Why do small business owners need good accounting?
Ninety percent of businesses fail in the first 10 years. One of the primary reasons for small business failure especially in the first year of the business is limited budgets and other resources. Accounting plays a crucial role in providing information that helps businesses in their growth and development.
For small business owners, accounting is crucial due to the reasons below:
• Brain Van Hook of Florida University attributes new business failures to a failure to focus on financial management, attention to cash flow, and proper pricing of goods and services
• A good accounting system and controls can aid in the proper pricing of products and services.
• Learning to read financial statements such as balance sheets, income statements, and profit and loss reports will make planning easier and ensure the success of your firm. Local adult education courses and community colleges can provide this training
• When your bookkeeper reconciles your bank statements and credit cards, monthly there is a reduced chance of fraud and human error.
• When you understand the risks of running your type of business you can manage the risks with the proper insurance to ensure against risks like lawsuits, property damage, and cyber liability.
• Bankers are more confident when dealing with business owners who have a handle on their finances and are confident that the companies taxes are up to date.
The business owner who can grow their company while at the same time managing cash flow and business risks will be able to scale their company successfully and have the confidence of customers, vendors, and potential investors. Being able to sleep at night knowing your business is well managed is the greatest gift you can give yourself.
Matchbooks is a virtual bookkeeping and consulting company. We help companies like yours make more informed decisions, increase cash flow and improve daily operations. For more information contact us at consulting@matchbooksusa.com