BOOKKEEPING AND GREAT BUSINESS CONCEPTS

Every great business begins with a winning idea. A good entrepreneur is one person with such an idea and the skill and will to make a success of it. However, there are several steps between conception and success. Rarely will one individual have all that is required to see that great business concept through. It will more likely take a team, each member with a distinct skill, set to achieve success.

This well-known fact so often only gets verbal affirmation from entrepreneurs. So many owner operated businesses stay stunted not for a lack of capital or a sound business idea but from the inability to assemble a great team. At the bottom of this attitude is a fear of letting go. The owner fears losing control and so the potential of the business is limited to what its founder can do - pretty much by himself.

Stagnation is the best results obtainable in such a scenario. This result is unacceptable because if the business is not growing, it is dying. Businesses must move with the times and seasons of their industries if they are to remain competitive. Vesting a measure of control in verified professionals is not a choice but a necessity.

Since this is the case, the owner must investigate the modalities of choosing business partners, peers and contemporaries with an eye on the success of their original business idea. A finance professional is indispensable to a good business team. Business owners with scant financial background that do their own accounts miss out on the expertise a trained professional provides.

The question few know to ask: Do I need an accountant or a bookkeeper? This is the question I will be discussing in my next post.

FIVE REASONS TO RETAIN A BOOKKEEPER

FIVE REASONS TO RETAIN A BOOKKEEPER

Understanding a company’s financial position and net income or loss is critical in running a business. Without this information, it’s virtually impossible for stakeholders in a business to make informed decisions about strategy and day-to-day operations. This is merely one reason of many, bookkeeping is key to efficient and effective business operations.

Accurate Financial Reports

Financial reports such as the balance sheet, income statement and statement of cash flows are critical for ownership and executive leadership. The balance sheet illustrates assets, liabilities and capital structure, while the income statement details revenue, expenses and net income. The cash flow statement delineates operational, investing and financing cash inflows and outflows. All of this information comes from the general ledger system, which is updated by the bookkeeping process.

Accurate financial reports allow business owners to make strategic decisions in a confident manner, and they also help keep a business alive. If there isn't enough money to make payroll or meet the obligations the business faces, business owners must know and take the appropriate steps to correct the situation. Without accurate reporting, a business can become off course and management won’t know until it's too late. This is especially true when it comes to capital structure and cash flow. Too much debt and high payments can spell disaster for business. Bookkeepers are essential for tracking issues.

Managing Receivables

Keeping on top of money owed to a business is extremely important, especially if the company is short on cash. Bookkeepers can generate accounts receivable reports that detail the ageing of accounts receivable. These reports can help managers gauge cash inflows, along with the potential for collect-ability. Without bookkeeping and the deposit of checks in banks, and the closing of receivables in the general ledger system, it would be very difficult to track receivables.

Managing Payables

Similar to accounts receivable, bookkeepers can create accounts payable reports that illustrate the money a business owes to third-parties. If a company doesn't have enough money to pay its payables in a timely manner, it’s possible that the business may need debt financing or other sources of capital. Payables must be managed in such a way that a business doesn't run out of working capital, while at the same time not missing critical obligations that can impact he long term success of the business.

Payment of Taxes

When bookkeepers update the general ledger and financial statements are prepared, it becomes possible to pay estimated tax payments. It also becomes possible to fill out year-end tax returns. Estimated tax payments are based on net income, while tax returns itemize the gross revenue and expenses to arrive at net income. Without bookkeeping, state and federal agencies would not get the proper amount of tax due. Tax troubles could ensue, if accounting records fail to illustrate the activities of a business accurately.

Payment of Employees

Bookkeeping also helps facilitate the payment of employees through accurate record-keeping, bank reconciliation and communication with the payroll function. If there isn't enough money to make payroll or pay the appropriate business entities, then bookkeepers can assist management with determining how much money is needed, and when it needs to be sent to the appropriate parties. Without having an effective bookkeeping and payroll process in place, a business will fail to survive.

Bookkeeping is a critical process that can make or break a business, which is why it’s important to understand the accounting cycle, how financial consolidation works, and document retention standards. There is no reason to let a great concept fizzle or a fledgling business shut down, because financial reporting and record keeping isn't sufficient. 

Successful Bookkeeping for Successful Business

 Tracking sales, expenses, and purchases is basically smart thinking for the overall health and sustainability of your business. Effective bookkeeping helps you evaluate your current practices, foresee challenges, and create attainable goals.

Even so, many business owners dread and avoid accounting tasks. In fact, some entrepreneurs claim that bookkeeping is one the worst parts of running a business! Is it really worth the aggravation?

Here are four reminders of how effective bookkeeping is the cornerstone of small business success.

Reimbursable expenses

A reliable system for tracking reimbursable expenses ensures you reap all the benefits you’re entitled to when filing your taxes. Expenditures sorted into categories, such as “food”, “travel”, and “office supplies,” can be catalogued quite simply with web based bookkeeping software.

Using a dedicated credit card for business expenses, and updating your records on a monthly basis, will put money back in your pocket come tax season.

Profitability and strategic planning

In order to grow your business, you must be able to track and compare its finances from one year to the next.

In addition to reconciling the books and bank statements every month, effective bookkeeping generates records you can use to gain a comprehensive overview of your business. This data can help you:

·         Measure year over year profits;

·         Identify opportunities to cut costs;

·         Plan for major expenses (such as new office space, equipment, or staff); and

·         Develop data-based strategies for expansion.

Preparing for tax season

Few things are more stressful for business owners than scrambling to get poorly maintained financial records ready for tax season. In addition to the panic of last-minute filing, inaccurate or incomplete documentation can lead to serious penalties, fines, and even an audit. In the United States alone, 40% of small businesses pay an average penalty of $845 per year for late or incorrect filings!

Save money and get peace of mind with sound bookkeeping. You’ll be assured of compliance with regulations, and will receive a reliable estimate of amounts owing long before your tax bill is due.

Final tip: ask for help

Most entrepreneurs are passionate about developing new business ideas – not crunching numbers. Employing a professional bookkeeper, even on a part-time or as-needed basis, can help optimize your accounting and increase overall profitability.

There’s a good reason 71% of small businesses outsource at least one accounting function to help manage tasks like payroll, closing the books each month, and managing accounts receivable.

It’s well worth it. Invest in effective bookkeeping and you’ll build a solid foundation for a resilient, forward-moving small business.