Accounting and Cash Flow

Accounting and Cash Flow

Accounting Software for your Accountants

Accounting and Cash Flow For Accountants

Step One: Gain the Knowledge

If you’re going to be in business, you must know how to keep score. To gain this knowledge will require that you go to school to learn both accounting and computer software that is used to support your particular business. With this knowledge, you can talk intelligently about your accounting needs with employees, bankers, and your own accountant.

The financial matters you will confront in your own business are little different than those of large corporations. Financial tools, coupled with an understanding of how to use them, will assist you in the proper management of your business. Without this understanding and without a dedicated commitment to using financial tools, you reduce your chances of success.

Your business will be judged by the classic financial measures: the balance sheet, the profit and loss statement, and the cash flow statement. These three measurements will define the financial health of your company. In this session you will learn how:

  • The balance sheet tells how much the business is worth.
  • The profit and loss statement tells if your business is profitable or not.
  • The cash flow statement predicts your cash balances into the future.

As a business owner, you need to feel comfortable with the values portrayed by each measurement. Understanding these three measurements will whet your appetite to learn more, which in turn will lead to your strategic use of credit and ability to make choices tying operational activities to the best use of funds. They will help you make better decisions.

You will also need to gain knowledge of accounting in order to evaluate your competitors or businesses you might wish to acquire (or be acquired by). While information about companies may be obtained from stock brokers or interviews with key executives, the best source to learn about your most successful and publicly owned competitors is to read their annual reports. You will need to understand accounting to draw intelligent conclusions. Accounting courses at your local community college will give you most of what you need to know.

Step Two: Select an Accountant

          You should consult an accountant before you start. This could be a Certified Public Accountant (CPA) who is a sole practitioner or a large accounting firm that can offer expertise in many areas (and whose fees tend to be higher). Another type of accountant is an “Enrolled Agent” (EA). EAs must pass a taxation test administered by the Internal Revenue Service.

You will need to decide how your accountant will prepare your annual financial statement. There are several levels of audit to select from. They are listed in our Session 1 on Financial Controls in Business Expansion course.

At present, there are no national certification standards for bookkeepers like there are for CPAs or EAs. So, it may be best to look for referrals when selecting a bookkeeper. Many CPAs and EAs will refer you to people they have confidence in to help you with your accounting needs. Bookkeepers range from those who only pay bills or process receipts to “full charge” bookkeepers who can summarize bookkeeping activity for your CPA or EA to prepare tax returns.

On the other hand, if you want someone to advise you on business organization and prepare income and payroll tax returns, you will probably want a CPA or EA to help you. The more “routine” bookkeeping you know and do yourself, the better it is because you can then afford a higher level of expertise.

You will need to determine what accounting software program will work best for your business and your accountant can help decide this. Some good ways to determine this:

Ask others in your industry whose judgments you trust about their experience with software. Payroll accounting and reporting is increasingly complex. If you will have employees, look up the “Payroll Accounting Service” providers in your area. Your accountant may have a recommendation. This complicated function can be outsourced at a reasonable cost.

Ways that your accountant can help in dealing with your banker:

Sooner or later, you will need financing in addition to your start-up sources. It is important to establish banking relations BEFORE future needs arise. Your accountant can help you:

  • Prepare cash flow control statements that will estimate what the cash needs of the business will be in months to come.
  • Prepare a personal financial statement, including a balance sheet of your personal assets and liabilities along with a statement of income and expenses showing how much cash flow you generate each month. Banks will usually require a personal guarantee.
  • Locate a banker. This can be helpful because the banker has had prior dealings with the accountant.
  • Polish your business plan for your banker.
  • Organize as much information as possible including financial statements in a neat and orderly fashion.


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