How professional accountants help small businesses to save money
Not all superheroes wear capes; some help small businesses thrive in chaos and come out stronger than before. Meet your financial hero – the small business accountant. These professionals are the backbone of financial stability, providing crucial services that go beyond mere number-crunching. They offer strategic insights, help you navigate tax laws, and ensure your cash flow remains healthy. With their help, you can avoid costly mistakes and focus on growth. From bookkeeping and revenue tracking to implementing sound accounting principles, these experts streamline your financial processes, allowing you to focus on what you do best - running and growing your business. How exactly? Find out in this article, and don’t forget to look at how Enty can help your business with accounting.
Financial planning and budgeting
To streamline your finances, you will most likely need to start with a solid budget. A budget is your financial roadmap, guiding you through the sea of expenses and revenues. An accountant can help create a realistic budget by calculating revenue, fixed costs, variable costs, and your net income. It's a crucial tool to ensure your business doesn't run out of fuel – that's cash, in business terms.
To create a realistic budget:
Calculate your revenue from all sources
Add up your fixed costs (rent, payroll, debt repayment)
Determine your variable costs (utilities, materials, commissions)
Subtract your fixed and variable costs from your revenue
This process will help you understand your net income and identify areas where you can cut costs or increase revenue. Remember, your budget should be flexible and reviewed regularly to adapt to changing business conditions.
Cash flow management
Cash flow is the lifeblood of your business. Positive cash flow makes your business flourish, and the pace of cash flow is just as important as having cash flow at all.
Effective cash flow management involves:
Forecasting expenses and preparing for dry month
Setting clear payment expectations with clients
Managing inventory efficiently to keep holding costs low
Diversifying your marketing channels to attract more customers
By closely monitoring your cash inflows and outflows, your accountant can prevent cash flow issues, ensure you have enough money on hand to cover your expenses, and invest in growth opportunities. If all of this sounds overwhelming and you don't know where to start, try Enty Financial service to get things in order - track incomings and outgoings, select and add transactions manually, as well as get a clear overview of your business financial health. Moreover, accounting becomes easier with Eny too - simplify reporting and all accounting tasks: match documents with transactions, submit reports, and much more.
Financial forecasting
Financial forecasting helps you play out a predicted future for your business. It's a powerful tool to assess your current business strategy and understand how decisions made now can produce desired outcomes in the future. An accountant can help create financial forecasts by using historical data, considering internal and external factors, and creating pro forma financial statements.
To create a financial forecast yourself:
Start with your historical financial data
Use straight-line or qualitative methods to make predictions
Consider internal and external factors that might impact your business
Create pro forma financial statements (income statement, balance sheet, and cash flow statement)
Remember, forecasts are more a moving target than a guiding star. Return to your financial projections frequently to adjust for changes in business strategy, internal and external factors, and new financial insights.
By implementing these financial planning and budgeting strategies, you'll be better equipped to make smarter business decisions and maintain your company's financial health.
Tax optimization and compliance
To streamline your finances, you need to make the most of available tax deductions. These deductions can save you hundreds, even thousands of dollars at tax time. Here are some key deductions to consider:
Business expenses: deduct costs like wages, rent, utilities, office supplies, and advertising.
Home office: if you use a portion of your home exclusively for business, you may be eligible to deduct a percentage of mortgage interest, insurance, utilities, and repairs.
Employee-related expenses: deduct salaries, wages, bonuses, benefits, and payroll taxes.
Health insurance premiums: if you provide health insurance for employees, these premiums are typically deductible.
Retirement contributions: contributions to plans like SEP-IRAs or 401(k)s are often tax-deductible.
Depreciation: deduct the cost of certain assets over time, including equipment and furniture.
Research and development: you may be eligible for tax credits for qualified R&D activities.
To claim these deductions, you'll need to keep accurate records and stay on top of your monthly bookkeeping. Consider using a professional bookkeeping service to ensure you catch all potential deductions and minimize your tax liability.
Meeting tax deadlines
Staying on top of tax deadlines is crucial to avoid penalties and unexpected tax bills. That’s where an accountant comes in especially handy for small business owners - they can help you remember key dates, such as quarterly estimated tax payments, annual tax returns, and employment tax payments.
If you can't meet a deadline, you can request an extension (or ask your accountant do so for you). However, remember that an extension to file doesn't mean an extension to pay. You'll still need to estimate and pay any taxes owed by the original deadline to avoid penalties.
Navigating complex tax laws
Tax laws are complex and constantly changing. To ensure compliance and optimize your tax strategy:
Stay informed: keep up with changes in tax laws that may affect your business.
Use professional help: consider working with a tax professional who understands small business taxes.
Implement a robust accounting system: this will help you track expenses and prepare for tax season year-round.
Plan ahead: consider tax implications when making business decisions throughout the year.
By focusing on these areas, you can optimize your tax strategy, ensure compliance, and potentially save money for your small business.
Business growth strategies
To streamline your finances and drive business growth, you need to identify new opportunities. This process involves developing fresh insights and generating ideas that your competition might have overlooked. Start by conducting thorough market research to create a shortlist of competitors. Gather information on their sales by country and category to understand if you're missing out on potential growth areas.
Consider these growth strategies:
Market penetration: increase sales of existing products in current markets.
Market development: sell existing products to new markets.
Product development: introduce new products or services to existing customers.
Diversification: develop new markets with new products.
Financial analysis for expansion
Before expanding your business, you need to conduct a comprehensive financial analysis. This involves:
Calculating realistic sales increase projections
Determining initial expansion costs
Estimating increased operating costs
Analyzing cash flow requirements
Calculating return on investment (ROI)
Work with your accountant to create detailed financial forecasts and pro forma statements. These projections will help you understand the potential profitability of your expansion plans and identify any cash flow challenges you might face.
Securing business financing
To fund your growth strategies, you may need to secure additional financing. Here's how to prepare:
Ensure your books are up-to-date and accurate
Gather required financial documents: these may include last three years' business tax returns, last three years' December financial statements or most recent interim financial statement
For startups, prepare pro forma projections for the next 2-3 years
Your accountant can help you present this information effectively to potential lenders, explaining your financial projections and demonstrating your ability to repay the loan. Remember, lenders want to know who's borrowing the money, if you can repay it, and whether they're protected.
Cost-cutting and expense management
To streamline your finances, you need to start by thoroughly analyzing your operational costs. An accountant can help you examine your current administrative processes and identify areas where automation and technology could relieve employees of manual tasks. By implementing technology like Enty into your business, you not only gain access to a user-friendly platform with multiple services for managing back office, but also get a chance to benefit from a professional accountant who will give you consultations and make sure your reports are in oder. To make your accounting process more smooth, simply open a company in Estonia with Enty and purchase an accounting plan.
If you’re not just yet ready - start by reviewing your expenses and identifying any unnecessary or avoidable costs. This exercise will help you measure your main expenses and find possible solutions. Pay close attention to areas such as office supplies, energy costs, and recurring expenses like subscription services or unnecessary vehicle services.
Once you've analyzed your operational costs, it's time to identify unnecessary expenses. Look for redundancies in your business processes and software platforms. If you have several software platforms with overlapping functions or ones you rarely use, consider consolidating and stopping payments for the extras.
Review your employee benefits package. Evaluate which benefits your employees used the most and least in the previous year. If your staff isn't using a benefit, there's no sense in paying for it. You might also consider examining specific benefit usage, such as health insurance, to see if you can reduce service levels without compromising your team's needs and expectations.
Implementing cost-saving measures
After identifying areas for improvement, it's time to implement cost-saving measures. Here are some strategies to consider:
Go electronic: move from paper hardcopies of documents to electronic files. This will reduce costs associated with office supplies and make your organization run more smoothly.
Embrace remote work: consider allowing employees to telecommute for part of the week. This can help you downsize your office space and reduce associated costs.
Outsource non-core activities: find an outsourcing partner for secondary business functions. This can help keep your organization slim while lowering payroll costs.
Negotiate with suppliers: try to get better deals on products and services. You may be able to secure discounts or better payment terms by negotiating.
Use technology: incorporate invoicing and accounting software to improve efficiency. This can reduce the time needed to accomplish daily tasks, freeing team members to pursue other crucial business pursuits.
By implementing these cost-saving measures, you can reduce expenses without compromising the quality of your products or services. Remember to periodically review your expenses and ensure the best cost-saving practices are being executed. This consistent review will help you operate in the most efficient manner possible.
Final thoughts
Ultimately, the path to financial success in small business is paved with expert guidance. By collaborating with a professional accountant, you're not just managing finances – you're setting the stage for sustainable growth and long-term success. They offer insights that go beyond basic bookkeeping, helping you streamline operations and maximize profitability. With their help, you can identify and capitalize on new opportunities, ensuring your business remains competitive. A well-managed financial system is the foundation of a thriving business. Embrace the expertise of an accountant and secure your business’s financial future with Enty’s accounting plan!
