Your business has grown to the point where you no longer have to handle the bookkeeping yourself but have been able to bring in a CPA-congratulations! Just because you have a professional crunching your numbers for you now, that doesn’t mean your books are no longer your responsibility, so says Jeanette Mulvey, managing editor of Business News Daily.
“If you think you don’t need to understand accounting because you have a professional accountant, think again,” Mulvey wrote in a recent article. “Even though you go to the dentist once or twice a year, you still brush your teeth every day. Think of accounting the same way. While you may use a professional for the big stuff, you need to be on top of the daily maintenance of your finances.”
Mulvey discussed a few key reasons why it’s important for business owners to keep familiar with their numbers, such as for planning purposes.
“Knowing what you owe out, what you are owed by your customers and how much you have in reserves will give you an idea of what’s working for you and what’s not,” she wrote. “Maybe you need to change your prices; maybe you have customers who consistently cost you money. Maybe you’re making money on things you didn’t even realize were profitable. Understanding how your numbers interact with each other is like having a financial GPS to help guide you toward better decisions and your ultimate destination: Profitability.”
Having a clear picture of your financial status can also help you at tax time.
“Even if you love your accountant, you shouldn’t let her be the only person who knows the details of your company’s financial health,” Mulvey wrote. “Remember, if the IRS comes looking for answers, they’ll be knocking on your door, not your accountant’s. While your accountant can help you through an audit, ultimately, you are responsible for what you sign off on. If you don’t understand what you’re signing, you’re putting yourself and your accountant in jeopardy.”
Truly knowing and understanding what’s going on with your finances can give you a better sense of what’s really going in your business.
“In the end, accounting is nothing more than a living business plan with all the details filled in,” Mulvey wrote. “You might have (should have) had one when you started your business, but you probably haven’t revisited it in a while. Once you fill in the blanks with your actual sales and expenses, you’ll know what’s working and what’s not.”
To read the complete Business News Daily article, click here.