As a business owner it is vital that you understand the finances of your small business. Yes, I know that you’d rather leave it up to your hired accountant to deal with so that you can tend to operations. However, studies have shown that those small business owners who understand bookkeeping, keep good records of financial transactions, and prepare financial statements are usually more successful. Additionally, as a result of comprehending the financials, business owners are able to avoid financial trouble and cash flow problems.
What are some of the Things Your Accountant hasn’t told you About Your Books?
1. Good recordkeeping is critical to the continued existence of your business – bookkeeping issues are one of the biggest problem areas for small businesses. Clean and accurate accounting records as well as timely posting of transactions ensure that you are constantly working with valid data when analyzing your financial statements.
2. You can reconcile your own bank statements monthly – there’s no need to pay an accountant extra money for bank reconciliations. Monthly reconciliations can be done rather quickly each month by you and can cut down on the amount of hours billed by your accountant. Set aside a time each month to handle this task. My recommendation would be a few days after month end close or after you receive the last month’s bank statement.
3. The purpose of financial statements – most accountants will prepare financial statements for you, but not educate you on how important financial reports can be to your small business. Financial statements create a control mechanism in your business. They help in determining the financial and cash position of your business at any given time. Without financial statements you are just flying by the seat of your pants and blinded to potential risks and opportunities for your small organization. Financial statements provide insight into how you can manage business operations.
4. Comparative Analysis of monthly statements of income and expenses are essential for future planning – this aids in monitoring cash flow, identifying trends, which are key components in strategic planning and budgeting. Although, you may not know all of the details of the financials that your accountant provides for you, it’s critical that you understand them. The more you understand provides you with the big picture which ultimately leads to more profit.
5. It’s possible and more cost effective to do your own bookkeeping – with training and better understanding of double entry accounting, you as a business owner can keep your own books. Often accountants don’t waste their time in making journal entries and most times utilize their in-house bookkeepers for those types of duties and charge you a premium. Additionally, your accountant may also be using software which cuts down on time and overhead. If you ask, I’m sure your accountant will recommend a great accounting system for you.
We want to hear from you:
What is your relationship like with your accountant?
Does your accountant take time to explain your financial statements?