While many entrepreneurs have been told that Edmonton bookkeeping is extremely important in conjunction with their accountant, entrepreneurs who do not truly understand what bookkeepers and accountants do may decide to not hire one or the other and run into financial problems. Industry Canada says that half of all Canadian entrepreneurs fail in business by year 5, and 29% of those failed entrepreneurs say that the reason why they failed was that their business ran out of money. Since financial issues are such a huge reason for business failure, entrepreneurs should understand what both of these professionals do, so they can hire both in their business and avoid running out of money.
What an accountant does for businesses, is file their year-end financial statements, do some business planning for them so that they can have plans on how to grow their business and tax planning, so they know how much money they can take out of their business as well as how to take that money out in order to avoid paying taxes. What Edmonton bookkeeping dance, is organize the day-to-day financials for business and provide interim financial statements. All of the payables and all of the receivables get organized by the bookkeepers on a regular basis so that when they send the interim financial statements off to an entrepreneur, they are able to see the financial health of their business. If entrepreneurs are making any sort of financial decisions in their business without checking their interim financial statements, they are risking making a poor financial decision that could cause them financial distress and even cause them to close their business due to running out of money.
What Edmonton bookkeeping does for entrepreneurs is to keep them organized so that they can file their taxes on time. Rather than bringing a giant messy box of receipts to their accountant at year-end, business owners will be able to bring great financial statements for each of the 12 months and there a fiscal year so that their accountant can get to work straight away on filing their financials instead of trying to organize the mess. They will save a lot of money by not having to pay their accountant by us to work on organizing their financials. Since and accountants of these are far higher than a bookkeepers fees, business owners can save a large amount of money immediately by hiring a bookkeeper.
Another way that entrepreneurs can utilize Edmonton bookkeeping is if they get audited by the Canada revenue agency. Business owners only have 30 days from receiving the letter in order to send Canada revenue agency the results of their audits. If they are not organized ahead of time, they probably will not be able to respond to the audit requests by the deadline. If that happens, they will be assessed additional taxes, or a business owner may be able to pay their accountant additional fees in order to get it done on time, but either way, it is going to cost a business owner for more money than it would have if they hired Edmonton bookkeeping in the first place.
In understanding what Edmonton bookkeeping does versus what accountants do, business owners need to understand that there is such a high failure rate for entrepreneurs in Canada. Industry Canada says that 50% of all entrepreneurs in Canada fail before their 5th year in business. 29% of those failed entrepreneurs will say that the reason why their business failed was because they ran out of money. The hiring of a bookkeeper and an accountant at the same time business owners can help themselves avoid running out of money by being able to make better proactive financial decisions in their business.
The reason that is the case, is because by hiring Edmonton bookkeeping, entrepreneurs will be able to get interim financial statements. The information on those interim financial statements will help business owners understand the financial health of their business as it currently is. Many entrepreneurs look at the year-end financials from the previous year in order to make financial decisions, but by the time they get that information, it is so old and outdated that it does not do a business owner very good. It does not accurately paint a picture of what the finances are in the business right now, and making decisions based on old information is the same thing as making decisions based on no financial information at all.
When receiving interim financial statements from Edmonton bookkeeping, business owners should expect to get a balance sheet that includes accounts with the approval and accounts payable, cash, and assets. When they get an interim income statement from their bookkeeper they should expect to see revenue statement which is at the top of the list, cost of goods sold, profit and expenses. By looking at both of the statements at the same time, entrepreneurs should understand that the balance sheet shows the current financial position while the income statement shows the money the corporation is making. It is important to understand how they relate to each other in order to make great financial decisions.
An example of this is if an entrepreneur is looking at their bank balance instead of the interim financial statements from Edmonton bookkeeping, a business owner may see that there is $10,000 in their bank account and they may think that there able to pay themselves a certain amount of money. However looking at their balance sheet will show them that file they are cash flow positive in their business, out of that $10,000, they have $8000 in checks that are waiting to be cleared that have not hit their bank statement yet. If business owners make financial decisions without understanding that, they may trigger payments to bounce. This would be especially devastating if it was payroll that bounced. By understanding the difference between the balance sheet and bank account can help entrepreneurs make great financial decisions that can help them avoid running out of money in their business.