Top Accounting Challenges Facing Small Businesses in the US
Regardless of the size of a business, accounting is an essential function of business operations. In most instances, smaller businesses often face unique accounting challenges that are rare in larger businesses. Notably, accounting is the language of business that clearly defines the financial growth of a business. It is prudent for entrepreneurs to wear different hats to ensure proper execution of functions that keep the business running. This implies that an entrepreneur should take on the accounting function with the same breath as he takes on sales and marketing.
Keeping financial records and books organized is crucial for every small business. Proper records translate to numbers that are comprehensible bout business profitability. Nonetheless, accounting may be difficult for small businesses. Here are some to the top accounting challenges that small businesses must be ready to deal with.
Cash flow management
Cash flow is an aspect that signifies the availability of liquid cash in a business. For a small business looking a rapid growth, cash flow management may prove to be a difficult endeavor. It is also challenging to ensure liquidity while simultaneously investing in the business. Essentially, effective cash flow management involves staying on top of accounts receivable while balancing outstanding payments.
According to a recent study, a surprising 82 percent of businesses fail because of lack of expertise in controlling cash flow problems. Entrepreneurs with small businesses in the US find it difficult to earmark funds to cover recurring costs. Another viable option to stay in control of cash flow is analyzing business bills and being thorough when following payments from customers.
Creating an Effective Budget
Not all small businesses have sufficient funding. Even if they are lucky to have enough funds, it is essential to create a business budget that will be adhered to in every transaction. Without a doubt, unexpected expenses could lead to financial instability. That may lead t the collapse of a small business, especially startups. The best way to encounter this problem is to formulate and implement a budget for both short and long-term transactions. The budget must consider business goals, availability of funds and cost of required resources, infrastructure needs, and intended operations. Including scenario planning into the business can help in optimizing available resources without resulting in extravagance.
Ensuring Effective filing of Tax Returns
Tax obligations are vital. It is a legal requirement for every business to meet tax responsibilities. Even so, it is crucial for a fledgling startup or small business to comprehend tax deductions and tax credits. Understanding the process of filing taxes on time can save the business immeasurable financial resources. Additionally, it will be helpful to ensure the business stays on top of its tax obligations and avoid any tax litigations. For most small businesses in the US, filing tax returns can be a daunting challenge. This makes it necessary for small business owners to hire a tax professional. If you need assistance getting an accredited tax professional, contact Mount Bonnell Advisors.
Managing payroll
It is prudent to ensure that employees receive their payment on time. That necessitates timely calculation of wages and salaries and completion of the payroll. Nevertheless, playing the role of a payroll expert can be difficult for any entrepreneur with a small business. Payroll computing involves a number of elements that should be handled with keenness. Adding a tax code to new employees may be a problem. In addition, payment of salary, in the long run, may also prove to be an issue.
According to a recently conducted survey, many small business owners in the US conquered that a lot has to be done to control payroll. Most notably, common payroll problems are related to organizational inconsistencies, incorrect tax computations, and over and underpayments. Moreover, tracking employee absence, compliance issues, and administrative burdens can also cause huge payroll problems. It would be best to hire a professional payroll expert to ensure the payroll task is in good hands.
Failing to reconcile books with bank accounts
Frequently reconciling the accounts of a small business is essential. Reconciling is the process of checking the accuracy and correctness of the items listed on account balances. This is simply done by checking the entries on the books of accounts correspond to the entries on the bank statement. The problem occurs when small costs and expenses go unrecorded from books of accounts. In many instances, this causes discrepancies in your financial statement that may consume time to rectify.
It is essential for small businesses to reconcile their books every month. That will go a long way in ensuring that all transactions are accurately recorded. Furthermore, it will help in preventing business books from becoming discordant with the real status of their accounts.
If you are having some accounting problems, feel free to contact us. Our experts will be happy to help you eliminate these problems for financial healthy business.
