GETTING THE BOOKEEPING RIGHT IS THE BUILDING BLOCK OF EVERYTHING
Bookkeeping is the process of keeping accurate records of company spending and revenue, there are advantages to doing accurate bookkeeping that every business owner should understand.
A comprehensive bookkeeping system allows a business owner to analyze spending and revenue one item at a time. The data can be grouped by the week, month, quarter or year to be analyzed and compared to past years. This is one way that business owners can discover ways to cut back on company spending and improve profitability.
Companies require an accurate report of current spending and revenue to help compare actual results with projections in the annual budget. A bookkeeping system facilitates up-to-date company financial information that can be cross-checked with the budget to make sure that the company is not overspending. Bookkeeping also identifies instances of under-spending so the company may find new uses for the extra money to help productivity.
Bookkeeping services include checking the accuracy of each payroll period to make sure that each employee receives the proper amount -- an especially important function in organizations that pay bonuses, sales commissions and supplemental payment based on a percentage of revenue. Confirming payroll numbers keeps employees satisfied with their pay and prevents the company from over- or underpaying payroll taxes as well.
STRONG ACCOUNTING AND COMPLIANCE ENVIRONMENT
The advantages of accounting standards become obvious to small business owners when they clearly see the health and performance of their company through simple financial data. When recording procedures are followed on a regular basis, data can be gathered into reports that easily summarizes information within specific categories. In turn, that information can be analyzed and used to make strategic decisions concerning company growth.
Among the basic benefits of accounting is that financial records are organized in one place and systematized. All your company's financial information is recorded and placed into categories which can be easily accessed, summarized and evaluated. A record of each sale is recorded in an invoice, payments are recorded as revenue, payroll and sales tax is set aside in a liabilities account and operating costs are expensed to the appropriate departments. Once appropriately recorded, this information can now be tracked and used by managers within your company.
It is the accounting system or "books" that records and tracks key information such as income, expenses, liabilities and cash flow. Business owners and company managers will praise the merits of an accounting department that supplies them with up to date financial information. Continual input from the accounting department helps them successfully evaluate data and then decide on the company's next steps. Financial summaries can reveal areas of strength and weakness. For example, does extra time need to be spent tracking down delinquent customer payments to bring in more cash? Do overtime hours need to be restricted to reduce payroll expenses? Did the amount of money spent on last month's advertising blast seem to pay for itself in increased revenue? Careful analysis of regular financial statements will keep a company operating efficiently and help it stay ahead of potential problems.
Another one of the advantages of accounting standards is that they will save you headaches when it comes to quarterly reporting and paying of taxes. It is important to maintain an accurate record of sales through invoicing and accounts receivable as well as wage payments made to employees. Regular deposits for earned income tax, filing of quarterly income statements and payment of sales tax to state taxing authorities are all a necessary part of doing business. But if you only run the numbers when it comes time to pay your bills, you could get caught short of cash and have trouble making the required deposits or payments. Following routine accounting methods will help you stay of aware of upcoming bills so you can plan ahead and have enough cash on hand to meet your tax obligations.
While accounting practices are essential for running a company, they are also useful for outside entities to evaluate the financial performance and value of a company. Creditors want to know how a business in which they have invested money is faring in the marketplace. Is their investment well placed and will they get their money returned to them? If you are trying to gather investors to back your company, you will need financial documents that indicate the overall financial health of your company.
GOOD BUSINESS ADVISORY
Sometimes, when business gets tough, it’s hard to separate your feelings from the needs of your company. In order to truly evaluate what your company requires to move forward, you need a neutral third party, one who’s an expert in growing businesses and improving company efficiency. Essentially, you need a small business advisor.
A small business advisor can have a great many advantages to a struggling company. They can recognize and pinpoint problem areas, discover inefficiencies and redundancies, and provide bona fide solutions that can help get the business back on a growth track.
A committed Accountant can be an accelerant for the business and provide strengths to counteract any weaknesses an owner might have. Consider these advantages:
Small business owners are notorious for their optimistic philosophies toward their businesses. While this is certainly a trait that keeps an owner motivated, the right accountant can challenge the owner to think clearly and objectively. This helps avoid an overly optimistic or “tunnel vision” approach regarding the business.
Accountants can provide creative ideas and alternative approaches for problem situations or new business opportunities. When owners are overwhelmed just trying to operate their businesses day in and day out, they often lack the time or experiences to see beyond their daily routines. Accountants can bring a new perspective regarding untapped opportunities and innovative solutions that can propel a small business to a higher level of profitability.
Networking is valuable for any business. Accountants can use their connections for possible funding sources, finding strategic partners, knowing vendors, or connecting owners with subject matter experts. Leveraging the connections of accountants can increase the visibility of a small business to other members of a community.
Sometimes a business owner does not have a specific problem or situation that needs to be addressed but just needs a sounding board of “think tank partners” to kick around the pros and cons of doing something “this way or that way.” Sometimes hearing other points of view can steer an owner in the direction needed to create future growth.