Quarterly reviews

We are in the middle of quarterly projects right now which includes the filing of payroll taxes and the review of financials. 

We prepare actual reports for some of our clients which include analysis and suggestions.  Others need a less formal process, but we like to sit down with all our clients to talk about their financial statements.

If the client has a budget, we compare the actual results with the budget.  We ask questions about any variances in the results. If there isn't a budget, we just compare the current quarter to the previous quarter and the same quarter in the previous year. 

We look at the various ratios on the balance sheet (current, quick, A/R aging, inventory turnover, debt/worth) and the income statement (gross margin, net margin, sales growth).

Looking at the aging of receivables should be done regularly and past due accounts followed up on promptly.  The longer an account is overdue, the less likely the business is to collect.  Inventory should be monitored closely as well, especially if it is perishable.  Even non-perishable goods need to be watched as money is tied up in inventory and therefore can't be used to pay other bills.

Margins need to be looked at for various reasons.  Reduced prices during a sale need to be viewed from an overall standpoint to see if the results were a success.  Increases in the cost of raw materials need to be monitored to see if increases sales prices are warranted.  The same is true for increases in employee expenses-is your staffing level appropriate for your level of sales?

Business owners should be looking at their financial statements on a regular basis and asking these questions themselves, but talking them through quarterly with an accountant or financial advisor is often very helpful.

Does your accountant have a backup plan?

We met with a potential new client recently who had a sad story to tell.  He had an accountant processing his payroll including filing the payroll taxes.  She was a sole proprietor and was the only one who knew all the passwords and logins she used. The woman died unexpectedly and her husband did not know how to access her computer to get the information the client needed to be able to continue processing his payroll and handling the payroll taxes. 
As a result, he ended up missing some filing deadlines and ended up owing the government a large penalty and interest which put his business in a precarious spot.  E&S Entrepreneur Advisors, LLC has the benefit of two owners and we have many redundancies built in so our clients will always be able to get the information they need regardless of what happens to Beth and Susan. 
If you are working with an accounting firm, this shouldn't be an issue but this isn't the first time we have heard about problems with a small accounting business.  A single accountant is great because you are working with the same person every time and she/he really gets to understand your business.  Just make sure when you are creating your own disaster recovery plan, you ask about your accountant's!