From the Lighthouse

Top Financial Strategies that Add Up for Your Business

At Northpoint, we’re Numbers driven, but we also enjoy having fun and sharing the light side of our profession.

Before we focus in on this month’s topic, here’s some levity to add to the mix:

  • Accounting is an accrual profession, where everyone works their assets off, and everybody counts.
  • Golf is a lot like taxes. You drive hard to get to the green and then wind up in the hole.
  • How can you tell when the chief accountant is getting soft? When they actually listen to marketing before saying no.

We hope that got some laughs … and now, on to this month’s topic.

Here at Northpoint, we know firsthand that accounting is one of those areas that isn’t at the top of most customers’ priority lists. We appreciate understanding the rules and principles of Credits and Debits isn’t terribly exciting and doesn’t come naturally for most because it’s simply not the way our minds work.

That being said, we believe it’s important for business owners to embrace and understand accounting principles because it’s key for success! The lack of understanding of basic accounting principles is often a major culprit contributing to business and retail failures across all industries we finance.

But, we’re not here to lecture. We’re here to help.

In our world, we obtain Financials annually that originate from several sources, ranging from “Internally Prepared” to “Accountant Prepared,” and to “Accountant Reviewed” or “Accountant Audited.” Sometimes a review of these docs may throw up a red flag and cause concern for our clients. For example, we may find Balance Sheets that don’t balance, or we may detect missing assets or corresponding liabilities. Sometimes, Profit and Loss Statements may be missing key elements like depreciation or interest expense.

In our conversations with customers, we understand some dealers produce Financials just to satisfy the lender or bank requirements. They really don’t understand the genuine benefits of having Financials to help guide smart business decisions.

Yes, we know working on the books is sometimes akin to visiting the dentist to get a tooth pulled. We get it! We also understand it takes a lot of time and work to establish a budget and/or forecast, but we can’t recommend it enough. Your ability to carefully monitor and measure against it is really “the secret sauce” for sustained business success.

Here are a few important considerations:

  • Owners and key managers should have a basic understanding of the impact of ALL costs and expenses on their business. FACT: Even though you may be profitable, you can still run out of cash.
  • When you review statements that you’ve received for the tax year, what’s your process? We recommend sitting with your key leadership team to jointly analyze and review what has happened to your assets, debt, equity, or cash flow. Get everybody up to speed and on the same page.
  • We recommend reviewing your financials on a monthly, quarterly and annual basis and aligning them to the budget you’ve established. This will allow you to quickly discern if you’re missing the boat or in control at the helm. And, having the key leadership team on the same page creates a higher level of accountability … and significantly better chance for maximizing profitability.
  • Make sure your GM or sales manager possesses and knows how to apply basic accounting skills including how to effectively price out the sale of a boat … along with understanding the bare minimums that must be charged for service by accounting for ALL the impacts of expenses, like cost of labor, rent/mortgage, interest, etc.
  • When requesting assistance from a partner or lender, be sure you’re able to communicate and demonstrate the minimum cash needs on a daily, weekly, or monthly basis for the business.
  • Align corresponding periods of your Balance Sheet with Profit and Loss Statements so you know if cash in the bank is decreasing; if Accounts Receivable or Inventory has increased; or if corresponding debt is trending up.

We’d like to offer up this analogy: your Financials are your business story for the year. Your business successes and/or failures should be reflected through the changes in your numbers.

Having a finger on the pulse of your business allows you to pivot as needed. Regular reviews may prompt smart questions, like “Are retail deals taking longer to fund?” Or, “How much did the inventory cost go up” … Or, “How much do you have in inventory?” Having the facts allows you to intelligently consider available options … for example, how much could you save and earn by allowing Elite Recreational Finance handle your F&I?

In closing, we hope you know you can always “count” on your team at Northpoint to support your organization. We’ve provided a few links to resources that can boost your accounting IQ as needed, and we’re always an email or phone call away.

Finance & Accounting Educational Resources

The following is a short list of established marine industry service providers that assist dealers and OEMs in accounting/financial management.

Northpoint does not provide recommendations but is pleased to provide these references and resources for consideration.

In alphabetical order: