Price is only a consideration in the absence of value. One of the most devastating accounting errors made by most companies is pricing their products and services too low. Many businesses break into new markets by under-cutting their competition. In the short run, they can gain new customers. However, the marginal cost of each new customer acquired is exorbitant over the long run. It also brings into question the quality of the company’s products and services by their customers. Quoting prices below your required profit requirements is not a sustainable strategy.
Another critical accounting error is building budgets based on last year’s performance. Future success cannot be forecast based on prior performance. New strategic assumptions must be created that are in alignment with management’s current goals to be successful. An accurate budget will list all anticipated expenses as well as take into consideration changes in everyday business realities such as seasonal changes in sales volume.
Best Accounting Practices
Pacific Crest Group’s posting “Identifying Best Accounting Practices” highlights several ways your accounting system can be a powerful tool in pricing and budgeting. It starts with creating consistent and well documented procedures. Using industry best practices makes the entire process efficient and effective for everyone involved.
Determine risks and weaknesses in your accounting methodology and make a list of ways to improve in those areas. Make sure there are checks and balances every step of the way. Listen to your vendors, clients and independent contractors regarding complaints they have about your practices. This type of feedback is critical in finding omissions, errors and potential fraud.
Review all your accounting policies and procedures at least annually. The more frequent your reviews the better. It is imperative that you keep up with new laws, practices and technologies in order to stay competitive.
PCG is a founding member of the Marin Business Forum. Our next meeting is Thursday, March 24, 2016 from 5 PM to 7 PM in the Drake’s Landing Community Room located at 300 Drakes Landing Road in Greenbrae. Lester Rosen, Esq. will provide a number of real-world case studies where employers stepped on legal landmines that could have been easily avoided with a safe hiring program. Please go to the Events page to register for this event.
Pacific Crest Group (PCG) provides professional services that keep your business focused on your critical objectives. We provide strategic Accounting and Human Resource (HR) services created specifically to help you meet your goals. Through exemplary customer service, clearly defined policies and procedures as well as a forward looking perspective, we provide the outsourced solutions that your business needs to grow. A PCG professional is happy to meet with you to discuss solutions for your unique requirements designed to maximize all of your business opportunities.