Strategic accounting is the crux of a successful business. Small business owners must be aware of the basics of accounting, especially if they have limited resources and a long way to go.
1. Start off right: Selecting the appropriate accounting system for your business is very important in order to organize and record your business transactions. You can choose between accrual and cash-basis methods of accounting. Some tips:
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Most businesses opt for accrual-basis accounting; it is the most accurate method. All your income and expenses are recorded at the time they are earned or incurred. In cash accounting, you record transactions when cash is actually received, and expenses actually paid.
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The cash method of accounting is simpler and can be appropriate for very small businesses.
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For businesses with no inventory or those which predominantly deal in cash, cash basis accounting can sometimes misinterpret financial results over time.
2. Organized Financial Records are Critical: The greatest reason behind small business failures is mishandling of accounts and finances. Therefore, it is crucial to monitor the financial records of your business to ensure forthright management and control of this information. Keeping track of financial records through diligent business accounting helps you assess your business and make decisions related to important issues such as
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How much money is owed to your business.
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How much money you owe.
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Recognizing financial problems at the very onset.
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Preparing your tax returns accurately.
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Informing bankers and investors about the financial status of your business.
3. Precise Financial Information is Vital for Strategic Management: Sound financial information is critical in order to understand the financial health of your business. A successful business necessitates diligent management decisions taken after considering concrete data such as
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How much your accounts receivable are worth;
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How old each account is;
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How fast your inventory is turning over;
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When debts are due; and,
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How much your business owes in taxes and FICA (Social Security taxes).
4. Banking and Tax Requirements: Organizing the information related to your financial statements, is required for preparing accurate tax returns. If the Internal Revenue Service audits your business, you will need to produce the relevant accounting records and statements.
4. Never Ignore Accounting: Accurate accounting is indispensable for a successful business. Ignoring challenging financial information or confusing accounts will lead to substantial problems like
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Spending money that doesn’t really belong to you; and,
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Missing out on tax payments and tax refunds.
Irrespective of how great your product or service is, careless accounting can ruin your business.
Since 1993 The Balance Sheet, Inc. has been a reputed provider of accounting, bookkeeping and tax services in West Palm Beach, Florida. Contact Maxine Taylor for a free consultation on how The Balance Sheet might benefit your business.
Please feel free to call us on (561) 842-1304 or fill out our online message from The Balance Sheet Tax Accounting Bookkeeping Company in Florida.
