Running a business is often difficult. You’ve got plenty on your plate without compounding things by having to do the accounting too. Business owners who do not have a background in this can make things easier by having someone do the accounting for them.
When it comes to business practices, a lot of small companies don’t use an accounting service. With that said, partnering with one makes sense for a lot of reasons. A good accounting service does much more than just keep up with your finances.
In this article, we will show you the importance of using an accounting service. Here is what it does and a few of the ways your business can succeed with its help.
What Does an Accounting Service Do?
Just looking at the basic definition, an accounting service performs some key metrics for your company:
- It accurately audits your books
- It then interprets the numbers in those books
- It creates a strategy based on those numbers
- It provides a picture of your business finances through trends, forecasts, cash flow, and growth potential
Just like Chron states:
In addition to providing you with the tools to compile the information you need to complete your tax returns and apply for business loans, small business accounting helps you understand what’s going on with your business financially. When you understand your company’s financial workings, you are better able to keep your operations profitable and stay afloat.
An accounting service does much more than this, though. It also helps you with tax information, corrects mistakes and aids with payroll and accounts payable. The service is there to help you navigate all your business finances.
An accounting service ensures that you get the most deductions possible, including the ones that you may not even realize, are available. Instead of waiting ’till the end of the year to try and calculate missed deductions, an accounting service helps throughout the entire year to calculate deductions as they are incurred.
An accounting service can also help advise you of a strategy. For instance, some small businesses may forget to include or keep receipts for out-of-pocket expenses, home office space, and other legitimate business expenses. An accounting service keeps up with every detail.
And let’s face it, deductions are crucial in keeping a little more profit in your pocket. It is the accounting service’s job to do exactly that. It not only knows the ins and outs of what is deductible, but it can also identify what might raise a red flag and potentially cause an audit.
According to Biz Journals:
Another really compelling reason to hire an accountant is to avoid the dreaded audit. Unfortunately, most people think of an accountant as someone who can fix these issues after they’ve occurred.
The important thing to remember is that an audit can easily be avoided if you get the guidance and counsel of an accountant year-round.
There are many explanations as to why a business is audited: from too many mistakes on tax forms to being too ‘charitable,’ to excessive write-offs. Think of an accountant as a long-term partner who is invested in your business and cares to keep it fiscally sound.
Audits are a frightening thing for any business, so why not mitigate the possibility by having a service that helps stave off the IRS?
Saves Time, Money and Headaches with an Accounting Service
Some businesses think that they cannot afford accounting services. This is simply not the case if you weigh in the time, money and headache of doing it yourself.
Your focus is on your business, and well it should be. Instead of worrying about paperwork and financial details, you will have the time to focus on your company if you hire someone else to do the math. And, when you concentrate on the operations of your business, it will excel from the attention you are giving to it.
One of the reasons it actually saves money is that an accounting service catches financial mistakes that can cause headaches down the road.
According to Forbes:
Hiring an accountant will take the stressful financial tasks off your plate. Delegating these fiscal responsibilities to a reliable specialist leaves you with more time to handle other areas in your business, leaving finances in the best of hands. The tasks that you may want to delegate are those with which you personally struggle (maybe it’s too much math, or just out of your range of expertise) or ones that are too tedious and cause you a lot of stress. Some of these time-saving tasks that an accountant can do include creating budgets, tracking/managing inventory, paying your staff, invoicing customers, filing/paying taxes, complying with government regulations, and more.
Having an accounting service also saves money elsewhere. You’re not paying for an extra employee’s insurance costs or sick leave – all of the employee overhead that you would normally pay for an in-house accountant is eliminated.
Make Real-Time Decisions
Many business owners do not know what calculations need to be made when making critical decisions. Hiring more employees and acquiring additional office space are just a couple of examples. These are big decisions, and you must be able to determine whether they are affordable or even a good idea for your business.
An accounting service can look at the overall business finances and help you make an informed decision that is in the company’s best interest. The service can easily pull reports from past months and give you input on the best time to pull the trigger. It will know your budget and what you can or cannot afford to do.
Future Planning and Data-Driven Goals
While you’re running your business, it may be hard to look at the big picture. There are details to take care of, employees to oversee and important decisions that need to be made in the here and now.
With an accounting service, you have more data about the company’s future. This is one of the biggest benefits of an accounting service. You get help with learning the seasonality of your business as well as a better look at the longevity and what will help propel the company further.
Data-driven goals help you as well. It is easy to find problem areas in your business by measuring progress in the way that links processes and profits. By measuring this progress, you will have the information you need.
Another area that an accountant helps with is your “burn rate.” This is the rate at which you are possibly losing money through excessive expenditures.
As mentioned before, an accounting service helps you with the Internal Revenue Service. But it offers more than just help with a potential audit. A service helps you navigate legal loopholes and maintain more of your income.
For instance, the U.S. tax code can be used to your company’s advantage. And an accounting service knows about the Section 179 deduction, Foreign Income Exclusion (FIE) tax credits, and other items you may not be familiar with.
Payroll and Accounts Payable
Payroll and accounts payable errors happen, and they happen more often when businesses do not have proper help in place. Look at it this way: Just one mistake with payroll or accounts receivable can mean hours of extra work. Not only does this take up precious time that can be put towards the business, but it also causes discord among employees and maybe even distrust of your accounts payable. Even a small error can double or triple the time you spend on a task.
Your Time Is an Investment
One of the most important reasons to reach out to an accounting service is the investment of your time. Sure, when you start a new small business you may be somewhat successful with the do-it-yourself approach. However, as the business starts to bloom, your time becomes more valuable. Not only that, but the books become harder to keep and the tax implications grow more difficult. All of this reverts back to your time being an important factor. You cannot focus on everything your business needs if you are taking all of your time to do the accounting. Mistakes can happen more often, and it simply takes the fun out of owning your own business.
According to a news release from Score:
Perhaps unsurprisingly, 40% of small business owners say bookkeeping and taxes are the worst part of owning a business. Specifically:
- 47% dislike the financial cost
- 13% dislike administrative headaches and time
- 13% dislike the complexity of compliance
- 10% dislike changing regulations and confusion
- 8% dislike all the paperwork
- 8% dislike inequity of the tax code
This shows some of the reasons accounting services make your life simpler, providing you with peace of mind and less frustration.
In fact, even if you have experience in bookkeeping and accounting, having someone else do the work gives you an extra set of eyes. There is a backup in case you miss an error, and you have more data to make informed decisions.
Each one of these examples is reason enough to have outside help. However, when you combine them all together, you have ample reason to consider hiring a service to help you with your accounting needs.