Small business owners need to be aware of accounting basics. Not only are they responsible for tracking expenses, but they also need to monitor their financial reports. This can be daunting, especially if you’ve never balanced a checkbook. However, it’s possible to develop acquiescent money management skills, even if you’ve never managed a business before. Here are a few helpful tips to get you on track.
One of the most overlooked accounting topics is the cost of goods sold (COGS). This applies to physical goods and services as well as labor. Small business owners often focus on revenues rather than expenses. It’s important to focus on increasing the profit margins of your business, so that you can grow your business. Accounting advice has always stressed the importance of understanding and differentiating between receipts and invoices. Keep track of your receipts!
Review your accounting reports quarterly. Look for trends in your sales and revenue. Talk to your accountant if you’re unsure about trends. A good accountant will give you a bigger picture of how your business is doing and help you prepare for any future capital needs. For example, you can use accurate bookkeeping to accurately project your cash flow and prepare for upcoming expenses. When you know where your business stands financially, you can create a budget and make financial projections.