Four Questions Your Accountant & Bookkeeper Can Answer That Take Your Business To The Next Level

In many organizations, accounting takes a back seat to other functions. Afterall, accountants are the scorekeepers, not the players on the field. They book entries, keep track of expense reports, and make sure payments are received and bills paid. Those are important functions!

But, looking at accountants and bookkeepers solely as the scorekeepers is a missed opportunity. A good accounting function keeps score AND adds value. Good accounting leaders serve as a bridge between departments, narrows organizational focus to the most critical business problems and helps drive profitability and product choices.

Sanitas Accounting has its own approach to elevate the function. We developed a methodology called the Owners Empowerment System (“OES”) that helps businesses understand where to focus their efforts, how to align teams, and narrow focus to the 2-3 critical KPI’s. The system has produced results that helped clients achieve their financial goals. OES combines principles from business analysis, zero-based budgeting, cross-functional collaboration, compensation design, and team alignment.

This is part 1 of a 2 part series and we hope you get enough value to read part 2.

If you want more out of your business results ask your accountants to help you answer these 4 questions.

What Business Are You In? Does Your Team Agree?

In the movie The Founder, there is a great scene between Ray Kroc (Michael Keaton) and Harry Sonneborn (BJ Novak) where Sonneborn reviews McDonalds’ books and sees McDonalds it as a lousy, low-margin business that sells hamburgers. Instead, Sonneborn gives Kroc the insight that McDonalds that financial success came from McDonalds thinking of itself as a real estate business rather than a food seller.

The scene is great and representative of what I’ve seen in countless businesses. The organization is selling, they have a successful product, and payroll is being met. Things are great, right? Maybe, but has the leadership team thought about the business they’re in? Are they digging deeper to find out why customers hired their product?

Afterall, the iPod wasn’t a success because it was the first MP3 player on the market. The iPod didn’t even have the most storage. The iPod won because it was a pretty good MP3 player that was the easiest and most convenient to use. The iPod won because they produced a product that was beautiful, worked pretty well, and, most importantly made listening to music easy.

A good team, supported by someone with an understanding of the numbers can help clarify the business the organization is really in. I worked at an ecommerce client that sold office furniture. Most people thought the company was in the furniture business. It wasn’t. The organization got a lot of clarity when it understood that it was a marketing company that happened to sell furniture.

The exercise of figuring out what business you are in is important and requires soul searching and digging deeper. When you figure out the answer, your team will gain clarity on where they need to be the best in the world and direct resources.

Do You Understand Your Unit Economics?

Admittedly, understanding your unit economics is a cornerstone function performed by most accounting professionals. Many companies know that if a customer buys Product A it has Margin A and Product B has Margin B. But, many companies do not understand how the unit economics of their offerings interact and affect each other.

Businesses that understand the collective unit economics interactions are better at driving operational and financial leverage. I have had clients where they knew SKU level margin details, but missed that relative pricing between products cannibalized margins as clients substituted towards the lower margin product. Another client included a complimentary professional service package to high potential clients and, in the process, devalued their professional service offering to their prospect. In both instances simple changes in price had profound impacts on sales, customer retention, and customer lifetime value. Unlocking unit economics is a powerful lever that will dramatically improve your financial results.

Having a deep understanding of your business unit economics is critical and more nuanced than it appears. While it may not apply to all businesses, I find that thinking of your offerings as a bundle can help unlock crucial conversations about unit economics.

Do You Know Which Clients to Fire?

This is easy to understand, hard to do.

Many organizations have inadvertently set up incentives that reward bringing in any client, regardless of fit. I’ve seen companies where salespeople were paid commission irrespective of customer fit.

In the organization, the data clearly indicated our product was not a good fit for customers from a specific industry. Those customers struggled to use the product, utilized a lot of our support team’s time, and had churn rates double of the next closest customer cohort. The results from selling to those customers frustrated everyone involved (well, maybe not the salesperson). The company eventually de-emphasized selling to those customers and freed up resources to focus on customers we could serve better. Cash flow, profit and morale improved.

Every company is resource constrained. With that being case, are you best utilizing your resources for the long-term success of the business and customer or to meet this quarter’s projections? Are you selling to all potential customers or focusing on the customers that will sing your praises? Are you incentivizing your team to find the right customers and let go of the wrong customers?

Bookkeepers and Fractional CFO's can analyze your customer profitability and tell you which customers to fire.

Does Your Product List Make Sense? Or, Is It Dragging You Down?

In-N-Out and the Cheesecake Factory sell food, but attack the problem differently.

Bookkeepers and Fractional CFO's can analyze your product profitability

For In-N-Out, less is more. They sell three things: burgers, fries, and shakes. If you don’t want any of those, you should eat somewhere else. In-N-Out has a cult like fanatics and has continuously expanded since it was founded.

For Cheesecake Factory, more is more. When you sit down, the waiter gives you a menu the size of a phone book with a wide variety of cuisines. Cheesecake Factory has people that like eating there from time-to-time and has gone through periods of restaurant expansion and contraction.

While there are a number of difference between the two restaurant chains, my belief is that the discipline and consistency In-N-Out has shown in its product offering is a key to its success. They are the best in the world at selling the 3 things on their menu. For everything else, they don’t compete in the arena.

On the other hand, Cheesecake Factory serves both good and mediocre food. Where is Cheesecake Factory the best in the world? Who knows, but its not easy to find.

With that in mind, ask yourself a few questions:

Does my product list make sense?
Is my product list too extensive and dragging me down?
Would you rather be the best in the world at selling one item or be good at selling 10 items?

Often, companies that sell from extensive product lists are often financially and operationally dragged down.

Remember Apple effectively only sells 5 products. In-N-Out sells 3. Do you need to sell as many or more than them?

Focused and disciplined usually outperforms.

Need Accounting & Bookkeeping Help To Answer These Questions?

Our team of accountants, bookkeepers, and fractional CFO’s are happy to help you answer the business you are in as well as the other questions.

Boulder, Colorado

Do you know what business you are in?