People don’t like to admit they need help, especially when it comes to do with numbers. I get it. I used to be one of these people. The older I got, the more I realized that even though I’m great at what I do, I can’t simply do everything, or at the very least, I can’t do it as good as it needs to be.
So, the same rule applies for accounting. And I get it – you understand debits and credits, discounts, invoicing and bill payments. But do you actually know accounting? (be honest).
If the answer is ‘no’, or ‘kind of’, then you (probably) need an accounting firm. Now you’re possibly wondering, “Alright, I’ll bite. What does an accounting firm can do for me?”
#1 – make sure all your transactions are properly recorded in the books
Q: Let’s say you purchased insurance for your business and prepaid it for the entire year. Does that mean you should book the entire entry as a cost in the month you paid for it?
A: No. This transaction should be recorded as a prepayment followed by monthly entries showing 1/12 of the payment as debited to your insurance account. Doing so is not only in compliance with GAAP but also shows a clear picture when analyzing financial statements and matches the costs to the revenue.
#2 – help you understand what the numbers mean (aka financial analysis)
Once all the transactions have been properly recorded in the system, it is time to review and analyze the results. Did the business earn money? Where’s all the cash? How are you doing with your accounts receivable? Did your business make a good margin on the sales? These are all questions to be discussed after financials are ready.
#3 – figuring out tax
Your business would have to comply with two main tax filings – sales and corporate. Each of these has different deadlines and they also vary in calculations. While the sales tax (HST) is quite straight forward and easy to calculate, the corporate tax is based on your income statement as the starting point, but then needs to be adjusted to cash basis. Are you sure you know how to do this and have the time and capacity to look at legislation (if needed) or do you prefer to have someone professional do this for you the right way?
#4 – keeping close eye on receivable and payable
Have you ever wondered how come you don’t have enough cash in your bank account when your business seems to be really profitable? If the answer is yes, then it’s got to do with the timing of your receivable and payable. Did you remember to invoice that last customer? Do you know why the one before hasn’t paid yet? Did you remember to follow-up? Do you know who usually pays late? Do you charge them any fees for that? What about your vendors? Do you pay them on time or do you rush to pay them as soon as you get their invoices? An accounting firm can help you analyze this and pinpoint the areas you need to focus more on.
#5 – prepare growth planning strategies
Another great benefit to having an accounting firm you trust and feel comfortable with, is having access to professionals that can see your business’ future together with you. The firm would usually prepare an analysis of what is required to grow and expand. Some firms would also explore government grants options as these could become a great source of funding without adding more liability to the company.