As a small business owner, you may have a lot on your plate- from ideation to execution to follow-ups and meeting. Since there is generally no shortage of professional accountants or CAs in the country, you may be tempted to leave the world of accounting and your business’ books to a professional. While there are many advantages to outsourcing, it is important that you, as the business owner, are able to understand how your accounts work. Here are the five things you, as the small business owner, must know to run a successful business.
The Frequency of Your Bookkeeping
Often if you are the one undertaking the accounting, your bookkeeping may take the lowest priority on your to-do list. But if you are outsourcing it to an employee or accountant, it is important that you ensure that your books are maintained on a daily or weekly basis. By doing so, you will ensure that the accounting for your business doesn’t pile up and important data is not missed or forgotten.
Review Your Accounts Regularly
When someone else handles your finances, you as the business owner come to trust that individual implicitly. That said, this does not mean that you should stay in the dark about any aspect of your business. To understand the operational status of your business, it’s important to review your books regularly. This will give you a clearer picture on how your business functions, where it can improve and where resources need to be allocated. While it is a good practice to review accounts at regular intervals, you should also review your accounts at unscheduled times to ensure that your books are properly maintained at all times.
Your Seasonal Cash Flow
In today’s business climate, you as a business owner need to be aware of your cash flow both annually and seasonally. Knowledge of the highs and lows in your cash flow cycle will give you a fair understanding on when you need to expand and when is a good time to consolidate. Your seasonal cash flow will allow you to plan the times when you should go all out and promote your product and services and when is a good time to work on developing new features or value added services.
An Accounting Checklist
Accounting and your business’ books can seem unwieldy to the uninitiated. The first step to becoming more comfortable with your accounts is to understand the basics. A good way to do this is to sit with your accountant or an external person who is fluent in accounts and have them explain the bare bones of accounting. With his or her help, create a checklist of the essentials you need to be familiar with and the corresponding numbers. Once you have mastered this checklist, you can expand your understanding of the accounting structures of your business.
Your Tax Details
The amount you need to pay in tax is information that every small business owner should be aware of. Often, if you are a sole proprietor, your company’s taxes will also be your personal taxes so it is important that you understand the expenses you can deduct, the different types of taxes you pay and the rate at which you pay these taxes. Knowing your annual taxes will allow you to better understand how to file your advance taxes and how much of your resources need to be set aside to cover government taxes.
While one can get lost in the nuances and different structures of accounts, begin with these five facets and you will be well on your way to strategizing the growth of your business in a more comprehensive and planned manner.