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Small Business Owners: Accounting Is for Profit Planning, Not Just Tax Preparation

You might think that profit is the main goal of the business, but it’s actually the money that comes and goes out of business that keeps the doors open. The concept of profit is somewhat narrow and takes into account only expenses and income at a certain point in time. On the other hand, cash flow is more dynamic in the sense that it is associated with the movement of money into and out of business. This is due to when money is moving. Profits do not necessarily coincide with the corresponding inflows and cash outflows. In the end, cash flow often lags behind cash payments, and if profits can be announced, businesses may face short-term short-term cash shortages. For this reason, it is important both to predict cash flow and to predict the likely profit. In these circumstances, it is important to know how to convert accumulated profits into cash earnings. You should have enough money to do business, but not before losing income from other purposes.

Why accounting is needed

Help you work better as an entrepreneur

Make timely decisions
Know when to hire a team of employees
Know how to value your products
Know how to mark your spending
Helps you decide whether to develop or not
Help with planned operating costs
Stop fraud and theft
Control The main problem is internal theft
Check your books and equipment inventory
Raising capital (helps explain financial data to stakeholders)
Loans
Investors
What are the best small business accounting methods to solve your common “problems”?
Hire or consult an accountant or accountant
How best and how often to get in touch
What is your experience in my sector?
Determine what my break-even point is?
Can an accountant estimate the total value of my business?
Can you help me grow my business through profit planning methods?
How can you help me prepare for the tax season?
What should I consider in my particular industry?

To be successful, your business must make a profit. All your business goals come down to this simple fact. But it’s easier said than done. To improve your results, you need to constantly know what is going on financially. You also need to make a commitment to monitor and understand your KPIs.
What are the overall profitability measures to be followed in business — key performance indicators (KPIs)

Whether you decide to hire an expert or do it yourself, there are a few things to look out for:

Overdue payables: Overdue payables (A/P) shows the balance of money you currently owe your suppliers.
Average cash consumption: Average cash consumption is the rate at which your company’s cash balance decreases on average each month for a certain period of time. A negative burn is a good sign because it indicates that your business is making money and increasing its cash reserves.
Cash Runaway: If your business is in short supply, Cash Runway will help you estimate how many months you can go through before your business runs out of money. As with cash consumption, entry-level negative work is a good sign that your business is increasing its cash reserves.
Gross profit: Gross profit is a percentage that represents the total sales of your business after deducting the costs associated with the production and sale of your business’s products. This is a useful indicator for determining how your income relates to your costs so that you can make appropriate changes.
The cost of attracting customers: Knowing how much on average you spend on attracting a new customer, you can see exactly how many customers you need to make a profit.
Customer Life Value: You need to know your LTV so you can predict your future earnings and estimate the total number of customers you will need to increase your profits.
Break-even point: how many sales do I need to make for my business to make a profit? Knowing this number will help you understand what you need to do to make a profit (for example, attract more customers, raise prices or spend).
Bottom line: this is the most important indicator you need to know to ensure the financial success of your business. If you do not make a profit, your business will not last long.

Customer Life Value: You need to know your LTV so you can predict your future earnings and estimate the total number of customers you will need to increase your profits.
Break-even point: how many sales do I need to make for my business to make a profit? Knowing this number will help you understand what you need to do to make a profit (for example, attract more customers, raise prices or spend).
Bottom line: this is the most important indicator you need to know to ensure the financial success of your business. If you do not make a profit, your business will not last long.
Comparison of total income with last year/previous month. Tracking and comparing your total income over time can help you make the right business decisions and set better financial goals.
Average turnover per employee. Knowing this number is important so that you can set realistic performance goals and identify ways to optimize your business operations.
The following checklist includes recommended timelines for providing accounting features to help you stay up-to-date with your business and optimize your tax preparation. The accuracy and timeliness of the numbers introduced influence the key performance indicators that determine the business decisions that need to be made on a daily, monthly, and annual basis for profit.
Daily accounting tasks

Check your daily cash position so you don’t go bankrupt.
Because money is the fuel of your business, you will never want to be without electricity. Start your day by checking how much money you have in stock.
Weekly accounting tasks

  1. Record transactions

Write down each transaction (paying customers, receiving cash from customers, paying suppliers, etc.) in the relevant account, daily or weekly, depending on the volume. While it’s probably easier to register transactions manually or in Excel tables, it’s probably easier to use accounting software such as zuickBooks. The benefits and controls far outweigh the costs.

  1. Receipts for documents and files.

Keep copies of all invoices sent, all receipts (cash, checks and credit card deposits) and all payments in cash (cash, checks, credit card statements, etc.).

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