Many businesses don’t realize it, but their accounting method can have a major impact on their bottom line. In fact, poor accounting is one of the leading causes of business failure. Making a mistake in your accounting methods can have disastrous consequences for your business. Here’s what you need to know to avoid this critical error.
How Poor Accounting Can Hurt Your Business
There are a number of ways that poor accounting can hurt your business. Perhaps the most obvious way is that it can lead to inaccurate financial statements. This, in turn, can make it difficult to make sound decisions about where to invest your resources or how to price your products and services. Additionally, if your financial statements are inaccurate, they can put you at risk of violating tax laws or running afoul of government regulations.
Another way that poor accounting can hurt your business is by causing you to miss opportunities to claim valuable deductions or take advantage of other tax breaks. For example, if you’re not tracking your inventory properly. You may be paying too much in taxes on the products you sell. Similarly, if you’re not keeping careful records of your expenses. You may be missing out on deductions that could save you thousands of dollars come tax time.
Finally, poor accounting can also lead to cash flow problems. If you’re not keeping track of your receivables and payables. It’s easy to fall behind on payments and rack up late fees and interest charges. This can quickly eat into your profits and put a strain on your relationship with vendors and suppliers.
According to data gathered by U.S. Bank and presented on the SCORE/Counselors of America’s Small Business, cash flow difficulties are the reason that small businesses fail. This includes a lack of experience with accounting and money, as well as a weak business plan. Other problems include starting with too little money and not having a firm plan. A certified accountant is essential from the very beginning stages of your business all the way to its conclusion.
Role of an accountant in E-commerce
Accountants are uniquely positioned to determine where and to whom online intranet information items (such as data on costs, revenues, production, budgets, standards, variances, and quality) should flow.
This is accounting’s “traditional” role in an organization. Accountants maintain and analyze financial data to provide insights that inform operational and strategic decision-making throughout the organization.
Thus, accounting has a new role in e-commerce: accounting is no longer limited to providing financial information to management; accounting must also provide operational and strategic information to all decision-makers in the organization.
The role of accounting in e-commerce is further complicated by the fact that accounting data often reside on the Intranet, where they can be accessed not just by accounting personnel, but by anyone with a PC and an Internet connection.
Thus, accounting must now concern itself not just with the accuracy of its data, but also with its security and integrity.
Do I need an accountant for my e-commerce business?
After reading these you might be wondering, Do I need an accountant for my e-commerce business? The answer is: it depends. If you have a relatively simple business with straightforward accounting needs, you may be able to get by without one. However, if your business is growing and becoming more complex, it’s probably time to bring in some help. An experienced accountant can save you time and money by keeping your books in order and helping you take advantage of every tax deduction and credit to which you’re entitled.
As you can see, poor accounting can have a devastating effect on your business. Thankfully, there are steps you can take to avoid making this mistake. Be sure to work with a qualified accountant or bookkeeper who understands both the mechanics of accounting and the specific needs of your industry. Additionally, make sure you establish clear policies and procedures for maintaining accurate financial records.
By taking these precautions, you can minimize the risks associated with poor accounting and help ensure the long-term success of your business.
At our accounting firm, we offer a comprehensive suite of services specifically designed to meet the needs of e-commerce businesses. We can help with everything from bookkeeping and tax preparation to financial planning and analysis. Contact us today to learn more about how we can help your business thrive.