It’s no secret that every business owner wants to make more money and maximize profits. The problem is they don’t know how to manage the finances of their business which leaves them confused and frustrated, not knowing which levers to pull to drive success. They may make decisions to make more money, but they’re not sure if those decisions are actually helping or hurting.
It strikes a nerve with CEOs that accountants are often not giving them the data they really need to make better decisions. CEOs of closely held businesses, unintentionally, underappreciate accounting. Because of that, accounting is often underfunded. If a business owner has an extra dollar of profit, they tend to invest it in marketing or selling their product/service.
This was certainly the case with Jim, a CEO of a growing company supporting the real estate industry. His company got hurt in the Great Recession, recovered, and now is growing and expanding. Because a piece of his business supports the construction industry, he is expanding into new markets.
However, he doesn’t have clarity if those new markets are profitable or not and doesn’t know where he needs to add people to support growth. He laid off his controller to cut costs during the recession. Now, he finds himself needing valuable data of revenue and profit by market and by division that his current staff can’t provide. So, he recently added a controller who has significant experience in the construction industry and will provide the data he needs to make good decisions.
There are several reasons for a company to add a controller:
- When you find you need data that is beyond the ability your accounting person can provide, it might be time to add a controller. That data is usually in the form of reports: sales by client or market and profit by client or market. A good rule of thumb is if a company makes over $5 million in revenue, they may need accounting expertise that a controller could provide.
- Growth increases complexity of the organization. When an organization increases in complexity — whether it’s because lines of business have been added or multiple sites have been opened — operations tend to get more segregated. At this point, it’s best for companies to have someone who can not only generate data, but also interpret it so that business owners understand why changes have occurred over time. A controller can also make recommendations that will put the company in the best position to save money and use capital.
- Trend analysis is a fundamental responsibility of leaders. They need frequent data and feedback from markets to make the right calls. The accounting function is critical. A controller should provide the kinds of reports and graphs that help the leadership team see into the future and shape strategic planning.
Is the accounting function in your organization under-appreciated and therefore, underfunded? Are you in need of someone to talk to about the critical issues in your business where you lack data to make decisions? Maybe you’re unsure about which levers to pull in your business to improve cash flow and profitability?
If this is you, let’s talk. We can analyze the financial health of your business and develop a plan that takes you from financial confusion to clarity. Pretty soon you could be traveling the road to financial success with profitability and healthy cash flow.