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Jun 16, 2015

Over the years, there have been a number of reports as to whether small/medium enterprise operators really understand financial accounts.

Today, with cloud technology and the numerous accounting software packages that are around, there’s really no excuse as to why small/medium enterprises shouldn’t have a clearer understanding on what their financial accounts are revealing.

I believe that this is an opportunity for accountants to commence a Chief Financial Officer (CFO) service to assist their small/medium enterprise clients to understand the financial accounts and, therefore, become more financially savvy.

This would start with showing clients how to:
•    Analyse a profit & loss account.
•    Calculate the ratios and the KPIs.
•    Review the balance sheet.
•    Calculate the important ratios, in particular, items such as debtors’ days outstanding and creditors’ days outstanding and how these figures compare to budget estimates.

The source and application of funds statement is a great statement to show the client what happened to the cash movements in the business.  How many times have you been asked: “If I made a profit (of $50,000 or $200,000), where is it?  It’s not in my bank account and I haven’t spent it.”

A client needs to be shown that they’ve invested more in stock, debtors, capital expenditure, etc., to understand where the profit is.

Benchmarking is a great tool to enable a small/medium enterprise operator to have a clear understanding of how their business operations compare to those of their peers.  Why not show the clients some reports from, so the client can perform regular, ongoing benchmarking comparisons.

If you’re interested in receiving additional information to assist you to offer a CFO service to your clients, please contact us.