When was the last time you went over your financial statements? If it has been more than a month or two, then it has been too long. The more often you review these statements, such as your income statement and balance sheet, the more accurate your understanding will be of what is working in your company and what is not working.
Many business owners today rely on inconsistent statements. These inaccurate records can potentially mask large discrepancies within their company. This creates the potential for problems to be detected too late and will likely lead to decreased business revenue. This could cost you more in resolving the problem in the long run. It is important to have precise statements because these records voice the health of your business. Establishing a system to accurately maintain your statements will make it easier for you to make sound business decisions.
There are different affordable ways to ensure that your financial statements are accurate and in order. The most reliable way to make certain that your statements are correct is to hire a well-qualified accountant to provide a bookkeeping service. An accountant can provide valuable insight on how to best save and manage your business’ money, and they are frequently updated on the latest software financial systems.
Other options to ensure the accuracy of your business’ financial statements are to hire an industry specialist and use technological tools to manage the statements yourself. An industry specialist has extensive knowledge about your industry, and she or he can assist you in compiling your statements. They can also offer you assistance in understanding what specifics to look for in financial statements. If you choose to use software to manage the statements yourself, it is crucial to understand the program thoroughly. If you do not understand the information in the reports then you should highly consider outsourcing to an accountant who can assist you with your bookkeeping.
Once you have accurate financial statements, you can efficiently monitor the monthly production of your business. As you become more comfortable and proficient in monitoring, you should become more proficient in noticing and predicting trends, as well as future income levels. Predicting these trends should then act as an aid when making future budget and projection updates.
The budget and financial statements are tied closely together. If your statements tell you that you have excess cash on hand, then maybe it is time to expand the budget. Budget increases allow your business to conduct any combination of changes. Changes can come in the form of hiring more employees, purchasing new equipment, increasing marketing and advertising initiatives, etc. No matter what changes are implemented, decisions should be made on budgeted cash only.
In essence, having a concrete understanding of what your business’ financial statements mean and why a budget is important is critical for the success of your business in its industry. Always remember, if you are unable to understand what your statements are telling you, consider outside assistance with your bookkeeping.
About the Author: Bert Doerhoff is owner and founder of Accubiz, a firm providing accounting services out of Jefferson City, Missouri. Accubiz specializes in small business accounting, outsourced bookkeeping, and wealth management. Prior to opening his own firm, Doerhoff worked for Peat, Marwich, Mitchell & Co, which is currently known as KPMG. Frequently, he speaks at state level and national conferences on various business management topics.