"Cash is King" which is why the cash flow statement is vital to a successful small business. You may hire a bookkeeper to record where all of the cash is earned and spent for your business. This bookkeeper may even provide a generic profit and loss statement or balance sheet produced from a canned report in Quickbooks or Peachtree. But how do you know the information is accurate? What type of benchmark should you use to determine if the numbers in these reports are good or bad? How do you even read this type of statement?
Bookkeeping is designed to generate data while Accounting is designed to turn that data into information. The role of an accountant, therefore, is to verify the data entered, and then use that data to generate reports, analyze the data, and offer strategic advice . An accountant's analysis of your financial information can provide information for forecasts, budgets, business trends, and opportunities for growth or when to restrict spending to manage cash flow.
Investing in a relationship with an accountant opens a whole new dialogue into the performance of your business. Your current relationship with a bookkeeper may look like this - you hand (or probably leave in your reception area) a folder full of receipts and checks for your bookkeeper to pick up once a month. Your bookkeeper enters each transaction into an accounting software and emails you a profit and loss statement and balance sheet. You have no guidance on your profitability and haven't even interacted with your bookkeeper face-to-face regarding the operations of your business.
Now picture a relationship with an Accountant. Your accountant will pick up the same folder, but after entering all of this information into an accounting software, your accountant will review the statement produced at a high level for errors or omission of data. Your accountant will compare this data against industry benchmarks or an established budget to determine if your business is meeting its goals. Your accountant will set up a meeting with you to provide insights on the profitability of the business and help answer any questions such as:
- Is my business doing well? How can I reach my business goals?
- How am I doing compared to last year?
- Do I have enough cash available to move forward with a new project?
- Can I afford to hire more staff? Or to invest more in marketing?
- Is my business model is working ?
- I see more money coming into my business, but where am I spending all the money earned?
If you'd like to begin a new relationship with an accountant and gets answers to these types of questions, please contact me for a free consultation. I'd love to discuss how my services can benefit your business.