It’s not your fault. And you’re not alone. When you start your own small business, you don’t put debits and credits at the top of your priorities. After all, keeping your records organized is not your passion or your strong suit. Nonetheless, ignoring management reporting leads to accounting problems that take you away from that passion, away from doing what matters most to you.
In the wake of various small business accounting problems, many of Padgett’s clients have said, “If I had only known how many accounting and government responsibilities there were, I may not have started a business after all.” However, Padgett shows its small business clients how to manage their businesses and keep their records in order.
And even despite knowing the existing issues, many small business owners don’t address them. Why?
“I don’t have the time.”
“I don’t know how.”
“There are too many other fires to put out.”
“A professional is too expensive.”
“I planned to hire someone to take care of it, but I just haven’t gotten around to it yet.”
Rest assured: The most common issues have solutions. You just need to know what they are and how to go about dealing with them.
The 5 Most Common Accounting Problems And Solutions
Problem 1 – You’ve purchased small business accounting software and thought that it would solve all of your problems. But, there’s a substantial difference between record keeping and accounting. Even with the best software, you need some basic knowledge of bookkeeping, especially to stay in line with regulatory compliance. Software alone does not eliminate your accounting problems.
Solution – If you need support, consult with a professional capable of helping you understand the basic record keeping – not accounting – that you require. You must have a baseline of knowledge to manage your records and run your business.
Problem 2 – You don’t have time to keep your books up to date. Without accurate, real-time bookkeeping, you don’t have the tools to know how your business is truly performing. If you own a restaurant, for instance, you should know the cost of your food, rent, utilities and other expenses. You should also know whether these costs are in line with others in your market. If you are in retail, you should know your inventory levels and how to balance your cash flow. Business owners often get so frustrated by their bookkeeping burden that they don’t know where to turn.
Solution – Failing to keep your books up to date is not an option. By nature, you must wear many hats, but one you don’t need is that of the company bookkeeper. Your time is better spent focusing on running your business. Partner with the right small business consultant to manage your bookkeeping efforts and ensure the accuracy and relevance of your financial information.
Problem 3 – You don’t know how healthy your business is. Remember, having money in the bank isn’t a sign of a financially stable business. Small business owners often fail to take their liabilities (loans, credit) into consideration. When you determine what you really owe, it may be that you don’t have the funds to pay off your debt.
Solution – You need to take the time to understand all of the components that determine the true health of your business – cash, assets and liabilities. A more realistic understanding of where your small business stands might change how you approach future decisions.
Problem 4 – You don’t analyze your finances before deciding what to do. Making sound decisions is best done in three steps: Interpreting. Analyzing. Advising. Regardless of the reports you use, generating the numbers is only the first stage. What do those numbers actually mean? More important, how do you improve them? You must interpret and analyze these numbers to lead yourself to the best advice and decisions.
Solution – Schedule time to analyze and interpret your management reports or consult with a professional. You should already be dedicating your time and energy into producing your reports to remain compliant, so it would be senseless not to use them to your advantage and improve your business.
Problem 5 – You seek accounting help, but not the advice of someone who understands your business. Some consultants try to turn you into an accountant rather than alleviate your stress. Many tax professionals say, “If you want to work with me, you have to use QuickBooks.” But, asking you to act like an accountant simply distracts you and leads to accounting problems. Use a tax professional who lets you focus on running your business, not learning new software.
Solution – If you’re looking for support, you need someone who actually addresses your needs. With that help, you should be focusing on the foundation of your business and what you do best. A true small business consultant should also be capable of communicating the financial status of your business in a way that makes sense to you. Your job is to get to know potential partners and fully understand what the nature of that partnership will be.
There is a difference from partner to partner, so it’s important to choose wisely.
Want to ensure a healthy cash flow and learn how to solidify your small business? Click below to discover tips on improving your cash flow.