Do Small Businesses Really Need an Accountant?

It’s difficult for business owners to seek help as they are in the habit of doing everything on their own. But what they fail to comprehend is that delegation is critical, and not everything is an owner’s job. Sure, hiring an accounting bookkeeping service is going to cost your business money, but financials is one of the areas you can’t afford to go wrong. So, instead of doing it yourself, it is always in the best interest of the business to hire professional accounting and tax services.

Do Small Businesses Need an Accountant?

Often, you’ll hear small business owners talking about the need for an accounting bookkeeping servicein the tax season. But you can benefit in a lot of ways from the professional expertise of an accountant who is trained not just to crunch numbers but also to analyze the financial data. An accountant can report on the financial data and make recommendations that can result in more profitable and sustainable revenues for the business. 

What is an Accountant Going to Do for You?

The duties of an accountant may vary from business to business, but typically include:-

1.Data Management

Accounting and tax services are responsible for ensuring that your financial data is appropriately stored, updated as well as managed. This is so the information can be reported accurately to the business owners, stakeholders, and the government. The accounting and tax services also ensure that proper compliance procedures are followed for data entry and the accounting software system is up to date, ensuring secure and regularly backed up data.

2. Financial Analysis and Consultation

When it comes to decisions involving the future of your small business, an accounting bookkeeping servicemay sometimes be the best resource. Perhaps you need some tips on how to proceed in the next quarter, or maybe there’s an investment opportunity, or you want to discuss your tax deductions. Be it anything finance-related, accounting bookkeeping servicescan help you with all of that, as well as troubleshoot the day-to-day activities of managing your finances. 

3. Handle Financial Reports

If you have been in the business for long, you may have heard the terms “Cash Flow Statement” or Profit and Loss Reports”. These are the types of financial reports that allow better decision making, keeping the company’s money updated. You and your investors are going to be making decisions based on such reports, so these need to be updated and error-free. And, accounting and bookkeeping services make sure that they are accurate and ready for translation.

4. Take Care of Regulatory Compliances

There are innumerable rules and regulations affecting your small business. Be it audit compliance or tax calculations; accounting and bookkeeping servicescan handle these headaches and ensure that all the regulatory compliances are being adhered to.

When to Hire an Accountant or an Accounting Bookkeeping Service?

There are several instances in the course of your business when you don’t want to wing it without an accountant, such as: –

  • Forming Your Business

Whether you are forming a business from the ground up or taking over an already established business, a new venture is always a tricky affair. Anaccounting bookkeeping servicecan help you construct a solid business plan, advise you on your business structure, help you get all the appropriate licenses, set up your accounting and bookkeeping software, etc. 

No matter how easy this may seem you don’t want to try and set up your own business accounting software. It requires precision and expertise. 

  • Compliance and Tax Issues

Even if your business plan is well-structured, you have all the requisite licenses and permits, you are not quite ready to go forward without professional guidance. There are still at least a dozen stumbling rocks to overcome. So, unless you want to have sales tax issues, payroll issues, or other operating requirements, you may want to consider hiring an accountant or reaching out to an accounting bookkeeping service.

  • When You are Unable to Handle Things on Your Own

Accounting and bookkeeping can be overwhelming, especially if you are doing it alone. There may be times when you need help, don’t hesitate to ask for it. Running a small business without an accountant can be troublesome, especially during tax or annual filing season, so you should really consider the benefits you’d gain by hiring an accountant.

Every small business can benefit from working with a credible accounting bookkeeping service. So, scout the internet for a small business accountant and start working with a financial wiz.

6 Ways Cash Flow Forecasting Can Help Small Businesses Grow

When it comes to the future expectation of profit and loss, entrepreneurs tend to know their finances inside and out. They know the margin they’ll make on each product and have an in-depth understanding of their overheads.

What business owners don’t necessarily know inside out is how and when changes to sales, purchase, or any other business costs will affect their bank balance. This is where cash flow forecasting/management comes in. Cash flow forecasting helps a business measure the positive or negative impact that is caused by even the slightest change in costs.

Why is Cash Flow Forecasting So Important?

It’s imperative for a business to recognize the profit earned at the end of a given month. But the calculated profit doesn’t mean that the company has this much cash coming into the business. Without cash flow forecasting, it would be nearly impossible for a business to estimate how much money will be flowing in at a given time. Moreover, if they don’t forecast the cashflow, it will be impossible to make an informed business decision or to plan for any change, or even enable business growth for that matter. 

Let’s discuss how cash flow forecasting can help small businesses grow: –

  • Helps Gain Confidence in Your Financial Systems

Probability doesn’t necessarily mean that your business graph will move upward, or that you have cash in the bank.

The answer to this lies in the process of cash flow management. A profit and loss sheet only tell you part of the story; without a firm grasp on cash flow, you are not getting the actual picture of your finances. 

Cash flow forecasting can reveal where you need to tighten payment terms, cut overhead expenses, or hire new staff. It is a godsend not only for business owners but also for small business accountants as it helps to provide critical advice for business planning.

  • Budget More Productively by Tracking Revenue and Expenditures

Cash flow forecasting helps identify and analyze your current revenue and expense budgets and whether they are accurate or not. You’ll be able to control and monitor all incomes and expenses, providing you with the necessary time to adjust ensure your business stays on track. 

  • Monitor and Manage Cash Deficiencies Proactively

By figuring out your cash flow movement in real-time, cash flow forecasting allows small business accountants to consider proactive future cash deficiencies and convey the same to the business owners. It is pivotal for a small business or startup to know when and from where the money is coming in and moving out. Using cash flow forecasting tools or an online accounting system can help to identify cash shortages well in advance, giving you the time cushion, you need to prepare yourself.

  • Determine and Spot New Growth Opportunities

Cash flow tools are immensely popular in online accounting as it helps anticipate a business’s future cash levels, allowing them to determine which new business opportunities are worth investing vs. passing on. Your small business accountant can use these tools to spot cash surpluses that can be reinvested for business growth.

  • Scenario Plan for Future ‘what if’ Questions

With so many small businesses being disrupted each year, it is not always clear which path is best for your business to stay ahead of technological and innovation changes. With a cash flow forecasting tool, small business accountants can explore the impact of different decisions on your business’s cash flow. This can prove to be pivotal in hypothesizing the feasibility of your plans.

  • Determine Flexibility in Overcoming Issues and Making Critical Decisions

Companies that operate down to the wire can limit their options, leaving themselves exposed and with very little room for error.

By forecasting your company’s cash flow, online accounting systems measure your ability to face financial problems and to test the impact that decision made on using your cash. The forecast will assist in determining how much money you should keep as a financial buffer, and this buffer can give you the flexibility to make mistakes. 

Bottom Line

Regular cash flow management is a critical part of any business planning strategy. It can help you make or break your business. It makes you aware of changes to your finances before you hit “an all-time low” point. Improving your awareness of how and when the money is flowing from your business strengthens your ability to make the right decisions at the right time. So, reach out to your accountant and get information about your cash flow, and if you don’t have an accountant, well, buckle up and look for a small business accountant right now.

Cash Vs Accrual Accounting: What is the Difference & Which One is Better?

There are two primary methods of tax and accounting that your business can utilize to report income and expenses: cash accounting and accrual accounting. The major difference between the two methods involves when the transactions are recorded. With cash accounting, revenue and expenses are recorded when it is received or when it is paid out; with accrual accounting, transactions are recorded when revenue is earned and when the expenses are consumed.

Let’s understand both the tax and accounting methods – how they differ, the implications of each method on your business, and how to determine which is the best method suited for you.

An Overview of Accrual Accounting

Accrual based accounting records revenue and expenditure as they are incurred and earned, regardless of when the cash or payment is received or paid. If your business sells a product in May but doesn’t receive the revenue till June, for example, you record the transaction in May, regardless of when you receive the revenue.

The benefit of accrual-based accounting is that it provides a more realistic view of your expenses and income. The only downside of this method is that it can be deceiving about your profitability, giving you less awareness of the actual cash flow. Even if the business appears to have positive cash flow, it doesn’t actually reflect the true picture of your bank account. Still, accrual-based accounting is generally preferred because it better complies with IRS requirements and gives you that long-term visibility into your small business accounting.

An Overview of Cash Accounting

The cash-based accounting method recognizes revenue only when the cash is received, and expenses when the cash is paid. Using the aforementioned example, if you sell a product in May but don’t receive the revenue until June, the cash accounting method doesn’t recognize the transaction until the cash has actually been received, that means to record the transaction in June.

The benefit of cash accounting is that your bank account is a real-time reflection of the resources you have at your disposal. The downside of this tax and accounting method is that there is a delay in revenue and expense recognition. So, if you make a sale in May, but don’t recognize that revenue until the transaction is processed one month later, you have less visibility into your business long-term.

Tax Implications of Cash and Accrual Accounting Methods

Businesses must figure out their taxable income and file a yearly return. Choosing between cash or accrual accounting method depends on the type of product or service you provide and of course, the size of your business.

If your business generates less than five million dollars in revenue, the IRS permits the use of cash-based accounting. Therefore, small businesses are more likely to use cash accounting. On the other hand, anything over the limit of five million dollars requires the accrual method of accounting. 

Which Accounting Method Should Your Business Use?

  • Cash Accounting

Many small businesses usually opt to use cash accounting because it is the simplest method to record transactions and cash flow. The cash method of small business accounting makes it easier to track how much cash your business has at any given time. There is no need to track receivables or payables, and your business doesn’t have to pay income tax on any revenue until it is deposited into your bank account. Cash accounting gives you an idea of the funds in your bank account and an immediate look at your business’ financial position in terms of liquidity.

Benefits of Cash Accounting

  • Immediate view of your business
  • Low maintenance
  • Easy to track your cash-flow at any given time
  • No need to pay income tax until your cash is in the bank
  • Accrual Accounting

The accrual method is the focus of professional small business accounting because it prevents manipulation of income by matching the expenses incurred in a period of time to the income earned in that period. Accrual accounting accurately reflects the financial position of your business by reflecting the revenues that have been earned to the expenses that have been incurred during a given period of time. When compared to cash accounting, accrual accounting tracks cash much more effectively by allocating cash flows to the appropriate period. It also provides a better outlook into the financial statements of the company, allowing for smarter business decisions and future growth.

Benefits of Accrual Accounting

  • A long-term view of your business
  • Tracks cash most effectively
  • Prevents income manipulation
  • Provides a defined look at the financial health

The Accrual Method Is Better…In Most Cases

It is generally recommended to use the accrual method of accounting because it helps your business better comply with IRS rules and regulations. Also, it helps to accurately reflect the actual financial situation of your business. While cash accounting may be easier to understand, accrual accounting is often more through and may even be a legal requirement for small business accounting. If you choose to use the accrual method, remember it will affect your tax return as it can change which year you record certain incomes and expenses, and it can also dramatically change the appearance of your financial statements.

Final Note: Make accounting practices a top priority to ensure your tax and accounting is in order before it is too late.

It’s Time to Automate Your Accounting Process: Here are 6 Reasons Why

Running a business successfully requires managing a number of tasks simultaneously. Out of these multiple tasks, tax and accounting hold a significant position. Accounting handles records, business reports, and many other financial transactions and interactions necessary for the business to grow. Traditionally, most accounting functions were completed manually with the help of a professional accountant. However, manual accounting system had many disadvantages including it consumes a lot of time and is prone to human error. Small business owners require a significant amount of manpower to carry out their accounting related functions.

The introduction of automated accounting software solutions in Canada has steered businesses in a different, more successful direction. Increasing demand results in increased workload, and therefore everything cannot be handled manually. Following are the benefits that describe how automating accounting systems helps build a profitable business: – 

The Benefits of Online Accounting Software in Canada

1.Budget-friendly

Spending money on an in-house accounting system can cost you more than you think. Small business owners can save this money by incorporating automated accounting software solutions. This cost-saving can then be allocated for better use, such as growth and development of other business operations.

2. Minimal Human Errors

With automated accounting software solutions, the risk of manual error is reduced significantly. Regardless of how qualified the professional is, manual accounting is always at risk of human errors, that could prove to be costly in the long run. Incorrect financials can lead to heavy penalties and losses for your business. To avoid such costs, it is recommended to invest in online accounting software.

3. Increased Productivity

Maintaining an in-house, full-time resource for accounting functions consumes resources. It not only requires money but also needs an entire management department that looks over the accounting systems. Leveraging accounting automation software provides, you can notice increased levels of accuracy, therefore increasing the productivity of those who no longer have to double-check all the reports and other aspects of manual accounting.

4. Easy Access

A major disadvantage of manual accounting is that it uses manual ledgers. These records pile up over time, making it extremely difficult to go back and access a particular record. However, automated accounting systems facilitate sourcing these records as they are organized as per your needs and accessible electronically at any given moment. Small business owners can save a lot of time that was otherwise occupied in fetching records. With the help of online accounting software, the financials and any other accounting information can be fetched in a matter of seconds.

5. Data Security

Manual records are more susceptible to breach. They have minimal security and are at more risk for exposure. Paper records and ledgers can be easily stolen, that could cause dire consequences for your business. Automated accounting software solutions, on the other hand, are much safer. These provide secure access for all your financial transactions and if it is password protected, no one except you or your authorized personnel can view the data.

6. Bookkeeping Software

Bookkeeping and online accounting software collects large amounts of data and organizes it in an easily accessible manner. Any payment or financial transaction only needs to be recorded once. Repetitive transactions can now be completed with a single click. Such software helps reduce accounting from a full day process to a simple task that can be managed by a single person. This automates critical tasks like tax and accounting payments, complex accounts receivable and payable, and other client payments.

The Processes You Can Automate With Online Accounting Software

  • Purchasing and Accounts Payable
  • Accounts Receivable
  • Managing Expenses
  • Financial Reports
  • Bank Reconciliation

Bottom Line

The small and medium enterprises in Canada can benefit from automated and cloud accounting systems because it just doesn’t handle accounting records and management, it can also be integrated with several other business systems like project management, CRM, and payroll. Small business owners can derive insightful information within a matter of seconds with the help of this technology. In addition, costly mistakes can be avoided because automated accounting software solutions follow international standards so businesses remain compliant as well as efficient.

So people, it’s time to save money and automate the accounting process of your business. Invest in a good tax and accounting software and save a significant amount on hiring professional services.

Introduce Yourself (Example Post)

This is an example post, originally published as part of Blogging University. Enroll in one of our ten programs, and start your blog right.

You’re going to publish a post today. Don’t worry about how your blog looks. Don’t worry if you haven’t given it a name yet, or you’re feeling overwhelmed. Just click the “New Post” button, and tell us why you’re here.

Why do this?

  • Because it gives new readers context. What are you about? Why should they read your blog?
  • Because it will help you focus you own ideas about your blog and what you’d like to do with it.

The post can be short or long, a personal intro to your life or a bloggy mission statement, a manifesto for the future or a simple outline of your the types of things you hope to publish.

To help you get started, here are a few questions:

  • Why are you blogging publicly, rather than keeping a personal journal?
  • What topics do you think you’ll write about?
  • Who would you love to connect with via your blog?
  • If you blog successfully throughout the next year, what would you hope to have accomplished?

You’re not locked into any of this; one of the wonderful things about blogs is how they constantly evolve as we learn, grow, and interact with one another — but it’s good to know where and why you started, and articulating your goals may just give you a few other post ideas.

Can’t think how to get started? Just write the first thing that pops into your head. Anne Lamott, author of a book on writing we love, says that you need to give yourself permission to write a “crappy first draft”. Anne makes a great point — just start writing, and worry about editing it later.

When you’re ready to publish, give your post three to five tags that describe your blog’s focus — writing, photography, fiction, parenting, food, cars, movies, sports, whatever. These tags will help others who care about your topics find you in the Reader. Make sure one of the tags is “zerotohero,” so other new bloggers can find you, too.

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