It’s been a busy few weeks in the Azure Group offices. Unusual for most accountants, but for us, it’s a time when our tax team and accounts teams combine to work on reconciling our client’s accounts, record year-end tax journals as well as collecting and collating compliance files for our clients.
Why you say? Well the reason for this is simple. We work on eliminating the hassle of transferring information between the client and us. It’s a proactive approach to ensure that we have all the information we need to complete the compliance and tax affairs.
This role is extremely important for our firm and our clients because it ensures their finance teams are working on accurate accounts from the beginning of the financial year not waiting for three to six months for their accountant to fix any problems.
Anyone who knows me well will know how strongly I believe that having accurate accounts is powerful and more importantly essentially in running a business. It helps you make more informed business decisions and aids in understanding exactly how your business is performing.
I am sure as a business owner you want to run your business more effectively? Well I believe without accurate financial information you will be flying blind and will find it impossible to manage your cash flows, your tax obligations and everything else in between.
I’ve seen many businesses struggle and some fail simply because they did not respect the importance of having accurate accounts.
I spend a great deal of time helping businesses that are not profitable to turn their businesses around and start driving profits. Establishing basic reporting procedures is critical for this process.
If you don’t have any basic reporting procedures in place, stop everything now!
I know you think your current customer is everything and new sales are critical, however what if you are losing money from your customers and you are spending too much on generating new business? What if you are losing each time you make a sale? It all becomes a waste of time and a sure fire way to get yourself into trouble financially.
One reporting measure you should have in place to help you achieve accurate accounts is reviewing your balance sheet on a monthly basis. The balance sheet is the backbone of any business. It sums up the business’ position by identifying the assets, liabilities and the equity of the business.
This may seem simple but 32 per cent of SMEs fail because they do not accurately understand where their business is positioned financially and they allow their liabilities to become far greater than their assets, making it virtually impossible for them to survive.
Three key ways to strengthen your balance sheet include:
- Ensure your cash position reconciles each month so you know exactly how much cash is available to pay your liabilities. Your accountant should ensure that each item is reconciled every month and they should be able to support any item at any point in time so that you can clearly identify discrepancies and fix the problem quickly and accurately
- Have an accurate balance of debtors so that you know how much money is available for collection and put measures in place to collect
- Be clear about your creditors, including money you might owe to suppliers but also your tax liabilities such as GST and PAYG.