Most people view bookkeeping as a chore to be done simply to get back much-needed cash at the end of the year. With this perspective, it is not surprising that so many companies fail from the beginning. Actually, accurate (albeit important) accounting and tax reporting is so far at the bottom of the list, really no fun.
The price of the product is probably the most important aspect of a business. Whether it’s pricing a widget or pricing the services it provides, if your pricing isn’t accurate, you can stop building a profitable business. Sounds pretty simple at first, charging more than it costs, right? Well, several factors can come into play: insurance, packaging, delivery, marketing, etc. All facets of the business must be taken into account when considering how much it costs to deliver whatever it is you are selling.
Cash flow is probably the next most important aspect of a business. Many small businesses do not consider maintaining a positive cash flow as a vital element. Some go into business thinking that demand will simply cover this item and, coupled with ineffective pricing, simply sit on the poor house within the first 24 months of operation. It’s sad to see, but it happens in the business world quite often. Proper small business accounting could have allowed them to grow in proportion to their profits and allow the dream to flourish.
If you’re going to borrow cash to get started, another great aspect of small business accounting is getting to know your banker. Develop a good relationship and your banker can provide vital assistance if your business hits an unexpected downturn. A good banker will give you credit options and help your business with different payment plans until things are up and running again.
Small business accounting can be the backbone of your business. As much as it may seem like a laborious task to many, it will make or break your business. Keeping accurate records, especially during the first few years, is what will create the wind in the sails of your commercial vessel. Don’t take your small business bookkeeping lightly. Research these basics and do some more research. Check with local and federal small business administration agencies for further guidance.