4 Benefits of Financial Accounting for Business Owners

I talk to a lot of small business owners, and I don’t think I’ve ever heard one of them say they went into business so they could do financial accounting. At the same time, if you want your business to succeed (much less thrive) you need to keep accurate recording, summarizing, and reporting your company’s finances (i.e. financial accounting). After all, a business exists to make money, and financial accounting is the best way to make sure your company is on track to be financially successful.

Here are the top four benefits of maintaining a financial accounting system:

1. Reduce Risk Management

Going into business for yourself is always risky. Half of all small businesses fail within the first five years, and after a decade, only about one-third of all small businesses are still operating. That said, there are ways to mitigate the risks you take as a business owner so you can pursue opportunities without worrying about the business going bankrupt if those opportunities don’t pan out.

Financial accounting gives you a chance to assess those risks and better determine when it’s safe to move forward and when you’re better off pursuing other opportunities.

2. Financial Statement Reviews

Financial accounting allows you to create financial statements, which in turn allows you to conduct financial statement reviews of your company.

Financial statements are especially helpful for companies that have multiple bank accounts and/or lines of credit. Rather than looking at each, individual account statement, financial statements give you a chance to look at your company’s financial standing as a whole, which enables you to make better financial decisions for your company going forward.

3. Create a Budget

Creating a budget for a business is best done by looking at the past performance of your business to determine, not only what you can afford, but which expenses have generated the highest return on investment (ROI). Again, this is best done when you can look at your company’s financial standing as a whole, rather than just one or two accounts.

4. Track Cash Management

There’s a saying that you have to spend money to earn money, and while that might be true to an extent, a business that overextends itself financially is bound to fail. That’s why financial accounting is so important: it can help you keep track of your company’s cash flow so you can see when and where you’re overspending.

This is also why it’s important to check in on your financial accounting on a regular basis (at least monthly, if not weekly). The more often you do your financial accounting, the faster you’ll be able to spot problem areas if your business starts spending too much money.

Is It Time to Hire a Bookkeeping Doctor?

As important as it is to stay on top of your financial accounting for your business, doing so on a weekly basis, on top of everything else you need to do for your business, often proves unrealistic for most business owners. If you find that to be the case for you, maybe it’s time to hire a Bookkeeping Doctor to keep up with your company’s financial accounting for you. You can schedule your FREE consultation now to see how a Bookkeeping Doctor can help you make better financial decisions.