If You’re An Entrepreneur You May Be Making These Accounting Errors
You had a dream, you made that dream a reality, and now you have a business to call your own. Being an entrepreneur is an amazing accomplishment. The number of good ideas floating around are seemingly endless, yet you were able to turn one idea into something tangible. Now that you’ve come this far, maintaining your achievement is next on the list. This means you may have to put some aspects of your business into the hands of other professionals, and that’s okay.
While you may know your market better than anyone, the financial aspects of your business have everything to do with the success of your company. Accounting errors could make or break your startup after a matter of months. Since 90 percent of startups fail within the first five years of operation, we’ve outlined some areas which can’t be ignored.
Are you an accountant?
Most business owners love to try and tackle the books on their own. With the online accounting software that’s available today, it may seem like a no brainer to download the program and do it yourself. However, the financial condition of your business extends beyond payroll and reconciliations every month. Keeping up-to-date records of transactions, as well as accurate records of accounts payable and receivable are crucial. Any accounting errors made in one month could affect the subsequent months. Your time should be spent on business growth and development, not balancing the books.
Business or personal?
Entrepreneurs starting out must determine the fine line between the world of their personal finances, and that of their business. It’s important to create two distinct accounts from the very beginning, because a small purchase here and there may not be a big deal today, but as it grows, so will the infractions.
Newfound cash flow
Ringing in some hard-earned profit after your first year of operations can be very exciting. It almost makes you want to go out and celebrate. Like many businesses, a successful year means you have a surplus of cash flow, and while you may want to spend some of it – you must spend wisely. Investing in high-value items for your business may seem like a good idea but consider their worth after a few years. With the advancements in technology moving at a rapid pace, you may be left with an expensive piece of machinery and depleted cash stores. Consider leasing or using short-term loans.
Let’s face it; things change. A budget that may have worked well for your business the first year may not be appropriate the following year. A financial analysis of your business will let you know if modifications are necessary due to increased profits, it will also tell you if there are any potential issues with the current status of your finances. With this knowledge, you can make the appropriate adjustments and get your business back on the right track.
When in doubt, you can count on the professionals at an outsourced accounting company for the management and maintenance of your finances. Tobin & Collins employs an amazing team of Certified Public Accountants (CPAs). Contact us today for more information!