Accounting and marketing may seem like left and right brain endeavors that would have difficulty working together.
The opposite is true.
While marketing brings money in, accounting analyzes how money is spent and return on investment. Similar to marketing and creative professionals, today’s accountants and Certified Public Accountants (CPAs) are tech savvy and efficiency oriented.
Unfortunately, marketing professionals are sometimes hesitant to work with accountants. For some marketing professionals, working with an accountant is seen as another hurdle to doing their jobs. Marketing professionals already spend a considerable amount of time educating clients about marketing strategies and technologies. And because the trust factor for marketing is already low, many business owners don’t view marketing as important to their budget as other operating expenses.
How accounting can help marketing
When marketing is aligned with financial goals, there is an accurate account of marketing’s impact on a company’s profitability. For instance, if a company experienced higher sales than normal but spent over half of that amount to launch a marketing campaign, marketing could be impeding profitability.
That’s where accountants come in. Accountants do a much better job than marketing professionals at analyzing the right kind of data. At the same time, marketing experts are more adept at determining what type of activities yield the best results.
When accounting and marketing work together for the greater good of a company, they are:
- Monitoring sales trends
- Openly dialoguing about the effectiveness of marketing and advertising efforts
- Tracking marketing expenditures based on pre-set budgets
- Allocating resources more efficiently
- Taking the driver’s seat with marketing activities that yield higher results
What better way for a marketing agency to build trust with a client than by providing accurate, action-oriented analysis that determines effective strategies?
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Marketing reports infused with accounting tell the right story
Marketing reports that work with accounting accurately determine the viability of marketing and sales strategies. Clear and concise marketing financial analysis allow for better business intelligence and better decision-making.
Accountants are educated and trained to monitor and to analyze financial activity. They regularly review financial statements and gauge whether or not the business is profitable within a certain period of time.
Accountants prepare and analyze the financial statements, data from which allows them to determine:
- where excessive spending is taking place
- sales trends
- what the business can do differently to be more profitable
Marketing reports typically consist of:
- gross sales per campaign
- gross sales per new customer acquisition
- gross web sales based on the number of customer hits
- gross sales based on A/B Split test results, etc.
This information can help prepare marketing and sales strategies for new product launches or breaking into new markets.
Another example: A company is debating on whether to invest in radio advertisements that reach a limited target market audience or digital marketing campaigns that reach a global audience. Marketing and accounting can determine which marketing campaign will have the most significant impact on sales.
Determining marketing expense vs. profitability
Ratio reports analyze the relationship between sales and expenses. If a company’s sales were $1 million during the first quarter and their total expenses amounted to $250,000, then the expense ratio is 25% of gross sales.
However, if the marketing portion of the overall expenses was $50,000 for the same period, then the marketing budget accounts for 20% of the overall first-quarter expenses. In other words, there is only a 5% gross sales.
When looking at the marketing and sales trends, accounting and marketing may decide there is a need for a campaign to increase sales. This could mean an increase in the amount spent on marketing activities by increasing their overall marketing budget.
A decision like this is a result of the collaboration between the marketing and accounting.
Evaluating the lifetime value of a customer
Accountants help determine signs and key performance indicators (KPIs) that indicate a customer may be low or slow paying. They can point out potential warning signs and develop questions about what to look out for beforehand.
When companies provide a service for customers over a long period of time, this is tied to the bottom line. Let’s say the customer struggles or even fails to make payments. This will have a significant impact on return on investment (ROI).
Now, let’s add a dollar amount to this scenario. If customer acquisition cost (CAC) for one customer is $10,000, then it’s imperative that the customer purchases products or services in an amount that’s more than $10,000 to yield a positive return. Ideally, the customer will provide repeat business for the long haul.
When calculating the ROI, keep in mind that customer acquisition costs are incurred during the initial customer acquisition process. Of course, there are some additional marketing expenses to maintain brand awareness and executing promotions, but for the most part, the initial CAC has already been absorbed.
It’s when customers fail to pay that ROI suffers.
Reporting Return on Investment
While there is a lot that goes into marketing — from customer acquisition and lead generation strategies to advertising and branding strategies — marketing dollars should be spent on customer acquisition programs that target customers who have a higher probability as a paying client.
Accountants can easily identify where marketers can make improvements with impartial recommendations. They understand trends and patterns concerning various performance metrics that marketing may overlook.
When marketing professionals deliver reports with the data business owners truly care about — the company’s bottom line — they’re showing ROI evidence for their marketing and sales strategies. Most importantly, marketers are reminding their clients why they were hired in the first place.