Bookkeeping and accounting services can be an absolute game changer in your small business.
If you’re the kind of owner who is operating your company as a one-person show (or even managing a small team of employees), you know how difficult it can be to stay on top of your finances while trying to serve your customers and deliver whatever it is you make or do.
How easy is it to overlook an important transaction entry, misread a report, or miss an important tax filing deadline when you’re being pulled in so many directions? In this post, we’ll show you the value that good bookkeeping and accounting services can bring to your small business and the 7 essential tasks they should be providing for you.
Bookkeeping and Accounting Services
As we’ve mentioned recently (in a post titled “How Outsourced Accounting Services Go Beyond Bookkeeping and Help Grow Your Business”), there is a big difference when it comes to bookkeeping and accounting services.
Bookkeeping is primarily focused on day-to-day data entry, handling transactions and invoicing, and accurately storing your company’s financial documents. Some may generate reports and help with payroll as well.
Accounting goes deeper and looks ahead further. It involves interpreting financial information to help maximize opportunities and prevent loss as well as handling all of your tax preparation and filing needs.
Any employee can handle bookkeeping, but only an specifically educated and usually licensed professional is qualified to be an “accountant.”
With that being said, though, hiring a firm to take both bookkeeping and accounting tasks off of your plate is a wise business move. The firm you choose to partner with should be able to provide you with these 7 essential services.
1. Financial Statement Preparation
Financial statements are a valuable tool that owners, lenders, company stakeholders, and potential investors can use to track revenue and expenses as well as measure the financial health of your business. As we’ve covered before in more detail, the 3 most important types of financial statements your business needs are
- Monthly Income Statement (or P&L)
- Monthly Balance Sheet
- Cash Flow Report
To produce these, your accounting service will typically go through the following steps. However, the process may vary depending on your particular business or industry.
- Verify receipt of supplier invoices
- Verify that customer invoices have been sent
- Account for unpaid wages
- Calculate depreciation
- Value inventory
- Reconcile bank accounts
- Review and close accounts
- Print updated financial statements
2. Tax Preparation and Planning
Taxes can be incredibly difficult for most small business owners. It’s just not what you spend your time doing all day. That’s why you need a pro on your side who is experienced with tax preparation and planning.
Most accountants are good at tax preparation, but you deserve to find one who also fully understands tax laws, tax compliance, and tax planning.
Tax preparation is a once-a-year thing that simply looks at the events of the past 12 months and makes sure they are recorded accurately. New information is updated from the previous year’s return as needed. This can be done with one or two meetings (even remotely) at the end of each fiscal year.
Tax planning, however, is an ongoing process. Its goal is to look forward in order to make sure that your business is maximizing tax savings (and minimizing penalties). In order to accomplish that, your accounting service will need to stay in regular contact with you throughout the year.
If your accountant only prepares and never plans, it’s like a football team that is only on defense and never on offense. To win the game, you need both sides to play strong.
3. Financial Reporting and Analysis
Financial reporting and analysis are valuable to the growth of your business because they take your financial data and look at it in 3 different ways:
- Horizontally – comparing it to similar information from the past 2-3 years
- Vertically – comparing the effects of line items on various departments within your company
- Ratio – comparing your company’s financial health over time relative to others within your industry
The insights provided by this kind of reporting can help you know where your business’s strengths and weaknesses are. It can help you plan to take advantage of future growth opportunities. And it can help outside parties have a clear picture of your company to help them decide about investing with you or not.
4. Business Tax Compliance
A good accounting service will stay on top of tax laws for you and make sure that you are in compliance at all times. It can be a challenge, so they need to
- List all tax laws that apply to your business
- Fill out all necessary forms that relate to each of those laws
- Note the due dates for filings and payments
- Ensure that all supporting documentation is up-to-date and included
- Stay current with ever-changing laws that affect your company
5. Payroll Processing Services
There are plenty of online payroll services that offer to help with payroll processing by giving you access to their payroll software. There is a certain amount of convenience that comes with doing things that way, but at the end of the day, you (or someone on your team) are still responsible for entering and processing your information.
What you really should have is a team of personal pros running your payroll for you. That way you can fully shift the burden of paying your employees accurately and on time to a real person you can talk to whenever you want.
Don’t settle for a DIY or remotely impersonal approach to payroll. To learn more, check out an article we did on how payroll experts can really deliver payday peace of mind.
6. Budgeting and Forecasting
Xero.com has a great article on small business budgeting and forecasting that is also worth reading (when you’re done with this, of course). In it, they do a great job of clarifying the differences between the two functions.
“Small business budgeting shows how you expect the business to perform over a given period. Forecasts use real-life sales and cost data to show where things are actually headed.”
Long-term growth and success depend on being able to look backward at historical data and using that information to create reliable financial forecasts. A good accounting service ought to be able to do that for you. If yours isn’t, then perhaps it’s time to switch to one that does.
Having this kind of information available is essential to running a business that goes the distance.
7. Cash Flow Management
Last, but not least, a good accounting service absolutely must be able to help you maintain good cash flow management. Cash flow is all about how money moves in and out of your business. It’s one of the most important things you need to do well and one of the most difficult.
Experienced accountants understand how to help you implement proven strategies for maintaining positive cash flows (i.e. more money coming in than going out). For example:
- Sending invoices on time
- Getting rid of costly inventory
- Leasing wisely when it comes to equipment and property
- Securing financing before it’s needed
- Monitoring your money
- Taking advantage of technology
(For more tips, be sure to read this post we did on “4 Winning Strategies On How To Manage Cash Flow In Your Business.”)
Small Business Accounting Solutions Made Simple
The bottom line is that business is tough, and you deserve to be able to expect more from your CPA.
Outsourced accounting shouldn’t be complicated. It should be something that helps you grow your business instead of costing you even more time and money. We make small business accounting solutions simple. Schedule a call today to discover how our team of accounting and business pros (with 40+ years of experience) can make a difference for you.
