Designed to get you back to work.
Accounting is necessary in any business. As a small business owner, it’s important to recognize that the best practices used by Fortune 500 companies also apply to you. Following basic accounting principles is essential for success in any size business; savvy record-keeping and financial analysis is key to not only monitoring your expenses, but to discovering new avenues of growth. In addition, it ensures you stay responsible for tax obligations to the government and to your employees.
Accounting entails more than just managing credits and debits, and it comes into play more often in everyday business decisions than you may realize. A few examples include:
Closely monitoring your accounts receivable to illustrate trends or behaviors in your customer base. It can also cut down on the costs you incur by pursuing late payers.
Establishing a detailed budget to help discover inefficiencies within your operations.
Sudden changes in vendor costs or sales revenues can alert you to important industry changes.
Understanding your financial position in order to spot problem areas that could interfere with loans earmarked for expansion.
As you consider your accounting strategy, review your company’s financial goals. Whether you are a solo entrepreneur or you employ a staff, your survival hinges on clearly stated financial objectives. You may be in business to reap as much profit as you can, or you may be interested in sharing a product or service that you believe in. Either way, experts agree that one of the most common reasons small business fail is because cash flow runs dry. To prevent this disaster, your business should implement policies for efficient record-keeping and a sound financial strategy.
Taxes are unavoidable. Depending where you operate and the nature of your business, the IRS has very specific requirements about the documentation required of your business. Submitting improper or inaccurate documentation can get you into trouble, and it can be extremely costly in terms of fees and penalties. The required documentation has its benefits though, and it can give you vital information about the health of your business. Regular and consistent financial statements provide a clearer picture of your business than your bank balance. Understanding IRS requirements and how you can make them work for you can give you a deeper understanding of your company’s financial health.