What are the top five questions I should ask my accounting team?
The first might be, “Explain the variances of the performance in my profit and loss statement this month versus last month or this year to date, versus last year to date.” I want to see material changes and explain or understand why those exist.
A second might be, ” Show me how my profit margins have changed in this period versus last period or this year versus last year.” Profit margins being things like gross profit or operating profit or net profit. That will help unlock or understand where you may have improved your gross margin. Or maybe incurred more expenses as a percent of total expenses as a percent of total revenue.
The third question would, “Which of my customers are profitable and which of my customers are unprofitable?” Now we are starting to get down to customer level profitability. Unlocking that analysis may be one of the most powerful levers you have in your business.
Question four would be: “where do profit opportunities, profit improvement opportunities exist in the business?” This question empowers your accounting team to observe your information and guide you in the discovery of understanding where possibility may be may exist. Could it be around growth? Maybe it’s increasing your prices. Or driving top line through added volume. Or reducing your cost of sales.
There is nothing here that is overly overly innovative but it’s the rigor and the discipline of asking yourself questions that might be a blind spot for you.
The last question you could ask is, “What is my capacity or current capacity utilization?” How much headroom do I have to add more growth without meaningfully adding more overhead costs or personnel costs?
This is a good list of five questions to ask your accounting team, give it a go. Let me know what you learn.