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Inefficient bookkeeping and accounting practices, along with poorly managed debt, can lead to cash depletion and poor financial health for a business. Prudent goal setting, based on a realistic assessment of business performance, operations, and growth targets can help build cash reserves and financial resilience.
Financial resilience and health have always been a top priority for small businesses. In the past year, the lack of strong financials have led to widespread closures of small to mid-sized businesses. This could lead to permanent closure due to the inability of owners to pay ongoing expenses. A Harvard Business Review study confirms that the primary reason for permanent business closures is attributed to being cash strapped, with a vast majority of companies having less than two months of cash on hand.
Identifying goals accurately
Smart financial planning, supported by accurate reporting, can help small businesses maintain better financial health. Identifying weaknesses, including poorly managed cash flow, ill-tracked accounts receivables, and lack of accurate information, can guide the process of correction. Goal setting helps to overcome inefficient processes by first considering business performance in accounting, bookkeeping, and financial management.
Corrective action can be taken after accurately identifying challenges. For example, if business performance is poor due to lack of on-time collections, increasing sales targets is not the solution. Instead, the process of collections needs to be refined and streamlined. Goals to help guide your business to financial stability differ based on various situations and can include:
Seek the support of a professional outsourcing partner
Financial resilience requires an in-depth analysis of past performance. Along with a historical analysis, an assessment of the current landscape can lead to an understanding of what worked and what did not. Goal setting must be unbiased and rooted in a realistic understanding of the business’s capabilities. Being overambitious and setting the bar too high will result in missed targets. Alternatively, setting goals that are too easily achieved may hamper the business’s evolution and growth.
Harnessing the expertise of professional outsourcing partners can shift the burden of a business’s financial planning. This can free key resources to pursue revenue generating activities. The in-depth industry experience and infrastructure support of a professional partner can guide business owners to create attainable goals by setting dynamic budgets and ensuring healthy bookkeeping and accounting processes.
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