The importance of accounting

The importance of accounting

Most people view bookkeeping as a chore that needs to be done in order to get some much needed cash back at the end of the year. From this point of view, it is no wonder that so many businesses fail at the very threshold. In fact, accurate accounting and tax reporting (although important) is at the bottom of the list for now, it’s really not funny.

Product pricing is probably the most important aspect of business. Whether it’s pricing a “widget” or pricing the services you provide, if your pricing isn’t accurate, you can stop building a profitable business. It sounds pretty simple at first, charge more than it’s worth, right? Well, several factors can come into play: insurance, packaging, shipping, marketing, etc. All aspects of the business should be taken into account when considering how much it costs to ship what you’re selling.

Cash flow is probably the next biggest aspect of business. Many small businesses do not consider maintaining a positive cash flow to be a vital element. Some go into business thinking that demand will simply cover this element and with inefficient pricing, they simply put themselves in the poor house for the first 24 months of operation. It’s sad to see, but it happens quite often in the business world. Proper small business accounting could allow them to grow in proportion to their profits and allow the dream to flourish.

If you’re going to borrow money to get started, another important aspect of small business accounting is getting to know your banker well. Develop a relationship and your banker can provide vital assistance if your business takes an unexpected downturn. A good banker will give you credit options and help your business with different payment plans until things get back on track.

Small business accounting can be the backbone of your business. As daunting a task as it may seem to many, it will make or break your business. Keeping accurate records, especially in the first few years, is what will put wind in the sails of your business ship. Don’t take your small business accounting lightly. Study these basic aspects and study them some more. Check with local and federal small business administration agencies for more guidance.

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