples of metrics and performance indicators your account should track:
1) Gross Margin – the revenue resulting by subtracting the costs of goods sold, or those costs directly associated with production, from sales. This measure does not factor in operational costs, so your gross margin indicates the percentage of profit made on each dollar of sales.
2) Product Line Profitability – this is similar to tracking gross margin but focuses on tracking profitability of the products you sell. It measures the profitability of individual product line by subtracting that product’s variable costs of production from it’s sales.. With knowledge of the profitability of each product line, improvements can be made to the product mix, pricing strategy, and marketing spend for promoting certain products.
3) Cash Flow Analysis – this analysis takes into consideration money movements from accounts receivable, accounts payable, inventory purchases, credit and more. Comparing your projected incoming cash flow to expected monthly costs and expenses will assist you in forecasting when and if you are going to be cash positive or negative. Decisions can then be made for new equipment purchases, new hires or for cutting costs.
4) Expenses as a % of Margin – this is a measure of total Expenses divided by total Gross Margin. You are looking to maintain a consistent Gross Margin. Then, from Gross Margin, Expenses are subtracted to arrive at your bottom line profit or loss. Often, businesses evaluate expenses as a percentage of Sales, when in reality a more practical and pertinent measurement is Expenses as a percentage of Margin.
Accounting Services Can Contribute to Improving Your Business’s Financial Health
To achieve profitability and growth, your business will benefit from the services that a small business accountant can provide. A skilled business accountant ensures your records and financials are accurate and provides insights to help you improve various operations including:
- Procurement & inventory management
- Cash flow Management
- Forecasting and planning
- Financial report analysis
Resolution Accounting can assist your team with all of these functions for businesses that would prefer to focus on sales and other core operations. Our outsourced accounting services provide dedicated business accountants to fully oversee your finance operations.
If you are interested in learning more about small business accounting services for your Philadelphia PA business, contact us today.
