Following basic accounting principles is important for the success of any business, whether small or large. A great accounting system is necessary for compliant record-keeping and meaningful financial analysis. This is key not only to monitor your expenses but also to discover new avenues for growth. Having a strong system in place also enables you to manage all the different tax obligations that you have within your business.
For your business to grow, you need more than just passion. You need a trustworthy team of professionals who are just as driven about your business as you are. That is why hiring an accounting team for your business is crucial. Accounting is what is used to define business performance. Without a strong system, how would you know how your business is performing?
What Exactly Does an Accountant Do?
When starting your business, accountants create the financial structure needed to test your concept, identify your start-up and operating costs, create credible revenue projections, and more.
As a strategy, accountants help you figure out what is most important by identifying your business’s key performance indicators (KPIs). They introduce you to accounting software and set it up so you can see your business’s financial status on a continuous basis.
Many small businesses fail because they’re not strategically managing their overhead expenses. Accountants help you predict future cash flows, develop strategies to manage finances, tax planning, organize cash reserves, budgeting, and much more.
Accountants can really help you cope with stress by breaking down big financial problems into manageable parts. They also keep you financially organized. This helps to create the types of reports required by investors, banks, and governmental entities.
Does Your Small Business Really Need an Accountant?
If you are starting a business on a limited budget, you are probably contemplating where you can cut business costs and do more to stretch the funds you have. A good accountant can help with this. A lot of small business owners are tempted to try to handle their own accounting at first, but if you lack experience managing a business’s books this may cost your business a lot more than just hiring a competent professional. A great accountant will save a business a lot more than their fees. There’s normally a great return on investment (ROI) with investing in accounting systems. That’s why the most successful companies do it. To answer the question directly, does your small business need an accountant?
Short answer: YES!
Here Are 5 Reasons Why You Should Hire an Accountant for Your Small Business
1. To help you improve your cashflow.
Without proper control of cashflow, you will not be able to make critical decisions to run or grow your business. To help you understand and manage your cashflow your accounting team can help you to create effective cashflow management strategies. These strategies will allow you to understand available funds and how to best manage future spending.
2. To help you reduce your workload.
Once you start a business, you will need all the time to run the day-to-day operations rather than be occupied with the many different areas of a strong accounting system. Hiring an accounting team will be essential in reducing your workload and allowing you to focus on running your business.
3. To help you manage scalability.
Hiring an accountant will help you manage operations by recommending process improvements, taking over the financial and tax obligations, and introducing tools to save both time and money. Understanding what the numbers are “saying” about your business is crucial. The numbers can help to predict future outcomes. Sudden growth that has not been planned can be almost as problematic as growth that is too slow. A good accounting team will help you react quickly to unexpected growth and turn it into an advantage.
4. To help provide valuable business advice.
Accountants have the right skills and expertise to serve as business advisers. A popular quote is “Accounting is the language of business.” When you understand your accounting, you’ll have a greater understanding of your business as a whole.
5. To help you understand the relationships between revenues and expenses.
A good accounting team will analyze the relationships between your revenues and expenses. This will help you to understand which costs to keep and which costs to cut. This is critical to the growth of any business. Again, this is why the successful companies invest so heavily into their accounting teams.
With Accounting Systems, What Mistakes Are Small Business Owners Prone To?
Without systems in place to organize your business financially, it is hard to understand the true performance of your business. There is no way to track revenues, manage expenses, create plans to save on taxes, or generate reports for potential investors, banks, or etc.
Small businesses that lack great accounting systems are prone to wasting money, paying too much in taxes, underestimating future expenses, overestimating future cashflow, and much more. These are the types of things that directly lead to business failure.
Planning and Strategy
Business is all about strategy and execution. Without sound financial reporting, it is hard to build future budgets, projections, and etc. Successful businesses create measurable goals, track their key performance indicators, and consistently manage operations to help them do so. Without accurate systems in place to do this, it is hard to build a well-oiled machine. Have you ever heard the saying about “running around like a chicken with its head cut off?”
Managing All of the Different Tax Obligations
Depending on the business type, there are a lot of different types of taxes that have to be considered. Sales taxes, estimated taxes, employment taxes, and income taxes are a few that a lot of businesses must consider. Any business that runs without an accounting system is at risk of falling out of compliance with the IRS and other governing bodies. This could lead to tax penalties and fines that could really hurt your bottom line.
Simply put, not having an accounting system in place makes it hard to determine if your company is being financially defrauded.
There are several other issues that can arise from not having strong accounting systems. A couple of things to remember are the biggest most successful companies invest heavily into their accounting systems and accounting is considered the “language of business.” A lot of the most successful companies have spent millions on understanding how to limit waste within their organizations, the fact that they invest so heavily in the accounting function should explain most of what you need to know.
A lot of business owners make the mistake of only working with an accountant annually to file their tax returns. This can cost them thousands of dollars in savings annually! Creating a strategic ongoing accounting system is extremely important to experience the type of growth that the most successful companies experience.
Right Choice Accounting Solutions is proudly a black-owned, CPA-led outsourced accounting and tax firm. Right Choice offers a one-stop shop accounting and tax solution that covers high-level strategy, accounting insights & analysis, financial statement preparation, tax planning and preparation, basic bookkeeping, and much more. Schedule your FREE intro call TODAY to learn more about what makes us the Right Choice for your accounting and tax needs.