Establishing a new business implies that the entrepreneur needs to have thorough knowledge of each aspect of the operations. One such core functional element of any company is accounting.
While often entrepreneurs think that they do not need to hire an accountant in the beginning, having a clear financial structure from the outset is imperative. Maintaining your business finances in an organized manner allows you to have a clearer picture of your business growth. Accountants for start-ups are important for many reasons.
This article will discuss the five crucial reasons for startups to have an expert accountant onboard.
These crucial reasons include:
1- Better Financial Estimates
In order to generate investments businesses need to provide lenders, investors, banks, and other financial service providers with financial forecasts associated with their ventures. Based on this estimate, these institutions provide money.
You will need to develop a thorough business plan that includes approximate start and month expenditure, economic forecast, pro forma financial statements, etc. Investors and lenders heavily rely on this information to determine how precise and clear your financial expectations are for your business.
While you may do these forecasts yourself, a professional account can certainly do it better than you. Thus the chances of your investment or business loan to get approved get higher!
2- The Business Growth Requires Accurate Accounting
A small business that is started as a side business or a hobby tends to stick to cash basis accounting. This is relatively easier as you get most of the cash in hand.
But when the company begins to expand, or else you are into a business that accepts credit card payments and cheques, you can’t simply handle this single handedly.
Moreover, you may also deal with a lot of suppliers and chances are that all are not cash transactions. So, you must need to change to the accrual method of accounting. It is the most commonly used method by businesses as it records and determines transactions when they occur, irrespective of whether or not cash is received.
This is where hiring the best accountant for small businesses can prove to be invaluable for entrepreneurs, as they can better keep smooth and errorless records of accounts receivable and payable.
3- Assessing Business Profitability
Accounting assists entrepreneurs in assessing the profitability of their business. Accountants constantly monitor the company’s operations and growth and recommend necessary modification for optimum financial efficiency.
By proper accounting, entrepreneurs will determine where they have to invest their assets in order to generate maximum profit. Accountants also formulate important financial documents like income statements and balance sheets that help in identifying the general profitability of the business.
4- Budgeting the Expenses
Setting up the budget is an important accounting function for a start-up. It highlights the expenditure required for various business aspects, including recruitment, advertising, inventories, etc.
Following a budget assists companies in using their capital as well as resources efficiently. Moreover, budgets can also serve as historical records of how little the company spent its capital on producing goods or services for consumers.
You may know managing money yourself very well, but when it comes to business budgeting, the professional’s assistance can help you make the most out of it!
5- Benefits from Expertise
A professional accountant holds strong knowledge, experience and expertise that start-ups can leverage to set up a more efficiently functioning business. With a little research, you can hire an accountant for low fees.
Businesses also need these professionals while filing tax returns. With accountants managing the financial aspect, you can concentrate better on the core business operations and growth of the company.
The Bottom Line:
During the initial phase of your business, a reliable accountant can offer valuable advice. Additionally, they can also help in making a decision that will increase profits. A qualified accountant will efficiently guide you through different financial aspects of starting a business and create a practical plan to maintain a balance between assets and liabilities.