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Monitor the Financial
Success or Failure of Your Business It's hard to
know where you are going if you don't know where
you've been. The same is true with your business
- it's hard to know how your business is doing without
a clear financial picture. A good financial system
provides answers to the questions: Am I making money?
Are sales increasing? How do expenditures compare
to sales? |
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Provides the Information
You Need to Make Decisions Evaluating financial
consequences should be part of every business decision.
Without accurate records and financial information,
it's difficult to forecast the impact of any given
course of action. For example, financial information
gives insight as to whether or not it pays to hire
another salesperson. Accurate records reveal the
profitability of any line item. |
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Obtain Bank Financing
The best time to seek financing is when you don't
need it. The bank will want to see your income statement,
balance sheet and tax returns for the most current
and prior years, as well as projected statements
showing the impact of the requested loan. |
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Obtain
Other Sources of Capital If your business has reached
the point where you need to take in a partner or
investor, any prospective associate will want to
become intimately familiar with your financial picture.
Suppliers and other creditors may also ask for certain
financial records. The source of this information
is based on your day-to-day recordkeeping. |
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Prepare
a Budget All businesses should use budgets for planning
purposes. Budgets keep businesses on track by forecasting
cash needs and controlling expenditures. When companies
seek financing, bankers or prospective investors
look for budgets as evidence of planning and stability.
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Prepare
Your Income Tax Return No matter what your business
entity, you must file an income tax return and pay
income taxes. With good records, preparing an accurate
tax return will be easier and filing will more likely
be done on time. Poor recordkeeping may result in
underpayment or overpayment of your taxes. If your
CPA prepares your tax return, poor records could
result in higher accounting costs. |
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Comply
with Federal and State Payroll Tax Rules If you
have employees, you are aware of the myriad of rules
and regulations relating to payroll taxes. Payroll
tax must be deposited according to strict deadlines.
Late payments of payroll taxes result in severe
penalties, including jail time!
Payroll tax returns must be filed quarterly, and
must reconcile with payroll deposits made during
the quarter. At year end, you're required to give
employees and the government W-2 forms, which must
agree with your quarterly payroll returns. Sound
bookkeeping practices, even if you use a payroll
processor, will make compliance with payroll rules
easy. Poor records will make it impossible. |
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Submit
Sales Taxes If you collect sales tax, good records
make it easy for you to compute the tax due and
prepare the required reports. Sales tax must be
deposited according to strict deadlines. Late payment
of sales taxes can result in severe and unnecessary
penalties and interest. |
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Distribute
Profits If your business is a partnership, you will
need good records to determine the correct amount
of profits to distribute to each partner. If you're
operating as a corporation, profits that you'll
be paying out as dividends to the shareholders must
be determined. |
