If you think your accountant's skills are only helpful at tax time, think again. As a small business owner, accounting is vital to your business in various ways you may not realize. A trusted accountant can be one of your top allies in establishing and maintaining a successful business. Read on to learn our top tips about how accounting can help your business succeed.
Accountants are usually the first to come to mind when you consider general bookkeeping tasks and filing taxes; however, an experienced accountant can be a tremendous asset to any small business as part of its financial advisory team. Here are five ways accounting can benefit your business.
Simply put, accounting is the way a business tracks financial activity. As a small business owner, you probably already know you can't run a successful business without accounting. When you consider the numerous financial actions that occur in a business on an ongoing basis, you can imagine how easy it can be to become adrift in a sea of receipts, invoices, bank statements, and financial forms. Accounting solves this problem by implementing a record-keeping system to maintain all of your business's financial records and activity. With that information at your fingertips, you are always organized and able to pull any records you need at a moment's notice.
Once your business finances are organized, you will use that information to generate reports that help you understand your business's financial position. You may think you don't have time to run a business and tackle accounting, which is understandable. Most business owners happily outsource accounting to a qualified firm. If that's the route you choose for your business, you need to discuss your financial position with your accountant. They can help you understand the reports and statements that reflect where your business stands financially. This knowledge is vital to making the best decisions for your company.
With ongoing and accurate insight into your small business's finances, you will understand how your business performs and make wise decisions that are data-driven, not gut-influenced. For example, let's say your main product requires a component that could be purchased from an outside source or manufactured by your company in-house. It will be easy to decide whether to purchase or produce that component for the best financial outcome with reliable accounting. This fact-based approach goes a long way in avoiding costly decision-making errors over the life of your business.
No one wants to consider fraud as an issue in their business; however, a 2019 research study exploring fraud in small businesses found that 30 percent of small businesses experience fraud. The most common type is asset misappropriation. A sound accounting system can remove any worry that such an occurrence gets out of hand. With your pulse on your business's finances via accurate and timely accounting reports, an issue will be detected sooner rather than later, which could save you thousands of dollars in the long run.
With regular financial statements and insights such as cash flow projections and potential expenditures, you can plan for your business's future more accurately. Decisions like whether to purchase new equipment, when to expand and when to add (or cut) employees are all decisions accounting can help you make.
So, in addition to budgeting, preparing taxes, and monitoring income and expenditures, accounting can breathe the life of growth into your small business and provide you with peace of mind knowing you are doing all that you can to ensure success.
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Source for point 4, above: Bunn, Esther; Ethridge, Jack; and Crow, Kaili, "Fraud in Small Businesses: A Preliminary Study" (2019). Faculty Publications. 34.