Good accounting practices are a critical factor to operating a small business. It will increase revenue and reduce risk of failure created by many factors.
St Louis, MO (STL.News) Accounting is boring! We can agree on that! When you own a small business there are always a million small details that appear to be more important to the operation than accounting. While that is not true, many small business owners have that attitude. The attitude might be because they do not understand accounting and use operations to avoid that which intimidates them.
Accounting used to be expensive and few small business owners saw the value in it because they overpaid some accounting firm to compile data and reports that they seldom understood. Most accountants assumed that their clients knew and understood the value of their work. Wrong!
Needless-to-say, most small business owners did not understand. Even today, many small businesses operate without proper accounting records. It is common for small businesses that have no accounting records to:
- not know their bank account balance
- owe back employee withholding taxes and/or sales taxes
- be behind on paying vendors resulting in poor business credit
- and is subject to higher risk of fraud by employees and/or vendors
All of this is a result of poor accounting standards. Poor business practices begin with poor accounting records. If you own a small business and can relate to one or more of these bullet points, you are operating in the danger zone.
Good accounting practices will result in improving all of these risks. In our opinion, accounting is more intimidating than difficult. There are no complicated mathematical formulas. You add up all income, classifying it into different sources and then subtracting all expenses. While it is more complicated than this, the overall theory is that simple. Yes, for tax purposes there might be depreciation calculations that need to be made, but even that is not complicated.
Having good accounting practices makes tax easy and will reduce the cost of a tax return in most cases.
Accounting has been incredibly simplified over recent years with improvements in accounting systems. The most popular small business accounting system is QuickBooks. However, for those business owners that are understaffed and are not tech savvy, QuickBooks might appear more complicated than it is. If that is the situation, then hire a QuickBooks consultant to help manage your accounting records using QuickBooks. The parent company of QuickBooks also offer payroll services and Turbo Tax software.
There have been many successful businesses fail due to poor accounting practices and many unprofitable businesses survive due to good accounting practices. We can assure you that poor accounting practices will eventually result in some major oversight that will likely result in business failure.
Better financial decisions are made in business with good accounting practices in place and certainly poor financial decisions are made due to lack of acceptable accounting practices.
QuickBooks is owned by Intuit, whom is a publicly traded company that also offers payroll solutions as well as other small business solutions.
This article is sponsored by St. Louis Media, LLC, whom is a QuickBooks re-seller and consultant.