March 12, 2022
7 ways accounting helps your small business

Unlock the benefits of having accurate financial records.

Accounting may seems like a process done at tax time, or a mysterious tabulation system done by IRS workers when a company is being audited. It's actually a practice that should be underway from the time a small business launches until it's sold, with real benefits all along the way.

Here are seven situations where accounting has very real benefits, that will make you want to invest in a professional accountant for your small business: 

You want to apply for a loan. Maybe your small business needs funds for equipment, to add an addition onto your building, finance a marketing campaign or invest in new technology. To apply for a Small Business Association (SBA) loan through one of the major banks, up-to-date financial statements are a must. Banks will likely ask for three years of financial statements and a one-year cash-flow projection for your business.

An accounting system is needed to produce these financial statements and complete the loan application.

You want to plan for growth. Accounting provides the information you need to plan your future. You simply can’t predict what your company will look like one year,five years or 10 years from now without accurate reporting.  

With accounting, you can examine over time if your company’s cost of goods increased, or if your margins are thinner. Accounting helps you see if your goals for growth are within reach.

You may want to attract investors someday. Putting accounting systems in place now will make life so much easier if you want to sell your business later. Stakeholders or buyers will want to see that your company is on track for growth, and profitable.  

It helps you get paid. Accounting generates your balance sheet, and accounts receivable.This shows how much you have collected during the month and how many payments are still due. From here, you can put systems in place – like stricter payment deadlines or a follow-up schedule – to make sure your company has ample cash flow.

It’s your “Get out of jail free”card. Having accurate financial records means less chance of an audit, or violating tax laws. Having a professional accountant handle your taxes will ensure they get filed correctly and on time.

It will prevent you from paying too much in taxes. Consistently getting large refunds isn’t a good thing. It means you miscalculated your business tax payment and gave the IRS money you could have reinvested in your business, instead. Refunds are generally due to miscalculated quarterly estimated tax payments, which are generated from predicted income. It’s nearly impossible to do this task without the reliable financial records that accounting produces.

It keeps you up-to-date on your whole debt picture. No more jumping around to multiple account statements to see what your company owes. A proper accounting system’s balance sheet shows what credit cards, loans and entities you owe payments to, with bank account balances there as well, to cross reference.

Accounting likely helps your business in more ways than you thought. It’s an important aspect of keeping perspective on your entire financial picture to guide, operate and define your small business success.


Susan Shalhoub

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