Car parts. Soda cans. Jellybeans. Tires. Cosmetics. Pet Food. Whatever you are manufacturing or distributing, you have products coming in one door and going out the other. The Big Picture: Your ability to reduce the time between “door number one” and “door number two” directly affects your cash flow and bottom line. But that’s not all. The steps to achieve maximized cash flow can be broken down into many micro steps that touch almost every department in your company.
Outsourcing your accounting helps manage the micro steps, from entering data and balancing accounts to creating reports, filing taxes, and planning for the future. That’s another of the main advantages of outsourcing your accounting: having an entire team of accounting professionals at your disposal—even occasionally—can open your eyes to fresh approaches to increasing cash flow.
Why Cash Flow is Important
Managing inventory effectively and efficiently is one way to increase cash flow. Still, from a previous post, we learned that Accounts Receivable management is also paramount. But WHY IS CASH FLOW important?
- Healthy cash flow can let you take advantage of trade discounts.
- It can allow you to put a down payment or to purchase a piece of equipment that you have been wanting to purchase.
- It can allow you to expand more quickly by jumping on opportunities that need free funds to grab a warehouse space or hire that unique talent who’s just become available, but they need a rich signing bonus.
- Or, your competitor had to sell their company quickly. You can buy it because you have the money! It’s exciting.
Do You Know If You Have the Money? REALLY?
Your accounting department is competent. They keep great books. Your checkbook is balanced, and you pay your bills on time or with discounts. Your employees get paid like clockwork, and you have a retirement plan that rivals the best in your industry. But you may need a solid handle on your future. Does your Accounting Manager act like a Controller? Can you afford a Controller? What about a CFO?
What problems do you face? Labor issues? Outdated technology? A changing geopolitical landscape? Unexpected growth (a good problem, but can you afford it?) Healthy cash flow helps you manage these bad and good problems with fewer headaches and sleepless nights.
How Do You Plan for Future Cash Flow?
Running a business is hard. You’re doing what you’re good at, which is why you’re successful, especially if you have money in the bank. And while you and your management team are pretty confident your accounting team is keeping track of the myriad of things for you to stay afloat, what about if you want to expand? How well can you weather setbacks of any kind? What things can trip you up if they’re not handled well?
Here are some considerations:
- Compliance issues—Audits of your financial statements, taxes, 401K plan, etc.
- Growth planning—Seeking more space, better employees, leaner inventory, and top-notch innovation.
- Strategies and tactics—Do you have the latest data and technology in place and understand them?
- Forecasting and guidance – Are you and your team looking forward? Are you positioned well in the marketplace versus your competition? Are you innovating or standing still?
Having an outsourced accounting department to inspire your in-house team can help with all of these, giving you complete clarity regarding your present and future cash flow. What can you do today? How will what you do today affect cash flow next week? Next month?
What is Outsourced Accounting? What’s included?
Outsourced Accounting can be everything from bookkeeping to an outsourced CFO. It’s flexible, and it’s temporary. One of the beauties is that you don’t have to pay an outsourced employee a 12-month salary plus benefits. You needn’t worry about accounting staff turnover.
Not only do outsourced accountants do the work, but they also provide many other services that ultimately affect Cash Flow for Manufacturing and Distribution management teams who are so busy. They welcome the professional, educated help of a team of CPAs and Accountants who do accounting work and only accounting work every single day. Outsourced accountants will:
- Review the existing accounting processes at your company.
- Provide suggestions and recommendations.
- Offer support to improve efficiencies, processes, and controls.
- Assist in the month-end closing protocols.
- Manage and train accounting personnel.
- Review accounting staff’s work.
- Provide monthly financials.
- Conduct monthly or quarterly meetings to discuss the financials, KPIs and profit and cash flow improvement strategies.
- Handle the meatier items, such as forecasting, budgeting, analysis, and planning.
- Prepare tax returns and instigate tax planning.
- Answer the question, “Can we afford this?”
The Bottom Line:
Cash flow is essential in any business, but in manufacturing and distribution, it becomes a key performance indicator that separates the good from the excellent. Customers who rely on your products need to know you can grow with them as they grow, be there with the product when needed, and deliver it where they want. Outsourced Accounting provides a confident foundation from which you and your existing management team, including the Controller and CFO, can make informed, assured decisions. It’s almost like an insurance policy.
At LSL CPAs, the accounting team finds that working with clients on an outsourced basis satisfies cash flow requirements almost by definition… letting their clients choose the level of engagement that fits their needs. Everyone wins.
Contact LSL CPAs today for an explanation of what outsourced accounting could mean to you and your cash flow.
