Small Businesses are the backbone of our economy. Being that small businesses play such an important role in the American economy, typically what affects the economy will affect the small business owner. In the wake of large businesses financial scandals that are changing the way the government and regulatory agencies mandate new regulations, one would think what are the consequences if small businesses fall prey to similar scandals. The small business owner must take these issues into consideration for accurate financial reporting is not only a “Wall Street” problem, but a “Main Street” problem.
When a small business owner tries to tackle the financial problem alone, they are usually too caught up in the activities of bringing in new business to take any time out to “look over the books” or balance the checkbook. It is also difficult for the small business owner to stay current on all the new changes in the tax law that may affect their business. Despite all the government talks of tax simplification Congress has made more than 5000 changes in the federal tax law since 1986. Small business owner must take into account these issues to ensure a solid future.
Typically a small business owner may attempt to alleviate the problem by purchasing an easy-to use software program to in a sense “do the work for them”. This usually only puts the small business owner back into the same loop of trying to bring in new business at the same time managing day-to-day activities. The time training on the software and entering the data alone could be spent on revenue producing activities which is why often time a small business needs to develop a system of financial record keeping.
How Accounting Systems Help
When a small business utilizes an accounting system in conjunction with an accounting software package, all financial issues can be addressed. This will ensure that the most prudent course of action is taken when making business decisions. At the same time the small business owner can focus their efforts on the revenue producing activities that will help the company grow. The three main ways an accounting system can help a small business owner are:
• Have more efficient tax planning- By preparing year round
• Improve cash flow- By knowing where the business stands at all times
• Have better insight as to where it is going- By utilizing accurate reports for decision-making.
By utilizing an accounting system, a small business will be able to uncover potential tax savings they can apply throughout the year instead of only at tax time. An accounting system that closely monitors the potential tax implications of various transactions during the year will assist the small business owner with the timing of those transactions to reap the best tax benefit.
Cash is the life-blood of any business especially a small business. Without cash the business will suffer and will possibly be forced to cease operations. By implementing an accounting system a small business’ cash flow position can be improved. The system can provide the small business owner with the numbers beyond just the bank balances so cash and/or financing needs can be addressed efficiently and effectively.
Many small businesses operate under a blindfold when it comes to planning for the future. By having an accounting system in place, the small business owner will have a better grasp on where they are and where they plan to go. By focusing on the business growth strategy, in conjunction with financial reports the accounting systems can “forecast” potential business scenarios before they occur. This will empower the business owner with the necessary information they need to stay in line with their strategic vision.
Accounting Systems are Important
By implementing an accounting system a small business can improve its tax planning, effectively manage their cash flow, and improve their management controls. It will also allow the small business owner to spend more time on revenue producing activities. Small business is a contact sport, it is important for the small business owner to make new contacts, cultivate their present contacts, and keep in contact with their bottom line. By using an accounting system, small businesses can effectively manage these contacts and continue to be the backbone of the economy.
The Tech Accountant