SME businesses, owner managed businesses and start-ups in Essex have unique challenges when faced with financial reporting and business accounting. Most businesses carry out their operations in a complex environment with constantly shifting operational needs.
It can be challenging to keep the business compliant while still providing relevant financial information for the management that enhances decision making.
Accounting systems and processes built on a strong foundation of recordkeeping and analysis – with the help of small business accountants in Brentwood – make it easier for businesses to operate smoothly and keep costs down.
With that in mind we cover the main areas of accounting in Brentwood that must be kept in check for SME businesses. The better understanding that you have of the cost centre for your business, the more effectively you can manage them to achieve success.
Cash Flow Management
Most accounting firms in Essex agree that cash is critical for the success of small companies. Many businesses have gone bust, not because they weren’t profitable, but because they were unable to maintain their cash liquidity.
This is because a business can operate in losses even for a couple of years and survive with the right financial support and financial forecast in place. However, a company cannot run when it is out of cash and would have to go into liquidation within weeks.
The most effective method of improving your cash flow is to put strong financial controls on the receivable and payable accounts. For instance, if your company was offering 45-day payment terms to your client in the beginning when you were building a network, you can lower the term to 25 or 30 days when you have established a healthy client portfolio.
Keep a check on your cash flow at all times and review the policies on a monthly basis to see how your cash position has changed over time.
Using cloud accounting software this can easily be automated alongside your day to day record keeping.
Put in place Budgetary Controls
Another issue overlooked by new start-ups and small businesses is the creation of financial budgets and control measures for a future period. Such budgets are based on production, sales and raw material prices. They should be adjustable based on various market factors.
It is not possible for businesses to make precise forecasts about how much they will produce and sell in a given year. However, budgets help set up a clear plan of action that provides guidance for managers and business owners.
You can use a variety of financial reporting software to make the process of budgeting easier for your business. You can also use independent, professional accountant in Brentwood to help you set up budgets based on previous years and make projections for future anticipated demand.
Inventory Control and Accounting
Inventory control and reporting is crucial for some businesses and does not matter at all for others. Most service sector businesses have little to no inventory and do not require any inventory accounting measures.
On the other hand, inventory control is central for the success of manufacturing and trading businesses. Accurate valuation of inventory will affect;
1) The cost of goods sold,
2) Gross profit, and
3) Net income
These three figures are necessary to understand how well the business is converting inputs to outputs and what value is added by the business.
Inventory also affects;
1) The amount of current assets,
2) Working capital,
3) Total assets, and
4) Stockholders' or owner's equity
These figures matter because they give the valuation of the business position at any given time.
If you find yourself saying “Do I need payroll?” Then that is a good time to talk to a local payroll provider to ensure you are staying compliant.
Payroll is another important area of consideration for new businesses. So much so, that it has acquired its own unique standards and chartered certified accounting firms in Essex that have gained expertise in processing payroll.
Payroll managers are proficient in employee tax matters and also know how to account for special perks and privileges such as bonuses, paid leaves, overtime compensation and benefits in kind. They also manage pension funds and salary deductions based on the company’s health and insurance policies.
Small firms often lack the financial means to hire a specialist payroll manager. They can either outsource the task to a credible local accounting firm or keep the payroll structure simple until they expand.
Managing Lack of Capital
New start-up businesses often lack the capital resources to grow and expand quickly. This can really hurt the start-up as they cannot invest in good opportunities.
Now only does this slow down their profit-generating investment, new businesses are also limited in their ability to hire the best talent because they cannot afford it.
Businesses often have to rely on short term credit to meet day-to-day expenses which further increase debt and lowers profitability.
In order to successfully generate capital, loans and funding, small businesses must present accurate and complete financial records to lending institutes. The company must put in place a strong financial management culture in the organization and encourage accurate reporting at all levels, right from the get go.
Small business accountants in Brentwood can certainly help achieve this goal.
All business are required to provide accurate financial figures for investors, lenders and government tax authorities. New start-up businesses and SMEs are not exempt from this requirement. You can use our reliable tax preparation service in Brentwood, Essex and nationwide for this job.
In order to qualify for loans and investments and to meet their business licensing requirements, firms must also maintain and submit their books of accounts to relevant regulatory bodies on time. This could be the securities commissions, tax department and/or non-profit regulatory bodies for the sector. Accounts must be created and submitted in a prescribed manner on time.
The accounting method used for the business must also comply with the accounting standards set out for the industry. This is particularly important for registered businesses and corporations.
Going for an IPO
The ultimate goal for some small organizations and new start-ups is to go for an IPO to expand its operations. This happens after the business has become established and successfully demonstrated its economic model and an ability to generate revenue.
That is why it is important to maintain transparent and accurate financial records. If you, as a business owner, intend to go for a successful IPO of your business, you will need independent accountants and auditors to review your accounts and submit them for approval and registration.
In this blog, we covered several important areas of focus for business accounting that are useful to new businesses organisations.
Financial record keeping and reporting are just as important for SMEs and new start-ups as they are for well established businesses. Chartered certified accountants in Brentwood Essex can help ensure that your accounting records are accurate and meet all compliance standards.