10 questions accountant final

7/30/2019 10 Questions Accountant Final

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10 Questions to Ask Your Accountant

Proft and Loss Statement

Small Business Development Corporationwww.smallbusiness.wa.gov.au | 131 BIZ (131 249)

1. Income 2. Cost o goods sold

3. Gross proft

4. Expenses

5. Net proft

Balance Sheet


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1.Howdoesmybusinesscomparewithmycompetitors?

2.Whatisincludedinmycostogoodssold?

3.Whatismygrossproft(grossmargin)percentageandisthisreasonableormytypeobusiness?

4.HowcanIreducemyexpenseswithoutcompromisingmyqualityorservice?

Ask your accountant to show you the business benchmarks relevant to your industry or visit SBDC and speak to

one o our advisors. Benchmarks are a quick and easy way o comparing the perormance o your business with

industry averages. Is your business income better than average? Are you spending too much on wages?

Business benchmarks will help spotlight areas in your business that may need some tweaking!

COGS(costogoodssold)are those costs that are incurred to produce a sale. It includes all the costs directly

attributable to the acquisition or converting materials into fnished goods. Items included in the COGS will dier

rom one type o business to another.

The lower your COGS, the higher your gross proft. Your COGS will vary, depending on the level o production or

activity.

Gross proft is the dierence between the value o the sales and the cost o sales. Understanding your gross

proft is a really important building block or any small business owner, so spend some time with your

accountant amiliarising yoursel with this fgure and what it means!

GrossProftPercentage=GrossProftSalesx100%

Increase your gross proft margin by increasing selling price or reducing cost o sales.

What can I do to increase mygrossproftmargin?

I you dont know where your money is going, you wont know where to start controlling expenses oten its

the little things that add up.

Take a good look at each expense and ask yoursel will my business run just as well i I reduce this expense or

cut it completely?


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6.Whatismybreakevenpointandwhyisthisimportant?

7.Whichomyproductsorservicesaremakingmethemostproft?

8.WhatcanIdotoimprovemycashow?

5.Howmuchnetproftismybusinessmaking?Isthisproftpercentageworthall

theeortImputtingin?

On average Australian small businesses make 10% net proft annually, but this fgure can depend on your

industry type. How does your business compare? Ask your accountant to show you the business benchmarks

relevant to your industry or visit SBDC and speak to one o our advisors.

The breakeven point is the point at which your business is making neither a proft nor a loss. Knowing your

breakeven point is critical or any business owner, because you will know exactly when you begin to make a

proft.

The breakeven point is the lowest limit when determining proft margins. You will know how low a price you can

oer, and the eects o discounting on your net proft.

You can calculate the break even or any period o time a year, quarter, month, week, day just make sure all

three estimates relate to the same time period.

Look at the proft margin or each product or service you provide. Keep the ones that are giving you the

highest return or the least eort. Discontinue the products or services that have a low proft margin and take

great eort to provide.

And remember the 80/20 rule typically 20% o your products or services will be generating 80% o your proft,

so it might be time to review your product range.

One o the most immediate ways o improving your cashow is to check how long it takes your customers to

pay you.

It is important to collect all money that is rightully yours on time. Its your money; i customers are paying late,

you are eectively giving them an interest ree loan! You do the work insist on being paid on time. Make sure

your customers are aware o your payment terms, and set time aside each week where you or your bookkeeper

personally contacts clients to alert them that their account is due.


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10.Ismybusinessinagoodpositionfnancially-willitbeabletosurvivea

downturn?

BONUS QUESTION

HowdoIincreasesales?

9.HowmuchmoneydoIhaveinvestedinthebusiness?Wouldmymoneybe

betterinvestedelsewhere?

What would be the return on alternative investments such as property, shares, or long-term deposits? I you

would earn considerably more or less eort and risk it might be time to reconsider your business.

Economic conditions can seriously aect your business. Are you in a strong enough position fnancially to be

able to weather the storm? Ask your accountant about your debt to equity ratio.

Thedebttoequityratio shows the proportion o capital invested by the business owners to the unds provided

by external lenders. It gives a comparison o how much o the business was fnanced by owners equity and how

much was fnanced through debt or liabilities.

Generally, a debt to equity ratio in the range o 1:1 to 4:1 (ie a maximum o $4 debt or every $1 o owners equity)

is acceptable but will depend on individual business and industry circumstances.

Too much debt can put your business at risk and indicates possible diculty in meeting interest and principal

repayments.

Too little debt means you may not be taking advantage o opportunities and realising the ull growth potential

o your business.

There are three ways to increase sales:

1. Increase the number o customers (or make sure theyre the right customers)

2. Increase the requency o transactions

3. Increase the value o your sales

10 questions accountant final

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