Working with a certified public accountant (CPA) can help you fully manage your business’s finances from top to bottom, but there are some specific financial indicators to look at when determining your business’s situation.
In this blog post, we’ll go over the five big indicators to review every quarter with your small business accountant.
1. Past-Due Invoices
One element you’ll want to look at is your business’s invoices that are past due. Late payments can easily hold your business back, which is why you’ll want to keep up with them and review your state of receivables. Your CPA should help with this consistently to keep you on top of payments.
2. Cash Conversion Cycle
This is another critical indicator to review regularly with your CPA. It accounts for the amount of time it takes to pay bills, collect payments, or move your existing inventory. Based on these insights, you can better optimize your cash flow to ensure you’re making more money than you’re spending, helping you maximize profitability.
3. In-Hand Cash Flow
Your CPA should also help you determine how much cash your business has based on annual cash flow. Using this indicator, you can figure out ways to ensure your business has sufficient cash to cover your business expenses each year while facilitating growth.
4. Balance Sheets and P&L Statements
CPAs can review your P&L statements and balance sheets to determine what sources generate meaningful revenue for your business. By analyzing these documents, you’ll ultimately have a better picture of your company’s overall profitability and take the appropriate steps to maximize your income moving forward.
5. Your General Financial Situation
When you review the various aspects of your company’s finances, you should gain a comprehensive understanding of your status. What kind of money are you making vs. spending every quarter or every year? What can you expect to spend against your earnings in a given period? Your CPA should be able to work with you to answer these and other critical questions based on your business’s financial health.
The Importance of Choosing the Right CPA for Your Business
Although these indicators can help gauge where your business stands financially, it’s not enough to simply review them. It’s crucial to work with CPAs who have a deep understanding of these indicators and what they mean for your business. As such, you should find the right small business accountants to help handle your finances, which will ensure your company is in good hands.
For reliable help from experienced CPAs, get in touch with the experts at The Total Wealth Group. We’re ready to help you stay on top of your finances with a unique solution that’s right for your business, helping you avoid potential losses and compliance issues while enabling you to focus on long-term business growth.