Small business online accounting is an important consideration. In my experience many small business owners are lax in their financial record keeping, leaving their bookkeeping and accounting work for their accountant to do for the purposes of their yearend and filing their corporate tax return. In most cases this results in small business owners getting a grip of their financial health 6 months after their fiscal year end. As a result, many small business owners end up making poor business decisions because they just do not have relevant and timely information.
This lack of active financial management, like on-going bookkeeping, can present many problems such as employee theft, liquidity issues or unexpected tax bills. Therefore, it is crucial to keep track of, amongst other things, monthly profit & loss; cash flow; bank reconciliation; accounts receivable and payable aging summary; inventory records; etc.
Proper and accurate bookkeeping, made possible with small business online accounting apps, needs to be done regularly so that the right financial reports can be generated and reviewed.
Lets take the issue of cash flow for a growing business. Start-up business owners, especially those on a shoe-string budget, need to ensure funds are available when bills come due or when there is a great investment opportunity. For example, let’s say you are a vintage clothing store and your whole-saler offers you a one-time bulk purchase special amounting to a 15% discount on great merchandise if you agree to buy their merchandise before the end of the day. It’s quite common for a business owner to jump on the sale believing that they have the cash available, only to find out that they have other obligations coming due within the next few days but no liquidity to meet those obligations. It is important to realize that knowing your cash flow is often times more important than knowing your profit level. A business can be profitable and still go under because there is not enough cash to pay obligations.
Other examples of important areas to keep track of are accounts receivable and inventory. If accurate and timely bookkeeping is done, a relevant 90 day accounts receivable listing can be generated, which allows a business owner to see what amounts are still owing from customers and what is still likely collectible. Having this information as part of a monthly summary enables a business owner to follow up with customers before outstanding amounts become uncollectible.
Likewise, by getting and tracking monthly inventory reports, a business owner can see what inventory is moving and what inventory is not moving, how fast certain items are moving, etc. When this information is tracked it allows a business owner to make the needed adjustments to stock the right items and avoid sinking needed cash into the wrong inventory.
With input from your accountant, individual business owners can decide the most important financial information to monitor.
That is why I advocate monthly bookkeeping and accounting packages. Call us for more information on small business online accounting.