Accounting is the process of recording, organizing, and understanding financial information related to businesses. It helps business owners gain a better understanding of their company’s financial health. Accounting can be classified into several types: tax accounting, cost accounting, financial accounting, forensic accounting, and management accounting.

Here are some benefits of accounting for businesses.

Helps in Decision Making

Business owners use financial statements to make operational decisions. Managers can use cost analysis reports to measure and track performance and make real-time decisions. Information provided by financial statements can guide key decision makers when making investment and expansion decisions.

Helps Businesses Secure Loans

When deciding whether to lend to your business, lenders will want to analyze your company’s financial performance. You will be required to submit your company’s financial statements and cash flow projections with your loan application. Without an accounting system in place, it’s almost impossible to provide the information lenders require.

Helps Ensure Regulatory Compliance

When done correctly, accounting can help you stay on the right side of the law. An experienced and qualified accountant in Sonoma County can not only ensure your financial records are accurate and up to date, but they can also assist you with planning your taxes. Effective planning reduces compliance risk, helping keep your business out of legal trouble.

Helps Track Business Performance

Business owners can track business performance using financial statements such as the balance sheet, the income statement, and the cash flow statement. Once they have implemented a new strategy, managers can compare projected results with actual results to identify areas for improvement.

Helps You Pay the Right Amount of Taxes (and Not a Dollar More or Less)

Paying less than what your business owes in taxes can trigger an IRS notice or audit. If, on the other hand, you pay more than your business owes in taxes, you may have to wait for several days before the IRS releases the amount, and you may lose investment opportunities.

An experienced accountant can use your financial records to calculate your taxable income accurately. They can also help ensure your business claims all the allowable deductions to reduce its tax liability.

Accounting Tips for Small Business Owners

Small business owners must realize that maintaining financial records is an ongoing activity, not a one-time task. Businesses that consider maintaining their financial records up to date as a time-wasting activity are sure to run into troubles.

Here are some of our top accounting tips for business owners:

  • Keep personal and business finances separate.
  • Plan ahead for taxes and stay on top of tax deadlines.
  • Create a budget to forecast revenue, expenditure, and cash flow.
  • Use receipts to track business expenses. Store and maintain expense receipts.
  • Consider accounting/bookkeeping software.

Virtual Jeannie Bookkeeping Services offers top-notch bookkeeping services in Sonoma County. Our bookkeeping experts have an unparalleled ability to develop customized bookkeeping solutions. To learn more, call 707-664-1425.