Allen Bostrom – Universal Accounting

An associate of mine once took over the management of a car dealership that was really having some financial difficulty. In order to generate more cash, he sold one of the product lines to another company. It raised a lot of immediate cash. Then, after reviewing the accounting statements, he realized that this particular product line had been generating a large portion of the profit. Although he was able to solve a short-term cash problem, he created a longer-term problem. He then had to acquire other product lines to replace the moneymaker that was lost. This problem could have been avoided altogether if the accounting system had been set up in order to give him the information that he needed to take immediate action. This accounting problem was soon remedied, but it took several months to re-build sales to previous levels.

Everything you do in business is related to Marketing. Accounting should play an integral part of the marketing effort. How can an accounting system help in Marketing? Your accounting system should collect critical information for evaluation by the business operator. Your accounting system should provide the answers to the following questions which will support sales growth:

• What are customers buying? Where are they coming from? How much did each customer pay for the products and services you provide? How did they pay—cash or credit?
• What product lines are selling the most? What products have the greatest gross profit margin? How are these products selling, compared to other products? Which products are being returned? If financed, is there a correlation between the products sold on credit and bad debts?
• What is the cost of sales? Which assets are being used to create sales? (Remember, all assets in the business should be used in some way to promote sales.)
• What information from each sale needs to be collected to help in making future sales, and in responding to the customers’ specific needs?

This list of questions has helped me develop excellent accounting systems for clients.  Do you have anything to add to it?  What are your thoughts?