Many entrepreneurs do not understand the difference between bookkeeping and accounting, and think that they need to hire only one in order to save money says Edmonton bookkeeping. But in fact, entrepreneurs need to hire both bookkeepers and accountants in order to keep themselves organized. By understanding the difference between the 2, entrepreneurs will be able to stay organized and save money.
The first thing business owners need to understand is that by being organized they can file late and therefore trigger penalties by Canada revenue agency. A typical scenario is an entrepreneur who drives around in their truck that also acts as their office with a big bag of receipts. When they need to do their year-end, they bring that giant bag of receipts to their accountant, who has to take a lot of time to go through those receipts. That disorganization can cause the accountant to not be able to work on the year-end efficiently, and can cause the business owner to file late. Businesses that file late get penalized by the Canada revenue agency. By utilizing a bookkeeper, entrepreneurs can have their monthly statements pre-organized so that when they take their information to their accountant, they are ready to work on the year-end without having to organize a bunch of receipts. Not only does this save time, but it saves a lot of money because bookkeepers are much more efficient and much more cost-effective than getting accountants to work on organizing.
Another way that is organized with the bookkeeper can save time, is if a business owner is audited by the Canada revenue agency. When an entrepreneur gets an audit letter in the mail, they have 30 days from the date of the letter to the response. If they are not already organized, and they have that big bag of receipts, entrepreneurs may not have their finances organized and time to give a 30-day response to the audit request. By hiring Edmonton bookkeeping, business owners can be pre-organized so that if Canada revenue agency does send an audit request, they will be much more able to take that pre-organized information to their accountants and prepare audited statements within 30 days.
Another way that using Edmonton bookkeeping can save an entrepreneur, is that if they wait until year-end in order to review the receipts and their various transactions, a business owner may not remember every single receipt is for a year later, and chances of them losing receipts are quite high. If an entrepreneur is using a bookkeeper to go through their finances on a month-to-month basis, then chances are they are going to remember what each receipt is for and be less likely to lose them.
For all these reasons, using Edmonton bookkeeping is extremely important entrepreneurs in addition to accountants, both are necessary for business owners to stay organized and keep on top of their finances. By using a bookkeeper as well as an accountant, business owners can save time, save money, and understand where their finances are throughout the year.
Many entrepreneurs do not know what Edmonton bookkeeping does differently from their accountant, and in an effort to save money, only hire an accountant. This would be a grave mistake, because bookkeepers and accountants although they work on the finances of a business, due entirely different things. The hiring a bookkeeper, business owners can stay organized throughout the year so that they know what the finances are in their business sooner than waiting for their financial statements from their fiscal year-end. By understanding what the finances are in their business throughout the year, they can make better financial decisions that can help them avoid running out of money in their business. Industry Canada says that 50% of all entrepreneurs close their business within 5 years, and 29% of those entrepreneurs fail because they ran out of money in their business. By understanding the finances earlier on in their year, business owners can avoid this, and increase their chances of succeeding in business.
A bookkeeper will be able to prepare financial statements on a regular basis for their business owners. These interim financial statements include and income statement as well as a balance sheet on an interim basis. The information that is included in the balance sheet is cash, assets, Accounts Receivable and accounts payable information. The information that is on the income statements has the revenue, the cost of goods sold, the expenses as well as the prophets. Entrepreneurs need to be able to read both of the statements together because they work hand-in-hand.
The reason why a super important for business owners to get these interim statements from Edmonton bookkeeping, is because they will be able to see what the revenue is in their business, the profit that they are making, as well as the expenses that they are paying. If an entrepreneur stays on top of these interim statements, they will understand if they need to cut any expenses. By looking at the income statement which should be organized and numerically dissenting order so that the most expensive items are at the top of the list, business owners can understand that by saving money by cutting expenses their the top of the list they can impact their bottom line significantly.
It is also extremely important for entrepreneurs to review their balance sheets and their income statements so that they can easily understand how much they can pay themselves. When the income statements and balance sheets are well organized, a business owner can see how much money their business has made, how much they are spending and if they have enough money to pay themselves. If a business owner does not have enough money to pay themselves, they can see how much more revenue they need and go and do some revenue generating activities.
By utilizing Edmonton bookkeeping, entrepreneurs can stay on top of their finances throughout the entire year, and be more likely to avoid running out of money.