• July 29, 2021

Evaluating the Efficiency of your Financial Processes

Finance

How does one make sure the efficiency of your company’s operations within the framework of your existing financial department? Keep a pointy eye on the performance of your business processes and key metrics related to them. Below are some suggested metrics you’ll consider integrating into your financial analyses so as to live whether your current financial processes are optimized or not.

Receivables Turnover Ratio- this is often a company’s credit sales divided by average account receivables, and it’s an indicator of how efficiently a business collects credit extended to customers or clients. Maintaining a sound accounts receivables practice can greatly help maintain the liquidity of Bookkeeping Services in Columbus, reducing the likelihood of cash lost as results of missed collections. As small business on a budget, you would possibly already be following established practices to make sure that your financial processes are on target.

Days Sales Outstanding (DSO) – Metrics that reduce the quantity time it takes to gather receivables can assist you tighten your cash flows and make sure that additional cash stays within the business. One rule to recollect is that you simply shouldn’t keep assets open for an indeterminate period. The longer your money remains unpaid, the upper the probabilities of uncertainty on collecting it.

Finance

Month-end Closing Period- Ideally, month-end closing should be bound up within a 1 month period. However, in practice the month end closing often extends into subsequent month also.

Month-end closings that move beyond the primary week of the next month indicate a requirement to streamline your processes. If your paperwork isn’t so as, your actual month-end closing can last for an inordinately while, counting on the quantity of labor that must be completed.

Read Also – 5 Trends that will define the future of accounting in 2021.

Rapid Follow-up for Accounts Receivable- Your assets needs an efficiency check if it’s taking quite 30 days, or if cash remains uncollected and pending for quite a month. it’s going to even be helpful to determine a maximum collection period of time , for instance 35 days. Online Accounting Services in Columbus certain key functions and enabling reminders to notify you about which accounts to pursue as they approach that maximum collection period. Also, consider incanting early payments by offering discounts.

Daily reconciliations- If you’ve defaulted on your daily reconciliations, your month end closing can become a frightening task. Ideally, reconciliations should be performed on a day to day. Banking especially should be reconciled everyday rather than being pushed back. Like assets collections, banking reconciliations additionally to ledger reconciliations lend themselves well to automation, which could provide enormous gains in productivity.

Nura Lee

I'm Nura Lee a full time Blogger. I am working for Accounting services and enjoy writing about technical subjects like Accounting and Bookkeeping.