Small business owners encounter numerous challenges in their daily operations, and accounting is a big problem. When it comes to running a small business, you need to wear multiple hats. Your tasks will range from hiring the right personnel to marketing your brand to maintaining good relationships with customers. Besides, you will also need to keep track of your business accounting and profits. While accounting might not be your passion, keeping your financial books organised is essential for a small business. Accounting is considered the language of a company seeking financial growth since it translates figures into an understandable statement regarding the business’s profitability.
Usually, accounting encompassed the process of recording, analysing, and summarising the financial transactions of a business. While this could be difficult, there are many other common financial obstacles that a small business owner should overcome. Here are the top accounting challenges small business owners should anticipate and learn how to handle them.
- Cash Flow
Managing cash flow is a huge problem for startups and small businesses as well. According to a study by the U.S. bank, more than 80 percent of the businesses which fail do so due to cash flow challenges. Business owners often find it challenging to earmark the funds to cater for any recurring costs and keep their business running. To remain on top of your business’s cash flow, analyse your bills thoroughly and be aggressive when you are following payments from your customers.
- Unforeseen Expenses
If a small retail store, after all its expenses, earns $100,000 per annum it might appear to be in good shape until a slip-and-fall lawsuit filed by an employee costs the business $1 million and there was no insurance cover. Even smaller business expenses like an increase in the cost of goods or a one-time government tax on businesses in a specific region could cause significant changes to your financial bottom line. It would be better if you optimized your existing credit to manage any short-term business expenses. Moreover, you should monitor the business’s long-term profitability to ascertain that the cost changes do not jeopardise your overall liquidity.
- Reconciling Your Books
Closing your business books can be annoying, mainly if you do not have a good accounting system in place. It is easy for you to make a small mistake in your books and it could result in incorrect calculations, inappropriate data analyses, and IRS audits. It is essential that you verify your business transactions on a monthly basis, if not daily or weekly. You need to develop the habit of going through your accounting at the close of business each day since the transactions are still fresh.
Avoiding Accounting Mistakes
An incredibly crucial task for startups and small businesses is choosing the right accountant. An experienced accountant could help your business avoid the top three accounting mistakes mentioned above. A good accountant will be in a position to advise you on the mistakes mentioned above, and a lot more, to help your business grow in the modern-day business space. Are you facing any of the above or other accounting challenges, Ascent Accountants Perth are here to assist you. You could contact them through their website ascentwa.com.au for inquiries.