Why is Business Accounting so Important for Small Businesses?

March 23, 2020 at 4:00 AM

When starting a small business, deciding on your bookkeeping and accounting process, and how you will account for all of your financial information should be one of your top priorities. Without an accurate accounting process, your business might not be as successful as you intended it to be.

Why is this so important for small businesses specifically?

Accounting is important across all businesses – but especially when it comes to small businesses.

Poor financial management is one of the primary reasons small businesses fail within their first year. Small businesses are usually faced with a limited budget and other resources, so accounting plays a major role in managing this budget and providing the business with opportunities for growth and development.

What is the purpose of accounting?

Accounting necessitates huge amounts of data collection and organization in a way that can be easily interpreted at all times, in various instances.

As a small business owner, it can be tempting to manage the business finances yourself to cut down on expenses. However, having a trained professional handle this for you is vital to the success of the business.

Business accounting will:

Demonstrate business performance and financial position.

How can you know how well your business is truly doing if you don’t know what the finances look like? Accounting services include reports that demonstrate how well the business is performing, including things like measurements of key performance indicators.

Reports can also reflect aspects of financial position, such as how much capital has been invested, how much funds the business has used, and the profit and loss numbers.

Keep you covered for legal requirements.

When it comes to running a business, there are always legal requirements to be considered. For shareholders, tax authorities and regulators, financial statements and information is required and should be accurate and regularly maintained.

Help with decision making.

It can be hard to decide when it is time to take that next step. When is it time to add or cut a service or a product? When it is time to raise prices? And when is it time to make other big decisions that go into owning your own business?

But, when you have your options backed by data and financial facts, decision making gets much easier.

Prepare you for future financing.

As your business grows, you will require more equipment, a bigger location, and more employees. It is likely that these growing needs will also mean a need for additional funding. When it comes time to apply for this funding, lenders and investors will want to see historic financial records and financial projections.

It can also help with these crucial duties:

  • Understanding the concept of fixed costs, variable costs, and how to accurately project the costs associated with the business
  • Understanding the general well-being of the business
  • Detecting and avoiding fraud and theft

How can we help you?

Our small business accounting services in Charlotte, NC, are designed to accelerate business success and ensure satisfaction through our efficient and prompt communication, elimination of the middleman, and extensive experience with small businesses and startups.

We understand that accounting services for your small business are different than what a big corporation’s processes might look like. This is why we have solutions tailored to your needs, such as catch up bookkeeping and 1099 filing. We’re ready to deliver these solutions directly to you, wherever you might be.

Contact us today to get started with a free consultation.