Keeping track of income and expenses is essential, even if you don't own a business. And if you do own a business, things get even more complicated. There are paychecks to issue, taxes to track, and subcontractors to pay out. All of these details are a whole lot less challenging when you hire an accountant to oversee them. However, it is still important to know a little bit about accounting yourself. Dig into the articles on this website, and you'll gain a better understanding of accounting principles, what services accountants really offer, and the benefits of hiring these professionals to assist with your finances.
One of the primary reasons to work with a certified public accountant is to avoid major issues. If you own or manage a business, the best way to deal with most problems is to stay ahead of them. A CPA can help you get in front of the following four accounting concerns.
Businesses are never better than what they can document. If you need to seek a bank loan, for example, the lender will want to see documentation of your company's history and its current financial situation. You need to be able to produce detailed financial reports and tax records attesting to your organization's creditworthiness.
Companies also need good documentation practices for internal reasons. If a firm can't document its inflows and outflows, the leaders can't say whether it's profitable. Also, you will want solid documentation so you can assess the success of projects, business plans, and various company leaders.
Nobody wants to discover fraud in their business. However, even the best-run businesses can fall victim to employees, contractors, suppliers, and even company officers doing nefarious things.
A CPA will want you to implement a series of best practices to limit the possibility of fraud and quickly detect any that happens. For example, you should break up the financial duties in your business. The jobs of the CEO and CFO shouldn't fall to the same person. Also, you should employ a GAAP-based system to reduce the risk that someone can hide fraud on the books. Place control of the company's accounts in the hands of multiple officers to limit the ability of one person to access the firm's money, too.
Poor Cash Flow Management
The goal of any business, in the long run, is to bring in more cash than it spends. Do not allow the simplicity of this issue to deceive you. Cash flow management requires immense forethought.
Suppose your business operates in a highly seasonal sector. You need to maintain enough cash and financing to build up for the sales season. At the same time, you need to manage the profits during the peak to ensure you'll have sufficient funds to restart the process during the next cycle. Especially during industry shifts or economic recessions, good cash flow management may decide whether a business survives.
Lack of Strategy
A business should have a clear strategy. In a startup, this might involve using financing to blitz the market and reach profitability. An established business might focus on locking in its position. In either instance, a CPA can assist you with monitoring and adjusting your strategy.
Contact a CPA for more information.