According to a study, about 14% of the small businesses in Australia fail because business owners didn’t understand their business’s finances. Not every business owner is a numbers person, and why should they be? That’s not a primary requirement for running a successful business. It isn’t, but taking care of your business’s accounts is.
And if you are not sure you can do a good job of it, you might consider outsourcing the job. Thanks to the power of the internet, you can find accountants anywhere you are. All you have to do is search for small business accountants, Bundoora, or something similar. But whether you do it yourself, or someone else does, it’s crucial for your small business’s health that its accounts are in perfect order.
There are several reasons why accounting is imperative for small businesses:
Actionable Data From Business
Many business owners fail to distinguish between accounting and bookkeeping. While bookkeeping ensures that all the transactions are recorded and all the relevant data is secure, it cannot provide business owners actionable insights about their business’s finances. That’s what an accountant does. By making sense of the cash flows, expenses, and income, properly kept accounts can help you place your finger on the pulse of your business’s financial health.
Right Accounting Method
Small businesses usually engage in cash accounting method and keep doing so for a long while. But as your business grows, cash accounting might not remain the viable method. For business owners used to maintain their accounts using cash accounting methods, it might be a difficult transaction to make without proper training or research, but it becomes important after a certain point. So if your business is at that important turning point or your business model simply fits better for the accrual accounting method, you may need to make the switch. The right accounting method won’t just help you understand your business’s finances better; it will also help you plan better for the future.
Creating a proper budget and sticking to it is important for a small business’s financial health. Without your accounts in order, you will not be able to allocate the right amount of resources for your business’s usual expenses. A lot of businesses make that mistake and spend more revenue on growth and not keep enough for important expenses and for paying off debt.
When your small business is doing well (and even when it isn’t), don’t forget the piece of the pie you owe to the Australian Taxation Office. Without your books and accounts in order, you will be hard-pressed to calculate your taxes accurately. Proper accounting practices will help you and your small business stay ready for taxes from day one. With all your accounts in order, you will be unlikely to underreport your income and make mistakes in your returns that can trigger an audit.
The financial reports you get from your accountant are not just for you. If you are seeking a loan for your business, a partner, or even an investor, the first thing they will look into is your business’s finances. If your accounts are in shambles or incomplete, it might present you as someone who cannot be trusted with funds.
If you prefer to work with the locals, you may find several good accountants in Bundoora that you can work with. But that’s something you should take care of from day one of starting your own business. Without proper accounting, your business is unlikely to grow and thrive.