CFOs Need to be Championing Financial Analytics

CFOs Need to be Championing Financial Analytics

Start Championing Financial Analytics Using financial analytics was once seen as a fad. Now, using financial analytics has proven to be effective in many aspects of a business. It is used in many areas including forecasting financial performance, pricing products and services, identifying new markets, improving margins, strengthening operations and assessing and monitoring risks. The role of today’s Chief Financial Officer (CFO) has expanded past profit and loss, expense management and budgetary control. You need to be more strategic. CFOs should lead the effort in establishing financial analytics at a business. They are the most logical choice to manage the analytics to serve the company’s needs. Most CFOs are already using financial analytics. They use it to evaluate what areas of the business are strong and what areas need improvement. They are the ones that collect data from operations, supply chains, production processes and other areas. 4 Reasons to Own Financial Analytics Financial Analytics Empower CFOs Using financial analytics empowers CFOs to conduct a more centralized control of operational  decision-making. Deloitte CEO and former CFO, Frank Friedman, said in CFO Magazine, “As profit can fall between the operational cracks, analytics can be a game changer by leading to improved operational discipline.” Financial analytics produces insights that demystify some of the accepted wisdom that resides within the business As the CFO, you are already a very respected leader within the company. And, now when you challenge results, you will have solid data to convince co-workers you are right. Expand your strategic leadership role in: Growing the top line Expanding your influence outside your primary financial role Strengthening your ties through the...
This Season’s New Online Tax Fraud Method

This Season’s New Online Tax Fraud Method

Stay Up-to-Date on Tax Fraud This year, the Internal Revenue Service (IRS) identified 12 tax scams ranging from phone scams, to identity theft, to falsifying income for tax credits. As an accountant, it’s imperative to stay up to date on tax scams to educate others and so that you can warn your clients in case they decide not to use your services. According to identify theft data from the Federal Trade Commission, tax fraud has increased in recent years (surprise, surprise). Last year, the number one consumer complaint in how an identify theft victim’s information was misused was tax or wage-related fraud. And, this year, a new method of online tax fraud was discovered. Often times, tax fraud criminals will file a tax return in a victim’s name in order to collect the victim’s refund. But, in February, between 24-40 taxpayers reported that when they logged into TurboTax®, they noticed their state return was already processed. In early March, Intuit® CEO, Brad Smith, and other tax software leaders met with the IRS to address the problem. How Taxpayers Turned into Tax Fraud Victims They explained that 24 of those victims used TurboTax and all of these victims had elected to have their filing fees taken from their refunds in a refund transfer. A recent AccountingToday article explains what happens next in this process, “After filing fees are withdrawn, refunds are transmitted to taxpayers with a deposit by Tax Products Group, owned Green Dot Corporation, a bank that works with tax-preparation firms. In these newly reported instances, taxpayers’ personal information is obtained so the refunds can be sent to another bank account.” So,...
Replace Excel with Forecasting Budgeting and Planning Software

Replace Excel with Forecasting Budgeting and Planning Software

Why You Should Replace Excel with a Dedicated Budgeting, Planning and Forecasting Solution Many businesses are making the switch from Microsoft Excel to a dedicated budget, planning and forecasting (BP&F) software program. BP&F is a three-step process for determining a company’s short- and long-term financial goals. Businesses are in need of these modern systems to help them turn data into business insight. Budgeting, planning and forecasting software also offers analytics and reporting. The Benefits of Budgeting, Planning and Forecasting Software Finance managers, business advisors, CFOs or business owners can create more accurate budgets and analyze what-if scenarios using budgeting, planning and forecasting software. Excel spreadsheets pose challenges to businesses in the realms of security, control, consolidation, workflow and automation. Here are the benefits of using forecasting, budgeting and planning software: Automates your annual budgeting process. Consolidates and centralizes a business’s financial information. Plan a company’s financial direction for the next three to five years. Document how this overall plan will be followed through month-to-month and specify expenditures. Forecast finances using past company data to predict financial outcomes for the future. Consistency across reports. 5 Signs That You Need Budgeting, Planning and Forecasting Software You do more work than you should When you need to do more work than you should to validate data analysis, it’s time to switch to a dedicated budgeting, planning and forecasting tool. “When the design, logic and algorithms in an Excel spreadsheet need to be independently reviewed for accuracy using the same testing and validation processes used in software development, that’s a good indication it’s time to question whether the Excel approach is still valid,...
5 Marketing Tips for CPAs

5 Marketing Tips for CPAs

Be the Brand & Be Client-Focused Differentiate and stand out from the crowd. Show your clients that you bring more value to the table than just number crunching. You can be a valued advisor by turning your relationship with your client from serving to partnering for success. Combine this new thought process with the right marketing tactics and growth is just around the corner! Here are our top 5 tips to help you improve your marketing tactics: Who are You? Before you brand yourself, you need to know what your company’s message is and its culture. Wrap your head around it and make sure you believe in it. Find Out What Makes You Unique  There’s a lot of competition out there, whether you’re an accountant based in a city or suburban area. And, with the Internet and word of mouth, information spreads fast, especially on social media. You need to be able to set your company apart from all of this competition. Quality and price are characteristics accountants are already using to differentiate themselves, so these aren’t unique factors use for your firm. Tell Your Story Finding the answer to this question can be daunting. Here are a few questions to ask yourself: What could you do that would make perspective customers care or care more about your company? When your clients think of you or your company, what words come to mind? If you were looking for an accounting service you provide, how would you want to find out about it? Once you answer these questions, craft these answers into marketing statements. For instance, begin your answer to the first...
Grow Your Business Using Social Media

Grow Your Business Using Social Media

Social Media Increases Product Sales & Brand Awareness The beautiful thing about using social media for your business is that it’s less expensive than traditional advertising avenues like billboards, radio spots or print magazine ads. And, there’s a way to track impressions and the click-throughs rates to your website, which allows you to understand how those results translate into return on investment. Professional service providers: here are our top three tips for using social media in order to grow your business: Hire a Skilled Social Media Manager, If Possible Even if you’re a small consulting firm, hiring a skilled social media manager to oversee your social media channels is crucial. There is a stigma that the field of social media is centered on creating content and simply posting it. But, there are actually a lot of creative and technical moving parts behind the scenes. And, when you’re busy focusing on business, you need someone on your team that has the skills to write creative marketing content, research, engage with brand advocates (followers who like your product or service so much they’re eager to tell others about it), and then analyze content – differentiating between what’s working and what isn’t. If hiring a social media manager isn’t in your budget, hire an intern. Many colleges and universities offer social media/social media marketing programs. The first class of students to go through these programs will most likely be graduating around the end of this year. Tapping these new graduates will be cost effective, as well. Identify and Engage Brand Advocates and Industry Influencers Whether you are able to hire a social media...
How To Compute Profit Margin Ratio & Financial Ratios By Industry

How To Compute Profit Margin Ratio & Financial Ratios By Industry

Key Financial Ratios Help Manage Your Business Your attention is usually focused on a key area within your company. Maybe that’s in marketing, sales or technology. Handling the financials may not be your forte. But, it’s important to be able to analyze your company using business profitability ratios. Financial ratios are used as indicators that allow you to zero in on areas of your business that may need attention, such as liquidity, profitability, operational efficiency, and solvency. Financial ratios are also useful tools in forecasting and financial analysis. They allow you to set specific goals and track your business’s progress toward these goals. It’s important to choose financial ratios that apply to your business. There are hundreds of financial ratios out there and while some of them apply to all businesses – there are some specific financial ratios by industry. Here are the top five most powerful and widely known financial ratios you should use in order to make your business succeed: 1. Net Profit Margin This ratio is the most important measurement. With this ratio, you can understand how each dollar earned by your company is translated into profits. How to Compute Profit Margin Ratio: Net Profit / Net Sales It indicates how efficient your company is at its cost control. For example, a higher Net Profit Margin means the business converts its revenue into actual profit more effectively. You can use this ratio to compare yourself to your industry peers, as well. 2. Current Ratio This ratio is a performance measurement of a company’s liquidity. The measurement determines if your business has enough resources to pay its debts...
How to Improve Your Relationship Banking

How to Improve Your Relationship Banking

Improved Relationships = More Money As a financial lending institution, you need to be able to balance risk and relationships. Beyond balancing, you need to build stronger relationships between you and your commercial customers. Improving your relationship banking can ultimately increase revenue for your lending institution. Relationship Banking Relationship banking is when financial institutions use their personal knowledge of the borrower over time to overcome roadblocks. This personalized decision-making gives the loan approval process more flexibility. Reasons to Improve Your Relationship Banking By taking the time to build relationships with your clients, relationship banking increases revenue for lending institutions. It increases the likelihood that the borrower would return to your institution for future loans. That means there could even be more referral business. Customers like personalized service (who doesn’t love some individualized catering?). So when you build a personalized relationship with each and every one of your customers, that gives your financial institution an edge over the larger institutions who don’t have the same proximity to the community and have a larger customer base. And, long-lasting connections with your customers allows you to stand out against competing lenders who are all vying for the same business. On the other side of lending, your borrower benefits, too. They don’t need as many collateral requirements over time. That personalized service goes a long way in increasing the likelihood of loan approval and the longer your relationship lasts with the client – there’s more understanding of their needs. It’s also important to keep in mind that there would be increased credit availability the longer the relationship endures. How to Improve Your Customer...
Grow Your Business Using Financial Analysis

Grow Your Business Using Financial Analysis

How Financial Analysis Can Fuel Your Tactical Execution for Growth Successful business owners consistently evaluate the performance of his or her company and compare it to industry peers and competitors. But, whether you’re a business owner or an advisor, reading between the lines of financial statements is essential for the company’s tactical execution for growth. Analyze Financial Ratios Financial ratios are important financial analysis tools that can you help you implement action plans for profitability, leverage, liquidity and more. This is a traditional financial statement analysis tool. While ratios mostly report on a business’s past performance, they also act as a strategic predictor tool that pinpoints a business’s weak areas. Then, the owner can start improving this area in order to optimize growth. This gives you a 360-degree view of your business allowing you to look at past and present performance as well as financial projection for the future. Horizontal Analysis You can analyze financial ratios during your current financial period compared to the past year of your company’s financials. This is known as a horizontal analysis. The number of years you can compare financial statements will rely on the financial analysis software you are using. For instance, IndustriusCFO allows you to compare up to four years of financial statements (if you have four years’ worth of statements). This comparison will allow you to identify good and bad trends and adjust your business practices accordingly. When you compare your company’s financials to another company’s financials, you can see exactly how your ratios stack up against each other. However, if you’re analyzing a startup’s financials, you wouldn’t be able to...
How to Perform Financial Risk Analysis

How to Perform Financial Risk Analysis

How to Identify Potential Risks Financial Risk Analysis looks at a company’s problems it could potentially encounter in daily operations. When changes in financial markets, legal liabilities or even manmade disasters occur, business operations can be disrupted. Once you identify potential risks, you can then prioritize them and take action steps to handle them, which include avoiding the risk, reducing negative effects, accepting the consequences of the risk, or transferring the risk elsewhere. As a growing company, proactively managing business risks will help you sustain growth. But, before you start identifying risks, assess your business. Ask yourself what could affect key services you offer or what could affect your staff. There are four main categories of risk you should consider to help you identify potential risks within your business: Compliance – These are risks related to the need to comply with rules and regulations. For example, you may need to think about whether health and safety regulations could increase your overhead costs. Strategic – These are risks associated with operating in a particular industry like companies merging, industry changes, or research development. You want to think about the strategic risk of the possibility of a company in China acquiring one of your competitors in the U.S. You want to be prepared with a response by considering different scenarios. Financial – These risks include your business transactions and your financial systems in place. To identify financial risk, examine your daily financial operations, particularly cash flow. Operational – These risks are linked to your company’s administrative and operational procedures ranging from your IT systems, to regulations to recruitment. For instance, if you’re...
How to Improve a Business Using Benchmarking Analysis

How to Improve a Business Using Benchmarking Analysis

Why You Should Be Benchmarking If you are a business owner, an accountant or business coach advising a growing business, measuring the company’s performance can help improve productivity and profit. Measuring performance keeps track of the business’s progress and gives you information to implement a target-setting system allowing you to strategize a plan for growth. Benchmarking a business is the process of evaluating it and comparing it to other businesses or internally based on measurements. It’s a great tool for improving your understanding of a company’s performance and potential. Who You Should Benchmark Against You can benchmark internally within the business. For instance, you can examine performance among departments within the company. Or you can compare the business to other businesses in the same industry. Yours or client’s company’s objectives and market position will also play a role in the comparisons you’d like to make. Info Entrepreneurs, a team of business information experts from the Board of Trade of Metropolitan Montreal says, “For example, a small business in a crowded sector may want to benchmark itself against average performance levels in the sector. But a business targeting rapid and significant growth may choose comparisons with an established market leader.” What to Measure Different industries and companies within an industry measure success differently. But, these financial measurements or benchmarks provide a quick evaluation of a business’s financial health: Net Profit Margin – This is the most important measurement. It is calculated by dividing net profit by revenue. By using this, you can understand how each dollar earned by the company is translated into profits. Liquidity Ratios – You should review two...