Business owners may inadvertently be putting their business at risk says Edmonton bookkeeping. If they are not making their financial decisions based on financial statements.
In fact, this is an issue that many entrepreneurs struggle with. And while 50% of all entrepreneurs in Canada will eventually fail. 29% of these failed entrepreneurs will fail because they ran out of money in their business.
When more business owners are able to make better financial decisions. By using the information they have at hand. And understanding more about their business finances. They will be able to make decisions that can help them avoid running out of money in their business.
Whether those decisions are helping them minimize their expenses. Raise their pricing so that they can cover their overhead costs. It might help an entrepreneur understand that they need to find more customers to sell their products and services to.
Regardless of the reason why a business owner has one out of money. They will be able to be significantly helped. By understanding their business finances. So that they can make more informed decisions.
These owners can learn this very quickly by learning how to do some basic bookkeeping. Because it will give them hands-on knowledge and experience that directly relates back to their business.
They will understand things like direct costs and overhead expenses. As well as keeping track of things like inventory, margins and pricing. And how to use that information to be more profitable as well.
Also, the more a business owner is able to learn about their business finances. The more they are going to be able to understand the information given to them by their Edmonton bookkeeping company. Such as their interim financial statements.
Because these statements have the potential to have errors on them. It is important for business owners to be able to review them and see if there are any obvious errors. Because if they make decisions based on these statements. And the statements are wrong. They could risk making the wrong decision in their business. That could put a financial strain on their business.
Helping entrepreneurs learn some basic bookkeeping is important. And when the way that they can do this is by using the same bookkeeping software as their Edmonton bookkeeping company. That way, they can do basic bookkeeping. And still utilize their bookkeeper for more difficult tasks such as interim financial statements.
Also, and not neural be able to benefit from investing in an accounting system. Not only so that they can do their bookkeeping in a program that they can hand off to their bookkeeper. But because it can help them learn basic business finances. While saving time. Such as investing in a program that allows them to integrate with their existing project management software or their timesheet software just to name a few.
Once a business owner has learned basic business finances. All of the financial decisions they make from that point on will be more informed. And can help them not only avoid problems in their business. But use that information proactively. The plan increased revenue and growth in their business.
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There is a good chance that entrepreneurs are extremely knowledgeable about the industry that their business is in says Edmonton bookkeeping. But less knowledgeable about how to run that business. And it can be a difficult job to learn. Because they are having to learn how to run their business. While running it.
However, the faster an entrepreneur can learn about their business finances. The better they are going to be at making more informed financial decisions in their business. This can help them avoid making bad decisions that can negatively impact their finances and business.
And it can also help them learn how to be more proactive in their business as well. A great example of this Is when an entrepreneur uses their interim financial statements to make a business decision.
For example, a business owner needs to review these statements in order to see if they have enough money to make payroll in a couple of weeks. After consulting their interim financial statements. The business owner realizes they do not have enough money.
So they engage in some collection calls, to help bring some money in quickly that customers owe them. But also, the entrepreneur spends additional time on their marketing and sales calls. To help bring even more money into the business that was not built.
Over the next two weeks, Edmonton bookkeeping says they will bring in enough money more than cover the cost of their payroll. Allowing them to meet payroll on time. And ensure that they are meeting their financial obligations.
If an entrepreneur does not consult their financial statements in order to make that decision. They might simply think that they have enough money in their bank to cover payroll. And find out the hard way that there was not enough money in their bank. And that they bounced their payroll checks. And now their employees are upset.
This is why it is incredibly important for a business owners to look at their financial statements prior to any financial decision in their business. Many business owners may think that they can figure out the same information by looking directly at their bank statement but Edmonton bookkeeping cautions business owners against doing this.
The reason why business owners should not look directly at their bank statements in order to see if they have enough money in their business. Is because a bank statement shows a snapshot of exactly how much money is in the bank account at that given moment. Without taking into consideration any payments that may have been scheduled. Both through electronic fund transfers. As well as checks that they may have written.
Therefore, learning the proper way to review their business finances. In order to make more informed decisions is incredibly important. And the sooner an entrepreneur can learn how to do that. The better off they will be at making more informed financial decisions.