For any business, accounting is the backbone of its finances. Without a good understanding of your financial flows and the money coming in versus going out, any company can easily find itself in trouble.
Startups are especially vulnerable to this situation. They tend to be cash-poor, which means that they can’t afford not to stay on top of their finances. Moreover, Phoenix business startup costs can be high in terms of both time and money. The good news is that there are cost-effective and reliable ways to do accounting for startups. While some of the options may not be ideal for every business, most will work for startups with careful planning.
Here are reasons why accounting is an important aspect of startups.
- Forecasting financial estimates
When accounting plays an important role in your finances, you can easily keep track of your business’s income statements and balance sheets without worrying about forgetting anything. One of the most important responsibilities of an accountant is to prepare financial reports for the CEO and other company executive regularly. The key is to provide timely and relevant information in a format that allows them to better understand the company’s financial health.
- Assists in tax preparation
Filing taxes is practically a full-time job for most small business owners. However, for small businesses without accountants, taxes are an arduous process that if not correctly handled, can cause your business a great deal of stress. This is why hiring an accountant can be such a useful tool.
- Tracks all business transactions
Another important job of financial management is to keep the books open for all business transactions. They not only help you by keeping your business’s books open but also help you by preparing tax returns and other financial documents.
- Helps you avoid audits
Hiring the services of an accountant is a great way to protect your business from being audited. Opening up your books to an auditor may cost you a lot of money if you don’t do it right. So, getting an accountant to manage your finances is a smart choice.
- Guides you to get more deductions
Taxes are only the beginning. If a company doesn’t understand the concept of tax deductions, it can easily be put in a position where it is required to pay more rather than less for its income or tax burden. This is why having an accountant is one of the most important aspects of running a business.