As an entrepreneur, even if you are not an accountant, you must have control of the expected results and constantly monitor financial movements in your business.
Keeping an eye on your business can help you determine if there are errors in the accounting records, as well as your tax returns. Remember that the bigger your company is, the more complex it is.
To have control of what your accountant or your administrator spends in your company, and know if it is worth it or not, here are 10 things you should know.
1. Your accounting system needs to measure the financial operations of your company, and process that information in the form of financial statements that are available to those who make decisions.
2. The tangible product par excellence of accounting are the financial statements and their annexes.
3. The accounting and bookkeeping services must be overseen by a professional who is duly certified.
4. Your accountant should be a professional and experienced in your industry.
5. Accounting is important for you, as an entrepreneur, because it allows you to understand the financial situation of your business, know if sales are generating enough margin to cover fixed costs, and produce attractive profits, and to know the monthly and annual amount of those profits.
6. Good accounting allows you to know the source of all the funds that enter your company and how those funds are subsequently invested in the business.
7. Timely financial record keeping will help you to better protect your business against contingencies, control the results at the level of each of the business units you have within your company, and measure whether you are achieving the results you want.
8. Accounting allows you to gain credibility with suppliers, banks and investors. A company that proves to be well controlled is a company that gains credibility and trust. A company that has good accounting systems in place can expect its clients pay on time more often.
9. Accounting gives you the information you need to increase your profits because it allows you to know the areas that are adding the least value and those that are making the greatest contributions. On that basis, you can take steps to correct things. And, even if sales are not increasing, you might be able to achieve more profit.
10. Even though you need to hire a professional accountant to manage the accounting of your business, there are certain things you should make a point of doing on a regular basis:
- Review managerial financial statements monthly.
- Analyse a monthly summary of the business: tax returns, tax projections, tax exposure, contingencies, etc.
- Request a weekly report detailing how the money is being handled: the cash flow, accounts receivable, accounts payable, inventories.
Although much accounting work seems repetitive and monotonous – as an entrepreneur, it is essential you are aware of all aspects for the success of your business.
With your finger on the financial pulse of your company, you can make better business decisions and extract maximum efficiency from your business operations.