I still remember the first time I filed taxes for my business. In addition to having no idea what a write-off really was, I also didn't worry too much about guessing on the numbers. A few government audits later, I discovered what it really meant to do things the right way. Over the years, I have met lots of business owners that weren't too worried about fudging the numbers, and nearly all of them have run into problems. Proper accounting is important, which is why I created this website dedicated to business accounting. I know that if you learn the right way to do things and focus on integrity, your business can avoid a world of problems.
Expansion is the most dangerous time for a small business owners. But it's also necessary to transition a small business into a larger business. When expanding, all aspects need to be carefully considered -- and that all comes down to the accounting. Here are some of the most common accounting issues that could hold a business back.
Not Conducting a Thorough Risk Assessment
Risk assessments go over the potential issues of expansion so the business can appropriately counter them. A risk assessment can't project for or eliminate all risk, but it can reduce the chances that an incident could occur. If the risks are inappropriately high, then the business may need to reconsider its expansion. A risk assessment will also provide contingency plans that can be followed when incidents occur.
Not Projecting for Existing Expenses
What happens when a business opens a new branch and then has to purchase new equipment for its old branch? The average expenses over the past few years do not tell the full story of a business. A company also needs to think about its current expenses moving forward, including lease renewals, equipment maintenance, and property management.
Not Getting the Real Costs of the New Business
It's easy to rely upon the company's existing expenses to project the cost of expansion. But a new branch or even simply sizing up an existing business can actually create vastly different expenses. As an example, an insurance policy could be very different from one branch to another.
Not Considering the Accounting Infrastructure
There are processes and procedures that work for small businesses that simply don't work for larger businesses. The most critical example is often payroll. Cutting checks for five or six employees manually is easy; cutting checks for fifty or sixty employees simply has to be done through an automated process if it is to be efficient. The administrative and accounting processes need to be carefully considered for additional optimization.
Not Securing Enough Funding
Companies always need a buffer. There are things that can occur that could be out of your control, such as unexpected costs. Businesses need to secure additional credit lines and be open to the possibility of additional investments and loans -- and that's what an accountant can help with. Accountants can create thorough reports that can be leveraged to secure funding.
A professional accountant will be able to go over a company's books in order to determine whether it's ready for expansion. Sometimes it may be a better idea to wait until the situation is optimal -- other times, a company may simply need to restructure a little to make the situation feasible. Either way, an accountant will be needed. Contact a company like Don Lamb CPA Inc P.S. for more advice.Share
28 December 2016