Over the years, a frequent lament from clients, old and new, during the course of a tax or business planning meeting, concerns the shock of learning the amount of money either they or their business earned for the year.
Frequently Asked Questions:
Are my financial statements important beyond their use in preparing tax returns?
I don't understand them. What do they mean?
Why is my income different from my cash in the bank?
Unfortunately, the purpose, interpretation and benefit of financial statements are not always clearly understood. Frequently, business owners generate the statements internally or have their accountant or bookkeeper prepare their financials. After a quick read, they are filed away and seldom, if ever, looked at again.
Many business professionals look at their bank balances at month's end and go with the assumption that what is left at the end of the month is available for them to spend. If this experience is similar to your practice then I want to encourage you to take a fresh look at this critically important and generally underutilized tool for managing your business.
Here are 7 tips, recommendations really, to seriously consider and adopt after consultation with a CPA:
1. Prepare your financial statements timely and reliably.
The skill of the person responsible for recording your sales receipts and disbursing cash for operating expenses should be evaluated by your accountant to optimize the reliability of the financials. Keep in mind important business decisions will be based in part on the information contained in these reports.
2. Review the bookkeeping.
The amounts reflected in the company's books should be appropriately supported by adequate work papers or other documentation.
3. Focus on your cash flow.
Internally generated cash is proof that your business model, meaning the way you operate your business, is working or not.
4. Meet with your accountant periodically.
Be sure to consult on existing and planned business operations and to discuss growth and profitability. Your CPA should be a strategic resource of your business.
5. Balance your compensation with business growth plans.
The withdrawal of too much cash depletes your ability to finance and achieve targeted growth levels.
6. Business owners can not live by sales alone.
Sales alone may not be the best metric for evaluating the success of your business. Knowledge of your profit margins is likely to be more important.
7. Listen to your customers.
Your business success may be more dependent on what your customers buy than on what you sell.
The end result or expectation from adopting these strategies into your finance regime (after appropriate guidance from your CPA) is that greater profitability, more informed business decisions and more effective business management will be achieved.
With over 25 years of experience as a CPA, Gary Zweig offers his clients strategic wealth building ideas and the means to implement them. Gary Zweig founded Gary M. Zweig, An Accountancy Corporation in 1979. The tax-based practice serves small and midsize businesses, individuals and offers affordable, timely and responsive independent tax and accounting services including tax preparation, planning and audit representation.
Frequently Asked Questions:
Are my financial statements important beyond their use in preparing tax returns?
I don't understand them. What do they mean?
Why is my income different from my cash in the bank?
Unfortunately, the purpose, interpretation and benefit of financial statements are not always clearly understood. Frequently, business owners generate the statements internally or have their accountant or bookkeeper prepare their financials. After a quick read, they are filed away and seldom, if ever, looked at again.
Many business professionals look at their bank balances at month's end and go with the assumption that what is left at the end of the month is available for them to spend. If this experience is similar to your practice then I want to encourage you to take a fresh look at this critically important and generally underutilized tool for managing your business.
Here are 7 tips, recommendations really, to seriously consider and adopt after consultation with a CPA:
1. Prepare your financial statements timely and reliably.
The skill of the person responsible for recording your sales receipts and disbursing cash for operating expenses should be evaluated by your accountant to optimize the reliability of the financials. Keep in mind important business decisions will be based in part on the information contained in these reports.
2. Review the bookkeeping.
The amounts reflected in the company's books should be appropriately supported by adequate work papers or other documentation.
3. Focus on your cash flow.
Internally generated cash is proof that your business model, meaning the way you operate your business, is working or not.
4. Meet with your accountant periodically.
Be sure to consult on existing and planned business operations and to discuss growth and profitability. Your CPA should be a strategic resource of your business.
5. Balance your compensation with business growth plans.
The withdrawal of too much cash depletes your ability to finance and achieve targeted growth levels.
6. Business owners can not live by sales alone.
Sales alone may not be the best metric for evaluating the success of your business. Knowledge of your profit margins is likely to be more important.
7. Listen to your customers.
Your business success may be more dependent on what your customers buy than on what you sell.
The end result or expectation from adopting these strategies into your finance regime (after appropriate guidance from your CPA) is that greater profitability, more informed business decisions and more effective business management will be achieved.
With over 25 years of experience as a CPA, Gary Zweig offers his clients strategic wealth building ideas and the means to implement them. Gary Zweig founded Gary M. Zweig, An Accountancy Corporation in 1979. The tax-based practice serves small and midsize businesses, individuals and offers affordable, timely and responsive independent tax and accounting services including tax preparation, planning and audit representation.