Even if your business is profitable, it could still be at risk of failing unexpectedly if you don't track your money properly. And yet every day we see companies launched with little to no budget for professional accounting services.
That's a formula for disaster.
You Don't Get What You Don't Pay For
The reason new businesses skimp on accounting services is simple: They think they're saving money. But just as you can save more than you spend by hiring a professional to prepare your personal income tax returns, you can minimize the "loss" portion of your company's P&L — and maximize the profit — with the help of skilled accountants.
Think about what you have estimated for revenue and make sure your budget for accounting and bookkeeping services is commensurate. If you expect to have a high cash flow, you want to plan for it and not rely on barebones or bootstrap accounting.
Inadequate accounting services can not only eat into your profits, but also lead to significant problems with the IRS. According to Franchise Business Review, "About one in three small businesses will face fines and penalties at some point in their operations due to mistakes, inaccuracies and other errors." And their recommendation for avoiding penalties due to inaccuracy is to hire a professional accounting firm with the skills and experience necessary to handle your business' accounting needs.
Also keep this in mind: If you're crafting a business plan and seeking investors, being thrifty with your accounting services won't impress them. It will scare them. They'll want to know their investment is well cared for.
Financial Planning Is a Big Part of Business Planning
Besides helping you keep track of your financials, an accounting services company can help you analyze and interpret them, a key component in helping your business grow. You may also need help producing timely, accurate financial reports for investors on a regular recurring basis — usually monthly.
Your accountant should take a holistic approach to your business, understanding not only its current state but also your goals for the future.
You need an accounting services company that can scale with your growth, not stifle it. If you work with a company that has solid processes in place and a large team of qualified professionals, you can minimize the kinds of financial growing pains that can stunt your development.
For more information on this topic, read my blog post from November 2016: Smart Accounting for Start-Up Businesses.
Legal and Tax Disclaimer
This website is created by Supporting Strategies to provide general bookkeeping and accounting information only. Supporting Strategies does not provide tax, legal or accounting advice, and the information contained herein is not intended to do so. As such, the information provided should not be used as a substitute for consultation with professional tax, legal and accounting advisors, and you should consult with a tax, legal or accounting professional before engaging in any transaction.