In order to help entrepreneurs understand what they need to know in their business, Edmonton bookkeeping companies recommend that entrepreneurs learn basic bookkeeping. This way they will be able to gain some basic understanding of business finances. That can help them avoid running out of money.
Industry Canada conducted a survey to find out why half of all entrepreneurs in Canada failed. What they discovered was the second most common reason. 29% of all failed entrepreneurs said that running out of money. Was the reason why their business was not successful.
One of the first things that business owners should do in order to help learn some basic bookkeeping. Is the purchase and accounting software program. They should check with their Edmonton bookkeeping company to find out what software they are using so that they can use the same one.
One of the benefits of using the same accounting software as their bookkeeping company. Is that if they need help with the file. Or if their bookkeeping company is going to take care of more complex bookkeeping. The bookkeeping company will not have to switch the file type into a different format to work on it. Only to switch it back to give it back to the entrepreneur.
Not having to switch files will significantly minimize errors that have the potential to occur. Also, if they have any questions. Their bookkeeping company is going to be a great resource. As long as they are using the same software.
Something else that business owners should keep in mind is that they should also keep at least a copy of all of their receipts. While they do not necessarily need to keep all physical receipts. Scanning them in is a great way to save space. While ensuring they have access to all the information.
When entrepreneurs are keeping receipts for all their purchases. It may be difficult to keep all of the receipts organized. They should not only write on the top or the back of the receipts the reason for making that purchase. But ensure that they also keep all receipts over a hundred dollars. Because those are the transactions most often looked at by the Canada revenue agency.
Business owners also want to know often if they are able to keep GST tax credits. Pertaining to the startup costs of their business. While most of the time this is yes says Edmonton bookkeeping. Since many people incorporate their business well before they start operating it.
Business owners need to ensure that they have registered for a GST number before submitting their claim. So that they do not end up claiming GST before they are technically able to receive credits for it.
When business owners learn that some basic bookkeeping. It is going to help them significantly in understanding their business finances. So that they can make more informed decisions. If they need to cut costs, increase revenue, or add more customers. Are all going to be able to be answered much more clearly.
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There are many things that can help entrepreneurs stay in business according to Edmonton bookkeeping. And learning basic business finances is one of those things. The more they understand about their business finances. Especially as early as possible. Can help entrepreneurs make more informed business decisions.
When entrepreneurs learn how to do basic bookkeeping. They are going to be able to understand their interim financial statements for one. That will help them learn a lot about their business finances.
Edmonton bookkeeping recommends that entrepreneurs learn how to read their balance sheet first. Partly because it should be the first interim financial statements that they read. But also, because it is going to show the entrepreneur with the overall financial health of their business is.
They should learn that the balance sheet lists their assets, liabilities, and equity. And listed in that order. Ultimately, if they have more assets than liabilities, that indicates that they are in a positive financial position.
However, business owners also need to look at the nature of the liabilities that they have. If they exist because not nor took out a loan to purchase the building or assets for the business. These liabilities helping their business grow. And not necessarily as negative.
The next financial statement that business owners should learn how to read is the income statement. Also called the profit and loss, or P and L. This is going to show the business owner what the profitability of their business is.
It will show them how much money they have in revenue, how much their direct costs are and how much their overhead expenses are. It is going to help the business owners understand if their business was profitable in a specific period. Based on how much their net income or net loss is.
For the most part, Edmonton bookkeeping says business owners are going to look at their income statement and balance sheet as comparative statements. Which means they are going to show several months, commonly six months. At a time. So that entrepreneurs can easily compare one period to the next.
The benefit of this, is that business owners will be able to easily seek trends in their business. Such as how the last six months are they making more money month over month, or losing money? This is much easier to see when six months of statements are looked at as a group.
Comparative statements are also very good at helping an entrepreneur see if there is an anomaly. Since they are viewing several months at a time. If one month is extremely high or extremely low in anything. A business owner will be able to see why. And they may even be able to explain it. Such as there was a mistake somewhere. Or perhaps the month that has the anomaly had something very unusual happened in that month that made the numbers extremely different than previous months.
When entrepreneurs understand business finances better. They will be able to make better business decisions. That can help them stay in business and succeed.