The reason why entrepreneurs should learn how to do some basic bookkeeping says Edmonton bookkeeping. Is so that they can gain a deeper understanding of their business finances. Many entrepreneurs open their business because they are extremely knowledgeable or passionate about the industry that they are in. And the products that they are selling. However, few entrepreneurs get into business because they have business finance experience.
In fact, many business owners struggle with business finances which attributes to them making incorrect decisions and failing in business. Industry Canada noted that half of all Canadian entrepreneurs failed in business within five years. And 29% of the failed entrepreneurs said that’s the reason why they failed, was because they ran out of money in their business.
If an entrepreneur wants to avoid running out of money in their business. Edmonton bookkeeping says they need to understand their costs. And how to price their products and services. So that not only are they covering their direct costs. But we cover their overhead costs as well. So that they don’t sell a huge amount of products, without turning a profit.
What else can cause an entrepreneur to run out of money, is not know how many customers they need to get in their business. In order to cover those costs. Both overhead and direct says Edmonton bookkeeping. Therefore, if they learn some basic bookkeeping skills. They will be able to know how many customers they will need and how many transactions do you need to make in order to cover all of their costs in their business.
One thing that an entrepreneur can find a lot of benefit in, is purchasing an accounting software program. And then in putting some of the information themselves. This can give them a huge understanding of the cost of goods, margins, forecasting, and profitability of the business.
They should find out which bookkeeping program their Edmonton bookkeeping company uses. And get the same. That way, when they send their files to their bookkeeper to work on. They won’t have to convert it into any other format in order to work on the files and send them back. That’s in and of itself can create errors that can impact the accuracy of the information.
Chances are, that’s their Edmonton bookkeeping company is going to use QuickBooks Online. Not only is it extremely user-friendly. But it is also the most popular accounting software in the world. That doesn’t necessarily mean that it is the best. But because it’s user-friendly, and so many people use it. If an entrepreneur ever needs to find an employee to help them with their basic bookkeeping. They’ll have a greater chance of finding an employee who knows QuickBooks Online. Then another software.
Learning how to use the software can take a little bit of time. but as they learn the program. They are also learning business finances. And that information is going to significantly help them learn how to run their business more effectively and turn a profit.
What Can Edmonton Bookkeeping Help You Find?
Even though business owners are often busy learning how to do so many things in their business says Edmonton bookkeeping. Learning basic business finances is one of the more important things to learn. Not only because so many entrepreneurs fail because they run out of money in their business. But also, so that entrepreneurs will be able to make decisions in their business sooner that can help them cover their costs, and grow their business.
Even if they do some basic bookkeeping themselves, they’re going to need an Edmonton bookkeeping company to do some more advanced things. Such as generating their interim financial statements for them. A business owner is also going to need a great accounting firm. Because they will need someone who is an expert in doing year-end taxes, Financial plans, and business planning.
This financial team is going to be significant in helping an entrepreneur grow their business. However, a business owner still needs to learn about certain Financial aspects themselves. Because the last thing they want to do has the wrong pricing sets, and not meet with their Edmonton bookkeeping company or accountant for a month.
One of the first things that an entrepreneur should learn is how to read those interim financial statements they’re going to get from their Edmonton bookkeeping company. The first one is a balance sheet, which is also called the statement of financial position. And this will show an entrepreneur the overall Financial Health of their business.
The balance sheet will list the assets, liabilities, and equity in that order. So that an entrepreneur can see what their assets are, compared to their liabilities. The more assets compared to liabilities they have, the better health of their business.
The second interim financial statements they will get from their Edmonton bookkeeping company. Is the income statement, which is sometimes called a profit and loss statement. This is going to show an entrepreneur the profitability of their business within a specific frame of time, typically six months. It’s going to show how much money an entrepreneur has in Revenue over that frame of time, how much are direct costs and overhead costs are. To be able to tell if the business was profitable based on net income or net loss.
The ability to truly understand the income statement means that an entrepreneur needs to know the difference between direct costs and overhead costs. Direct costs are all of the costs directly related to producing their product or service. And typically includes materials purchased to produce the product and the labor, but there the labor was staff on payroll or an independent contractor.
Overhead costs on the other hand says Edmonton bookkeeping. Are all of the cost of a business before they make a sale at all. These typically include rent of their building, administrative staff, and their bills and office supplies to name a few.
Once an entrepreneur learns more business financing and how to read their interim financial statements. They’re going to be able to make better and more informed financial decisions in their business. That can help them not only avoids disaster. But significantly grow their business.