When entrepreneurs do not understand the importance of updated financial statements, they may put off hiring Edmonton bookkeeping in their business thinking that they can save money by doing it themselves. However, if entrepreneurs do not do it as often as they need to, they are causing their business to not have the financial information ready in order to make great financial decisions. Business owners should consider that even though they might be saving themselves the bookkeeping fee, by not making informed financial decisions in their business is actually more costly. Industry Canada says that half of all Canadian entrepreneurs fail within five years, and 29% of those failed entrepreneurs fail because they have run out of money in their business. That shows the importance of keeping up-to-date books so that business owners can have the tools at their disposal to make decisions in their business that can help them avoid running out of money or help them grow their business.
Regardless of who ends up doing their books, entrepreneurs should get into the habit of keeping organized finances from the very beginning in order to make the bookkeeping easier. They need to ensure that they have the bank statements and credit card statements for their business expenses as well as keep all of their receipts, with notes about why things were purchased. This way, regardless of if they do it, or if they hire Edmonton bookkeeping, business owners know the information that is important to have, so that it is ready for whoever is going to be updating their financial statements.
Business owners often have multiple bank accounts because they think that it is helpful to stay organized. They may have one for their operating expenses, another one for GST, another one for dispersing payroll. However, Edmonton bookkeeping recommends that entrepreneurs do not do this because instead of keeping track of one bank account with all of the transactions in it, that is going to force whoever is doing the books to have to look through multiple bank accounts with multiple purchases in them. If entrepreneurs can get into the habit of only having one bank account for all of their business expenses, not only can they make things simplified, they can also ensure that they are not paying multiple bank fees and save that cost.
Something else that entrepreneurs should get used to early on in their business ownership, is to not use their personal bank account for business purchases. The reason this is important, is because if business and personal expenses are lumped together, Edmonton bookkeeping is going to have to spend a much longer time looking at both bank statements and verifying every single purchase for each of them. This can be difficult as well as time-consuming, and increase the chances of errors happening. If there are errors being made because of this, business owners can be assured that their interim financial statements are less accurate. By keeping personal and business expenses separate, business owners can easily make things far more simple for Edmonton bookkeeping.
Often, entrepreneurs understand the value of having an accountant in their business but think that Edmonton bookkeeping is less important, therefore they try to save money by doing the books themselves in their business. However, while accountants are extremely important in business as they help entrepreneurs with tax planning, business planning as well as doing their corporate year ends, bookkeepers actually help business owners manage the day-to-day finances so that they can have current financial information any time they need to make a business decision. Because of that, entrepreneurs need to put importance on keeping up-to-date books in their business. Regardless of if they do it themselves, or hire a bookkeeper, if entrepreneurs understand the importance, they can ensure that it gets done by any means necessary.
Because of the importance of the interim financial statements, business owners need to find an Edmonton bookkeeping service that sends them interim financial statements biweekly. The reason this is so important, is because most entrepreneurs pay their staff every two weeks. An entrepreneur should also be in the habit of reviewing their balance sheet and income statements before any payroll is dispersed. The reason they should do this is so that they can check to ensure that they have enough money in their business to pay their staff. If business owners are only relying on their bank balance, they may not adequately take into consideration any payments that have yet to be dispersed or checks that have yet to be cashed. Their bank statements will show their finances as they currently are, but they do not take into consideration any future payments that are scheduled. Therefore, if a business owner is using their bank statement instead of their balance sheet in order to check how much money they have in their business, they ran an extreme risk of running out of money and bouncing payments.
When entrepreneurs are looking at those interim financial statements, they need to understand that they should first be looking at their balance sheet, and then their income statement. Business owners often look only at their income statement, because it is much easier to understand, however it is much more difficult to catch errors if a business owner is only looking at their income statement. Therefore, business owners need to first look at their balance sheet and discuss with Edmonton bookkeeping how to read it how to use it in their business to make great financial decisions. By using both the balance sheet and income statement, business owners will be better prepared to operate their business and use that information to make great financial decisions.
If entrepreneurs are doing this on a regular basis, they can be sure that they are going to be able to make smarter business decisions, ones that will help them avoid running out of money in their business, but also decisions that can help them see if there marketing is working so that they can continue doing it, minimizing expenses and grow their profits.