Do you know exactly how well your business is performing? Or are you simply guessing about your finances each month and hoping for the best? (Be honest. This is a no-judgment zone.)
There are some important things your accountant should be telling you about the financial health of your business so you should never be left wondering. Because, after all, your business finances are much too important to play around with guessing games.
Refer to the list below anytime you meet with your accountant to make sure all your financial ducks are in a row, and not waddling off in various directions. Or, better yet, work with an accountant that offers online access to your financial data, so this information will be available to you anytime you need it.
5 things your accountant should be telling you:
1. How much money is coming in (i.e. Accounts Receivable)
Are you on track with all of your invoices? Do you have any clients with outstanding balances that need to be followed up on? Make sure you always know what payments are scheduled to come in – including how much is due and when to expect them.
If you have electronic invoicing with automated client reminders, you shouldn’t have to worry as much about timely billing and payments, but you’ll still want to stay on top of this to make sure nothing slips through the cracks.
2. How much money is going out (i.e. Accounts Payable)
Are you on track with paying your bills? What bills are coming up, and will you have enough cash to cover them?
It’s easy for small expenses to add up to make a big impact on your bottom line. Your accountant should not only help you to understand how much you’re spending each month but also find ways to cut costs wherever possible.
Also, automatic payments will help you sleep a whole lot better at night by simplifying this process – just be sure your bill payment schedule is set up correctly. This is something you can do with or without the help of an accountant, but somebody should keep an eye on it each month to make sure nothing is missed. Nobody likes to get hit with a late fee.
3. What’s left over (i.e. cash balance)
Once you’ve got a solid grip on where your money is coming from and where it’s going, then you’ll be able to determine what cash is left over to grow and expand your business.
This is where an accountant’s insight is especially important – your accountant should be able to spot any red flags that are impacting your available cash balance and work with you on a realistic solution. No business owner should ever have to wonder what her company’s cash balance is – and with the right help, you never will.
4. How much you can spend (i.e. budget)
For many businesses, a ‘budget’ lives in that same fantasyland where you’ll find New Year’s resolutions and other such idealistic goals that you have no real intention of sticking to. But hey, it sure looks good on paper, right?
You and your accountant should create a budget that your business can realistically stick to, not one that just looks good on paper. Then you’ll be able to compare your actual revenue and expenses to the budget that you and your accountant have set.
5. What should go to the IRS (i.e. taxes)
Are you setting aside enough money for taxes each month? A good rule of thumb is to transfer this money to a savings account so it won’t accidentally get spent.
Work with your accountant to be sure your taxes are covered so there won’t be any quarterly or year-end surprises. This will also inform you exactly how profitable your business is.
Every business – even small businesses and startups – should have the oversight of an accountant, not just a bookkeeper. Read more on the importance of getting the right financial professional for your business.
If you’re not currently working with an accountant or if your current accountant isn’t quite cutting it, get in touch and let’s see how our team at FusePhase can help you!