- Accounting is the fundamental component of a business
- Accurate and timely information about business performance is critical to making decisions and obtaining financing
- Will assist in avoiding business failure
- Can help reduce legal and financial costs
The Value of an Accounting System
- What is selling the most
- Are the right products selling
- Who is buying
- Is the list of customers increasing or decreasing
- What amount of repeat business exist
- What is the average sale
- Who is selling the most
- What is the profit margin
- Is the company making money
- What is the debt to asset or equity ratio
- How is actual performance compared to budget
- What is the return on investment and capital
- How effective is the advertising
- Can specific channels be identified
- Would borrowing money be smart for expanding the business
- How fast is the company growing
- Does it make sense to invest in new equipment
- We is it reasonable to hire a new employee
- Can I afford to make an acquisition or should I sell the business
Useful Metrics
- Gross Revenue - Broken down by services
- Number of clients serviced
- Types of clients served - Diversity in client mix
- Expenses/Overhead
- Expense per client
- Net income - Net income per client
- How long has the business existed
- staff to client ratio
- Market segmentation
