Many small- and mid-size businesses fail to adequately measure and manage their finances, even though poor financial management is a major cause of business failure. If you don’t have good financial practices in place, your business could suffer in a number of ways, including lost revenue, insufficient tax planning, and missed financial opportunities.
Yes, working with an accountant can help, but a lot of companies aren’t getting the kind of support they need from their annual accounting firm in order to grow and thrive. The problem is that annual accountants only offer end-of-year tax filing. They cannot provide insight into your business finances during the year or give proactive tax planning advice.
In order to take control of your business finances and help your business succeed, you need to work with a professional accounting firm that works with business owners on a monthly basis.
Here are three things monthly accounting services offer to help you stay on top of your finances:
1. Profit and Loss Statements
Your accountant will provide you with an accurate profit and loss statement every month. This statement summarizes your revenue and expenses and helps you see how to generate profit by increasing revenue or reducing costs.
2. Monthly Balance Sheets
A balance sheet details the ending balances in your company's asset, liability, and equity accounts every month. Balance sheets are commonly used to determine the liquidity of a business, which is its ability to pay its debts in a timely manner. Balance sheets are also important to show the financial strength of a business when the owner needs to borrow money.
3. Monthly Account Reconciliation
Account reconciliation is the process of “closing the books” each month. Your monthly accountant will compare your recorded transactions with statements for three main categories of accounts to check their accuracy:
- Your cash, checking, and savings accounts.
- Your notes and bank loans.
- Your prepaid, deferred, or accrued accounts.
- You business credit cards.
Profit and loss statements, balance sheets, and accurate account reconciliation are all important for your company, and they are the most effective when analyzed together by a trusted accounting professional.
When you work closely with your financial partner on your accounts each month, you will have greater insight into your cashflow. Managing your finances well is critical to ensure your business turns a profit and continues to grow.
If you have questions about your monthly finances, we’re here to help. Learn more about the benefits of monthly accounting by contacting us or calling 952.927.4011.