Taking accounting seriously is often the difference
between having a successful business and having to call it a day, filing for
bankruptcy. In a report carried out by experts, four in ten small companies
don’t make it past 5 years. The reason they often fail to do so is that they
run out of money. They run out of cash because they often don't understand the
financial drivers in their business and end up spending money they don't have,
neglecting factors like gross and net margins and their break-even point most
important.
If most of those small businesses that didn’t make
it past 5 years invested in accounting at the start, then they would probably
not have to end up filing for bankruptcy.
Do you need a business accountant for a small
business?
As a small business, you may see hiring an
accountant as another expense that you can avoid, but the saying goes that
there is a great entrepreneur behind every good business, but behind them,
you’ll often find an expert Vancouver Business Accountant.
Turning an idea into a business and dealing with the
accounts is an entirely different ball game. You need not only the accounting
expertise and know-how but also time. If you've asked any business owner what
they'd want, we bet the answer is more time. Do you have the time to do your
accounts with running and growing a business? It is here that an accountant
comes in.
How accounting is important in business?
Analyze business operations: There are many
different reasons why it is important to do accounting. First, assessing
accounting information allows business owners to analyze their business
operations ' overall efficiency and effectiveness. Prepared financial
statements can be compared with industry standards to determine just how a
business is doing in this area.
Creating trends: Accounting can also be used, by
looking at historical financial statements, to create trends to analyze and
forecast future sales.
Getting backing from banks: Business owners often
need to provide a financial forecast to get the backing from banks, lenders or
investors. This information is essential if a business wants to receive funding
outside of it. Besides forecasts, some may even require a business plan that
includes economic forecasting, expected expenditures, and financial statements
pro forma. All this information gives a good indication to banks, lenders, and
investors that the business owner has a precise and reliable picture of the
financial expectations.
Profitability: Vancouver Business Accountant can
also indicate to a business just how profitable it is. There's no point in just
being able to generate high sales revenue if profits go down, as this is just a
disaster recipe. Compared to the profit margin of the company, business owners
should understand how well they are using assets to generate services and
inventory costs. Those who invest in your business also need this information
so they know they will be repaid over a reasonable period.
Budgets: A very important factor in accounting is
the creation of budgets. Budgets are essential as they outline what is needed
for the various areas of a business that need to be purchased, such as
advertising, hiring personnel, materials, etc. Budgets will stop over-spending
on business and will help avoid wasting money on non-essential expenses.
Budgets are great for historical data too.
Essential business information: Finally, accounting
allows business owners to be familiar with essential business information such
as break-even point, gross margin, and net margin. Knowing the breakeven point
is crucial, since you know just how much your business needs to make to
breakeven on a monthly or annual basis, emphasizing how much more you need to
generate to make a profit. Equally important is your gross and net margin;
keeping an eye on margins is a key indicator of how your business is performing
and will help you set goals and goals.
Hire a good business accountant and see your
business prosper like never before.
