With it recently being the Fourth of July, you likely took in many red, white and blue festivities. We’re willing to bet you also watched some fireworks displays.
When it comes to fireworks, there’s nothing quite like the glitter and pageantry, as well as the loud booms and inevitable oohs and ahhs for every firework that goes off. That is, unless there’s a fizzle. We’ve all seen the ones that lift off … and never actually explode.
The same can be said with small businesses. There are companies that lift off the ground and soar to new heights, and then there are others that lift off and never reach their full potential. In other words, they fizzle.
While we can’t be your source for everything business related (though we could certainly try … we’re pretty awesome like that), today we’re talking about four (for 4th of July … corny, we know) accounting issues that will help your business be a firework rather than fizzle into the night sky.
#1: Taxes: DIY v. Business Advisor
Also known as everyone’s favorite word and subject for that matter. If you feel like you’re constantly banging your head against a wall, or continually hearing from your pals at the IRS, you’re not alone. Did you know that 52% of small businesses say they’re paying too much in taxes or are unsure of the amount? In other words, you’re not the only one. It’s hard to even begin to know all the possible deductions you can take, the information you need and the planning you’ll want to do.
The best way not to fizzle in the wake of the overwhelming tax burden is to use a professional. Use someone whose job is specifically tax focused (there are definitely people out there … and they even like it!) who can help you look at the overall picture of your company and find ways to ensure you’re paying just the right amount, and not a penny more (or a penny less). The money you spend on a tax advisor will be minimal in comparison to the money you may have to pay for not doing it correctly. In fact, they may even save you money as they know what to look for and how to minimize your tax liability.
#2: Using a Spreadsheet
A sure fire way to fizzle is to not have any idea what your finances look like … or how your business is doing. It’s also really hard to track your business, and get useful metrics, when you’re using spreadsheets to track your financial data.
Don’t get us wrong, as numbers nerds spreadsheets do get our hearts racing. However, they are not the most efficient or effective means of tracking financial data. There are a number of accounting software options that can easily track, compile and show you your current financial state.
So if you’re using a spreadsheet, or software that’s not giving you the information you need, it might be time to think about a change. Not sure if you’re ready to make the change? Ask yourself these questions.
#3: Knowing Your Finances & What They Mean
At the risk of sounding like a broken record, your finances are important. They tell a story about your business and help you see where you’re going. Numbers are also probably not the reason you got into business, so they’re frustrating and even aggravating at times. In fact, only 40% of small businesses say they are “extremely” or “very knowledgeable” in accounting and finance.
So if you’re in the vast majority that don’t have a solid accounting knowledge base, what do you do? To begin, we really think you should have a good foundation of financial knowledge and at least understand basic concepts (we talk about a lot of them on this blog). But beyond that, hire someone with CFO or controller level knowledge (here’s the difference) to help you.
And before you even begin to say you don’t have the money for a full time hire, remember you can always OUTSOURCE it. These numbers nerds will help you not only understand your current financials, and make sure they’re cleaned up, but they can also help you with larger picture ideas and goals … feel free to ooh and ahh at any time.
#4: So how’s business?
Can you answer this question honestly … do you know the health of your organization? Remember, just because you have money in the bank doesn’t mean you’re doing great (cash does not equal profitability).
It’s important to know the overall health of your business, as well as ways you can improve. Here are a few ways you can gauge the health of your business:
- Compare yourself with other fireworks (see what we did there) via benchmarking.
- Projections and forecasting, which you can only do if you have accurate financial data (see numbers 2 & 3).
- Have up-to-date books with accurate financial data … please tell us we don’t have expand further on this.
The moral of the story
All of these are easily attainable and can change your fizzle into a firework. Just make sure to take the time to dedicate to the numbers part of your organization and find a trusted business advisor to help you along the way. From there, you can watch your business rocket into the sky and shine bright as ever!
From all of us at Eide Bailly, we hope you had a wonderful 4th of July!