There is far more to accounting than filing income taxes. Proper use of accounting allows your business to create and use many useful tools to help your company grow and to understand how and where improvements can be made in your business to maximize growth and profits while reducing expenses and losses.
To most large businesses, this is old news, but many small businesses remain small and struggle because they are not aware of just how useful accounting is and how important it is to have an accountant to track every aspect of your business.
Most business owners think of accounting as just recording the income and expenses for their taxes, and only use an accountant at the end of the year for filing the income tax statement. You know, that point when you gather up all of your receipts and place them in an old shoebox and drop them off with the CPA. Well, there is far more to accounting than filing income taxes.
By recording all of your business activity from income and expenses to man hours, pay rates, production, and inventory or wastage, an accountant can create reports that help you track and understand the growth or reasons for lack of growth of your business.
Some basic reports that are useful are productivity reports, balance sheets, cash flow analysis, and profits and losses reports.
Profit and loss reports analyze the costs of production against the amount of profit made. This takes into account the income, labor, materials, wastage and overhead costs associated with a particular part of your income. These reports show you where you can reduce overhead costs and labor or if you need to increase the price of the product or service analyzed to meet your desired profit margins.
Cash flow analysis reports examine the amount of income and expense your business has overall, and more directly shows how and when your income comes in and your expenses go out. This is crucial to your business.
When your expenses flow out before your money comes in, it creates problems making payroll, inventory purchases, or overhead costs. The cash flow analysis report can show you when to order inventory or adjust payments and income schedules to ensure that you always have the available funds to operate your business.
Balance sheets record your assets, liabilities, and equity or Net Worth. While these reports show when things are out of balance and help locate missing funds, they are also used to gain an overall prospective of your business performance. In understanding where your company sits, you can make more informed decisions about your company growth, expansion, advertising budget, and ability or need to hire new employees or cut back on your labor force.
Productivity reports can be used to show rate of production, costs of production, and overall performance of where your company is performing daily operations. By comparing reports of product or service production with wastage and labor or even each individual labor and your schedule of man hours used, you can determine many points of improvement in your company productivity. Productivity reports help to determine scheduling, staffing, when to order materials, how long it takes to fill orders, where you can reduce wasted man hours and materials or just use a less expensive employee.
As you should see and understand by now, these reports are crucial to the growth of any company and make the difference between staying a small struggling business or growing or just stabilizing your small business with higher profits and less complications.
These reports are all part of accounting services that an accountant can generate for your company through daily accounting services and recording all activities of your business. Accounting reports can be generated daily, weekly, monthly, quarterly, and so on. When you start using these reports, you will find different trends by comparing daily, weekly, monthly, and yearly reports that will also help your business grow and profit.