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Three Reasons to Start Using Professional Bookkeeping and Accounting For
Your Business Today
By Finance Accounting International
May 2014 (FINACCUSA.com)
Three Reasons
There are three primary reasons accounting is
critical to the success of every business:
- tax planning,
- cash flow management,
- and, management information.
Let’s go through each of them in the order above.
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Three Primary Benefits of Accounting for Business
Tax Planning – How would you like to be the coach of a basketball team, but were not allowed to see the score, nor the statistics until the end of the game? Does it surprise you that many small business owners run their businesses this way?
Many small business owners just collect all their financial information in a box during the year. After the year is over, they will drop these on a tax preparer’s desk, and hope the tax person can figure the assortment of papers out. The tax preparer then does his/her best to sort through the materials, and arrive at the information the IRS is looking for. Then a phone call to the wearied business owner will notify him/her of the damages.
It doesn’t take much imagination to realize that this is no way to manage a business. With information available throughout the year, a business can take advantage of tax deductions and tax planning concepts that will reduce taxes for the owner. It’s not unusual to save the business more on taxes than we charge them in fees for a year.
Cash Flow – Every Business owner knows that cash is the ‘life blood’ of the business. Without it the business suffers, and in many cases is forced to close. On the other hand, with proper cash flow management, a business owner can make the best use of his/her cash, and anticipate cash needs in time to arrange for financing, if necessary.
Furthermore, knowing the bank balance is not enough. A business can have a sizable bank balance, but be in terrible shape. Our role is to go beyond the bank balance, and see further cash needs and resources.
Not only will we be able to provide the business owner with accurate lists of cash resources (current assets), but we will also assist them in collecting accounts receivable, reducing their tax burden, and acquiring financing through preparing all the necessary documentation for the bank, investor, or finance company. The fact that we are helping the company with their accounting will improve the chances of
them getting a loan, as banks deeply recognize the value of good financial record keeping.
Management Controls – Would you ever drive your car blind-folded? Of course not, that would be not only foolish but probably have tragic consequences. Yet, so many businesses have the blindfold on when they operate their business. They have no idea where they’ve been, where they’re at, or where they plan to go. Is there any wonder why one-third of all businesses close in the first 6 months of existence?
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What to Do About It
Contact a professional Bookkeeper and Accountant today by calling us at 424.260.8572 and asking to view our presentation booklet. There is no obligation to call. Ask to view a sample of complete books of accounting for various types of businesses.
Take a look at what type of information you will be provided that will help you in running your business. Review each journal. Identify the value of knowing how much sales a business had each month, and where the money was spent. Note that payroll will no longer be the fearful subject it now is as you hand over the burden of maintaining it. If you already have a payroll service processing your payroll, great, we can help you understand your payroll even better and communicate to the state and various taxing agencies regarding your numbers.
View the income statement and balance sheet. The income statement provides the monthly ‘score’ for the business. By comparing the current month to prior months a business can not only determine if they are improving or not, but also why profits were up or down.
The balance sheet provides information on financial resources and obligations. This will help to determine the strength and solvency of the business. By tracking key indicators, such as current ratio, together we along with the business owners can identify potential problems before they become insurmountable.
In each of these scenarios we want to emphasize that information is power. The more information we can provide to the business owners the more capable they will be at running their business effectively. If you find these benefits are appealing then you should talk with a professional Bookkeeper and Accountant today.
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