Unfortunately, most small businesses do not put enough emphasis on their accounting until something has gone terribly wrong. The realization that your bookkeeping has not been kept up-to-date usually happens a few days before taxes are due or even worse, when you notice charges on your bank account for a check bouncing. You can save yourself all of the stress and less minute updating by developing a successful accounting strategy upfront.
The first and most important part of your accounting strategy is to maintain accurate and detailed records at all times. The next strategy will involve a regular review of these reports, to make sure everything is on track. You should run your cash flow statement, your balance sheet, and your income statement quarterly (or more frequently) to ensure everything is on track. If you use an accounting system (Quickbooks) reports can be quickly run in a matter of minutes, so there is no reason you can’t review them regularly.
The last crucial component to your strategy is planning for major expenses. If you are using all the income your company generates and you are not putting any aside for taxes or emergencies, you are setting yourself up to fail. Make sure you are keeping enough for your taxes in a separate account, as well as an extra 1% to 5% as a safety net. This way you will have the funds if something goes wrong or if there is an opportunity for growth.
Accounting for small businesses does not need to be complicated. If you take the right steps in the beginning, like maintaining your records, reviewing your financial reports, and putting a little extra aside, it will be much easier for you to stay on track.
If you are wondering whether or not you really need to prepare financial statements when you already know your business is profitable, the answer is definitely yes. You may be convinced that your business is doing fine, but you will need proof for investors, creditors, shareholders, government agencies, and essentially you will also need it for your own peace of mind. Feeling successful is great, but seeing the facts and figures in front of you that prove your success is empowering!
Better Decision Making
Financial statements are vital for making crucial business decisions. You should be reviewing more than just your bank statements whenever you are considering whether or not you can afford to invest money back into your business. Financial statements will give you a clear and accurate visual of how your business is currently performing, so you have a means of monitoring its progress and identifying opportunities for growth.
More On-time Payments
Financial reports like accounts receivables are essential for ensuring customers pay on time and account payable reports will make sure that your vendors are paid on time. It will also give you a reference point to predict your future cash flow.
Prepared for Tax Time
Regularly updated financial statements will keep your information neatly organized for tax time. You don’t want to realize that all you have is a shoebox full of receipts on April 14th. Regular financial reporting means your accounting software is also being updated regularly.
Provide Proof of Your Success
Financial statements will act as a historical record of the overall success of a business, if there is ever a decision to sell the business or obtain new investors. New clients and suppliers may also request financial statements while trying to determine if they should conduct business with your company.
Catch Costly Mistakes
A set schedule for reviewing your financial statements will help catch mistakes earlier. They can also help an owner detect theft, fraud, or illegal activities within their business. You can hire a professional accountant or a bookkeeper, or an entire finance department, but that doesn’t mean you still don’t need to be involved. As much as you want to trust the person who is handling your finances, you need to be watchful for any discrepancies.
Fortunately, if you use an accounting system, you will be able to access instant and accurate financial statements at any time. It will make it easier to track clients, enter new invoices, manage expenses, and review reports while making crucial business decisions. Financial statements are so important to the success of your business, but they can be easy and accessible if you have the right accounting system for the business.
https://ohiobusinessgateway.ohio.gov/OBG/Membership/Security.mvc/Login
http://ccatax.ci.cleveland.oh.us/
https://clients.ohiosbdc.ohio.gov/center.aspx?center=17086&subloc=0
