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Are your accounts SMART?

Guest post by: Kathryn Crockford AFA

Article Overview: SMART is an acronym common among business coaches. This article suggests we should apply it within our accounting procedures and make it a part of our everyday accounting results. In order to achieve we must first set targets - our accounts can only tell us how we are doing if we prepare them using the right information and the right amount of detail.

Are your accounts SMART?

Today's economic climate makes it necessary for all of us to manage our money in the most cost effective manner.

All of us are now much more accountable to our stakeholders, whether they are shareholders, employees, customers orsuppliers.Every businesshas to have their eye on the bottom line.

Traditionally, SMART is a business planning tool where goals are set that are specific, measurable, achievable, realistic and timely. Accounting and finance are a core element in business planning and as such deserve our full attention when setting any kind of business goals or operational plan.

Without goals how do we know when we have achieved anything?

Your first target should be to ensure you will be able to take enough home, after the business has paid its taxes, to meet you and your family's needs.

From knowing what you need, you should then add back the tax you would need to pay and also the amount of spend you cannot avoid - such as Rent /Rates /Insurances.

This figure should then be at least equal to your gross profit - your sales less the associated direct costs. If your direct costs are known - even if only in percentage form - you can then work out your sales targets.

As a business owner it is vital to become proactive in your accounting methods.

Rather than the reactive way that some employwhere the accounts are simply a reflection of the year's activities,make them a useful tool in planningyour business' activities.

Get back to basics first. Look at your chart of accounts. Does it give you scope to measure accurately

• your different income streams
• your direct costs
• the effect of your spend on advertising and promotion

You can introduce sub accounts to break out this information if it is not there already. It is not enough to know you have sold x number of high value items unless you know what it has cost you to make or sell them.

It is also important to be able to differentiate between fixed costs that must be paid, where you have a choice and also what you need to take out of your distributable profit.

If you are in business you need to know not just if your business is profitable but if it is profitable enough to meet your needs.

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Article Tags: accounting procedures, business coaches, targets



Related Forum Posts
Re: $200,000 in 91 days - You have setup a SMART goal. But, is this realistic. I doubt. Anyway will wait till March to hear from you.
I could use some help with my Marketing Plan Objective - Hi guys, Well I'm off to the UK be back to work on April 10th. In the meantime, I could use some help. My Marketing Plan Objective is definitely not SMART. It doesn't have anything specific, or measurable, it is achievable, it is realistic and it is timed. You're help will be appreciated. Hope to tallk to you in April and see you in May. Judi
Re: Twitter Members, Post Your Twitter ID Here - Hey GT good to see you found the conversation that was taking place about your accounts and took necessary action. At first I thought you got hit with a hacker or something like that. Then I figured out that you had them auto-updating from blip. They are your accounts and you can do as you wish, it doesn't matter to me, I just gave you my input from the perspective of a follower and it looked odd having all those updates that didn't seem to fit in. Talk to you soon my friend, Trent
Re: Social Media & Digg, Google, MySpace, and YouTube - [quote="JBunion":8d9xkqac]I spend considerable time navigating Facebook, YouTube, BlogTV.com, and Twitter. They have all proved to be very beneficial in setting up lead generation for my internet business. It is surprising how annonymous one can be with their postings and schematics as well, setting up multiple accounts and profiles to swoon traffic into a particular direction. I was shocked to see how ellaborate some MySpace users were. They were actually 'fake', as a marketing firm essentially managed all of them in an effort to create buzz around their client (music industry). It's shocking nowadays how far someone will go to market themselves.[/quote:8d9xkqac] That doesn't really surprise me any. People or companies will do almost anything to get noticed and have their name or brand made aware. It's about the same as opening up a bunch of social bookmarking accounts for the same sites to bookmark all your posts with each account. Or, create a bunch of YouTube accounts and rate and comment on all your videos from separate accounts. There are marketers that actually teach this stuff. My question is this. Does it actually pay off in the end?
Re: Meltdown in the Financial Markets - [quote="ideasuniversity":25hqys3v]So what happens to people investments with these three banks[/quote:25hqys3v] This is how I understand it. For people who have money in banks that are "FDIC Insured" - the first $100,000 in an individual account is insured, in joint accounts, the first $250,000 is insured. I heard today that investment accounts can be insured up to $500,000. But, for banks that are not "FDIC Insured" - the money is gone. There are some creative ways around these limitations, but the accounts have to be handled in specific ways. I have my mortgage with one of the mortgage companies that the government took over and so far, I've heard to keep making the payments. Shri


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