If you’ve recently opened a business, you’ve thought about making money.
But have you thought about what making money actually means? For all small business owners, business and accounting can seem confusing and overwhelming. The good news: it doesn’t have to be.
Every year, there are thousands of small businesses open in industries that have little to do with financial numbers. It’s more than possible for every single one of them to effectively track, collect and grow their profits.
With the proper guidance, any business owner can overcome their fear of business and accounting. In fact, they might just get pretty good at it. Here are ten facts to help you along the way.
1. Becoming Profitable Can Take a Few Years
In general, the purpose of accounting is to keep track of complex financial information, presumably with the goal of running a smoother financial operation. In other words: good accounting helps explain how to increase profit through saving and earning.
Still, it’s important for any small business owner to note that regardless of business and accounting skills, huge profits probably won’t happen overnight. In fact, the average time it takes to be profitable is between two and three years.
Beyond that statistic, the big takeaway for a small business owner is to be persistent. Just because profits aren’t growing at the speed of light doesn’t mean drastic changes are needed.
Be patient and trust that your business and accounting efforts will amount to something. But that doesn’t mean ignoring the facts.
2. The Average Loan Interest Rate is Not So Simple
When considering finances, a business loan seems appealing to every small business owner. For all the costs you have to deal with, wouldn’t it be nice to have a cool ten thousand dollars deposited into your bank account?
Of course that would be nice! But not everyone is aware of how complicated receiving a loan is. Many think that the only thing they need to worry about is the interest rate.
Zooming out, the process simply involves more than just interest rate. There are different kinds of interest rates that vary depending on the loan’s size and recipient.
It’s important for any business owner to have a solid understanding of business loans before diving deep into the application process. At a certain point, it might make sense for every small business to take out a loan.
But without the proper business and accounting knowledge to move forward, that loan can easily become a burden instead of a buoy. It’s important to keep track of loan payments in the future.
Eventually, with time, the payments will be made and finished. Time will bring some more benefits, too.
3. Accumulation of Wealth is an Active Process
Bringing in money is pretty important. Ultimately, it’s the only way your business can stay afloat. (Plus, it’s a good feeling to have some extra cash on hand personally.)
Improving your understanding of business and accounting can help you understand how flow of cash into your business. Just as importantly, it allows you to understand how your business is leaking cash, and enables you to sew up any holes.
It’s important to know that despite your best efforts, you need to keep your attention and effort focused for the long run.
Keep track of financial statements over time and look for long-term trends, not instant money surges. This will help keep you from getting bogged down in the daily details.
4. Growth isn’t Always Even
Tracking the early life of a small business can be like a roller coaster. Sometimes the news is great, other times it’s less than savory.
That’s why it’s important to know that growth happens in the long term. Any accounting and business data will show that zig-zag nature that is indicative of revenue.
It’s important to remember that growth isn’t a straight line. If you do, you’ll be prepared to stay on course over the ups and down.
5. Technology Can Be Your Friend
The good news is that you have many options for help in 2017. With new technologies popping up every day, business and accounting tasks are becoming more manageable for every business owner.
Reach out to one of the great solutions that are available for you. Some solutions might even integrate with your other software, such as your payroll or inventory management systems.
6. Understanding Taxes is Key
One of the main reasons small business owners turn to accountants is tax help. For many business owners, taxes are so stressful that they prefer to turn over all their paperwork to accountants.
This strategy–to avoid the punishment of messing up your taxes–is effective for many small business owners. But avoiding the stick isn’t always much fun. It’s possible to seek tax help from accountants to get some benefits.
7. Taxes Do Help Some Small Businesses
Taxes don’t always bring out the stick, but sometimes offer a carrot incentive. The main example of this relative niceness is through tax deductions.
Tax deductions are reductions in the amount of your income that can be taxed. The United States government is generally happy to help a small business out with a tax deduction.
Many costs you incur on a regular basis while running your business fall under the definition of tax deductions. Check out this list of (typically) acceptable examples under the rules of the U.S. government.
8. Most Future Income Is on Facebook
The cats out of the bag: there are a whole lot of people on Facebook. In fact, there are about two billion active profiles in this very moment.
The consequence for you is clear. Your future clients are on Facebook, right now. This is as much a marketing tip as it is a business and accounting rule: go get them.
Set up a Facebook page for your small business; it works like free advertising in some ways. Engage with new clients along with your current base. Soon enough, you’ll start to bring in income.
Keeping track of that revenue is a great part of business and accounting services. But you need to make sure you don’t get too personally involved.
9. It’s Better to Keep Personal and Business Funds Apart
When you start a small business, it’s just you in the game, even if only for a moment. Because you’re the founder, the money is all yours to deal with. But that doesn’t mean your business finances and personal finances are best mixed together.
The financial analysis you do of your own bank account is a separate process from the business and accounting that tracks the financial success of your company. That’s why it’s much, much better to keep those two bank accounts separate.
It’s a rule that any decent accountant will tell you to follow. Keeping your finances compartmentalized will allow you to organize your business and personal life better. Plus, it’ll let you turn the business switch off more easily if you ever want to.
Some rules like these are obvious to people without degrees in accounting. Some rules, on the other hand, are less clear.
That’s why you should keep in mind that there’s always an accountant waiting for work somewhere. All you need to do is call.
10. There Are Over a Million American Accountants
That’s no exaggeration, either. According to the United States government, there are almost 1.5 million accountants working in the country as we speak. You should remember that they’re available.
You don’t need to rely on them. In fact, it would be better for you if you had a clear grasp of the relationship between business and accounting. But, at a certain point in time, it might be better for you to reach out to some professionals.
There are a few things to keep in mind when thinking about hiring an accountant. Are you in the financial position to pay at this moment? Do you really need this, or can you do it yourself?
If you’re set on hiring one, make sure you work with someone who knows what they’re talking about. It’s more than possible to get high-quality help for affordable rates. In fact, you deserve an outcome like that.
Check out the various products we offer to see if you’re interested in any of the aspects of accounting we can help you with.
Take Charge of Business and Accounting
The money numbers that swirl around a business can be overwhelming for any small business owner. But, with a bit of understanding and patience, those numbers can quickly make more sense. In fact, a business owner can take charge of business and accounting and use it to their benefit.
With these ten facts, you’re already on your way to better understanding the finances that keep your business up and running. If you can master business and accounting, it’ll soon feel less like a burden and more like an exciting opportunity.
Looking for more ways to improve your finance skills? Reach out to a member of our team to get started. What are you waiting for?
Go for it!