Big company accounting for small businesses is a term we at Elite Accounting sometimes use when describing ourselves – this is what we provide.
But, what the heck does that actually mean?
Well, here are some practices medium, large and corporate companies do from an accounting point of view that not all small businesses do, and the benefits of them.
These companies plan; they have strategic plans that span a few years and that they use to drive the business and achieve its goals for its stakeholders (shareholders, employees, customers etc).
We have an article ’10 Reasons Why It’s Important to Have a Business Plan’ that you can refer to for more information on this one.
Big companies have a budget for their financial year. This is a more detailed map of how they will achieve the company’s goals in order to achieve the long-term vision detailed in the Plan.
The Budget will have targets that need to be achieved in order to achieve the year’s goals. For example, if the company’s goal is to increase revenue by 10% from the previous year it will have targets for how to do that. Such as increasing lead conversion by 2% by quarter 2, or increasing the revenue generated by customer by 5% by quarter 3.
These companies also forecast, meaning they’ll look at the actual results and the Budget to make sure they’re on track to reach the year’s goals.
If they’re not on track, the Forecast is how they adjust those targets to make sure they still reach their goals. Maybe they missed a sales target in quarter 1, so quarter 2 and 3’s targets need to be revised.
Maybe they smashed the target, so the goal wasn’t stretched enough and they adjust targets accordingly to reach a more stretched goal at the end of the year.
Monthly Management Reporting
Big businesses have monthly management reports that give the leaders of the business information about the company’s performance in the most recent period.
These management reports will include financial information, sales, costs, profits. As well as non-financial information, such as metrics, key performance indicators and drivers.
This information will give the business leaders everything they need to evaluate how the company is currently performing.
Monthly Management Meetings
Once they have the information from the reports, it’s usual for larger companies to have a monthly management meeting, or a board meeting, to discuss the performance.
They set time aside to stop, take a step back from the day to day, and spend time ON the business, not IN the business.
It’s using this time, and the information from the reports, that allows business leaders to make informed decisions about what the company should be doing. This is how they’re able to improve profit and efficiencies within the business.
In reality this one is linked to all of the other points made so far, but it’s so important it’s worth highlighting it separately.
Big companies have cash flow plans, budgets and forecasts, and they monitor the cash flow using reports and other information in order to maximise it.
Big companies employ people to run all of these accounting actions for them. It’s not unusual for large corporations to have hundreds of people employed in finance teams tackling small elements of this process each, to make up the big picture.
Employing professionals in small businesses to do this can be quite costly, and not cost effective, as they often don’t need a full-time resource. This is where accountants, that specialise in this kind of accounting, can help!
You can get the expertise of a Management Accountant, or a Finance Director, and everything in between, for the portion of time you need them for.