If you own a small business in Nashville or are planning to start one, consider hiring a CPA to help set up your company and your accounting system. Don’t make the mistake of taking accounting and bookkeeping for granted. You may not see their importance until tax season, but they can actually be more valuable than you think. In fact, accounting information plays an important role in making decisions that could make or break your business.
Here are some of the reasons why you should keep your accounting information accurate and updated.
1. To help you set your budget
Can you afford to hire additional employees? Should you buy new equipment? Will spending more on marketing bring you bigger profits?
Knowing where best to put your money can help you maximize your profits and streamline your expenses. Your accounting reports, such as your Profit and Loss Statement, Accounts Payable, Accounts Receivable and others will help you see the bigger picture of how money goes in and out of your business. You can identify where you may be spending too much or too little on, and make the necessary adjustments.
2. To bring in new investors
If you’re looking to bring in new investors to your business, you need to present them with the necessary accounting reports that show your business’s financial health. These include your income statements, balance sheets, cash flow analysis, and so on. Potential investors will review your accounting information to know the value of your business and to do a credit analysis. They can make projections on future profitability and weigh how much risk they may be exposing themselves to if they put money or resources on your company.
3. To secure a loan
If you need to take out a loan to infuse new money into your business or to fund a purchase or investment, banks and lenders will ask you for your financial and accounting records, such as your income statement, cash flow analysis, balance sheets, tax returns, and others. Using your accounting information, lenders will assess your creditworthiness to determine whether to grant you a loan, and on what terms and interest rate.
4. To assess your financial performance
Appearances can be deceiving. Business may be brisk and your store or restaurant may have a steady stream of customers. But whether you are hitting your profit targets or are making any profit at all can only be seen through your accounting information. Perhaps your manufacturing or overhead costs are higher than your original calculations, and this could be pulling your profitability down. Or perhaps you’re spending too much on advertising and promotions. A review of your financial reports can give you an accurate assessment of where your business stands and allow you to come up with any needed solutions to put you back on track.
Your CPA’s services are invaluable not only in keeping your books accurate but also in analyzing your financial records so you can overcome any obstacles and find the right path to success.
Sources:
Quarterly Growth for Business Formation in TN Up for 10th Straight Year, WKRN.com
The Importance of Keeping Receipts, WellyBox.com
Business Formation Essentials Your Accounting Firm Can Assist You With
