4 Reasons Why Accurate Accounting Is The MOST Important Part of A Profitable Business

What comes to mind when you think about accounting? If you’re like most people, probably not that much! After all, accurate accounting is all about dwelling on the numbers, right? It’s looking at how much money you’re bringing in (or not), it’s dealing with the “realities” of your business. NOT the fun part.

Most of us pursue accounting support in the first place because we need to file taxes (cause, ya know, it’s the law and all). For that matter, most of us avoid thinking about it when April 15th is far out of sight and out of mind. 

But here’s the real deal.

Accounting is much more than going through the motions of your business responsibilities. It’s the MOST important action you can take to ensure the life of your business.

Staying on top of your books through accounting is the one step that will determine all the other steps you take in business. Accounting holds all your business secrets, and gives you all your business answers!

Having clean books is everything. But what do “clean books” even mean? I mean complete, accurate, triple checked, understood, tax compliant, relational, “by-the-book” books. 

We’re talking about keeping impeccable records from taxes to cash flow. You need to be able to call up your business numbers at the drop of a hat if necessary. 

Accurate and up-to-date accounting will prepare you for any scenario. It helps you to move through uncertainty and handle any potential issues that arise. Because when you know your numbers, you can take immediate and decisive action.

It’s simple. Accurate accounting sets you up for the ingenuity and adaptability that defines entrepreneurship itself!

How is keeping track of the numbers that powerful?

Here are 4 specific reasons why accurate, up-to-date books will save your business:

Reason #1: Accurate Accounting provides essential information FAST.

Having clean books shines the brightest when you need them the MOST. But you might not notice this until s*it hits the fan. That’s why you want your books ready to go if the bottom falls out. 

For example, countless small business owners were affected by the Coronavirus situation and applied for emergency loans (especially the SBA low-interest loan). 

But to get approved for ANY loan (not just during a disaster) you need to tell the lender where you stand. They need this information to decide if you can sustain payments on any loans received. If you don’t have up-to-date books, you can’t get approved for the loan.

If your numbers aren’t accurate or honest (i.e. “adjusting” your income so you don’t show a profit on your taxes). your chances are low, too. (At least not without paying an accountant top dollar for an emergency clean up session!) 

So keep your numbers clean, accurate, and honest. Solid accounting will do that for you! 

(P.S. There are lots of legal ways to increase profits and keep more of the money you make without paying a high tax bill! Check out my blog post on this topic right HERE.)

Reason #2: Accurate Accounting will show an accurate Cash Flow.

Let’s get right to the point on this one. You need to know your cash flow. That is, you need to know how long you can sustain your business with the revenue you generate. You also need to know if you DON’T have the revenue to sustain your business. Clean books will give you all the data you need to know your cash flow! 

Cash flow shows your ongoing overhead. It also shows your expenses that are directly impacted by sales. So if you ever need to pivot at the last minute, knowing your cash flow will show you how to do it safely. 

Reason #3: Accurate Accounting will tell you when you can scale your business.

Knowing your books tells you when you can sustain internal growth, and when it’s time to scale up your business. 

For example, you’ll be able to tell at a glance when you can afford to take steps like hiring employees. You’ll also know when you have the cash flow to add perks. For example, paying into unemployment insurance in case you have to lay anyone off. 

(This is something that a lot of small business owners are dealing with now, for sure!)

Reason #4: Accurate Accounting will show the value of your business.

Want to know exactly what dollar amount you can put on your business? Keep your books clean. You’ll have instant access to the dollar amounts that determine the value of your business. The current value plus your future growth potential will be readily available. (This is especially important if you ever want to sell your business!)

Pro Tip: Don’t have accounting software set up yet? I highly recommend QuickBooks, and offer a LOT of training on how to use it!

The take-home message here?

Accounting isn’t about numbers for the sake of numbers. It’s an indispensable way to keep your finger on the pulse of your business.

Your numbers can have a crucial conversation with you about what’s going on with your business. But that conversation is only as accurate as your current accounting practices! 

When you keep your accounting current, you know where your priorities are. You’ll know if your pricing is accurate. You’ll know which directions of sales to pursue, and which to give up.

Accurate accounting will also show you know when you’re ready to expand, and you’ll know how to prepare for any unforeseen contractions. You’ll be able to tell which months you can take time off, and which months you need all hands on deck.

These are a few examples of the vital information your numbers can tell you. But it ALL starts with accounting. So take care of that first, and you’ll be amazed at the results!

So what questions do YOU have for your numbers, and can your accounting give you accurate answers?

Tell me in the comments what you want to ask your numbers. Then tell me if you have the accounting support you need to get good answers!

Until next time, 

Love, Light, and MONEY, Honey…

Kaylee

P.S. Feeling clueless about P&Ls, Balance Sheets, and Cash Flow Reports? I’ve got you! My new course Finance 101: How To Read Financial Reports will help you learn how to read, understand, and apply your Financial Reports, so you can take charge of your finances NOW. Take this empowering first step to financial freedom, and learn more about this course HERE ⬇️⬇️