As small business owners, it's important to regularly review your financials to ensure that your company is on the right track. One key aspect of this is an annual accounting review, which can provide valuable insights into the health of your business and help you make informed decisions moving forward.
Cash Flow: One of the most important aspects of an accounting review is assessing your cash flow. This involves looking at the money coming in and going out of your business, and determining whether or not you have enough cash on hand to cover your expenses. By regularly reviewing your cash flow, you can identify any potential cash flow problems early on and take steps to address them before they become a major issue.
Working Capital: Another key aspect of an accounting review is assessing your working capital, which is the difference between your current assets and current liabilities. A positive working capital means that you have more assets than liabilities and can pay your bills, while a negative working capital means that you have more liabilities than assets and may struggle to pay your bills. By regularly reviewing your working capital, you can identify any potential issues and take steps to improve your financial situation.
Cost Base: An accounting review also involves looking at your cost base, which is the total cost of producing your goods or services. By regularly reviewing your cost base, you can identify areas where you may be able to reduce expenses and increase profitability.
Borrowing: An accounting review also involves looking at any borrowing that your business has done, including loans and credit lines. By regularly reviewing your borrowing, you can determine whether or not you are taking on too much debt and if so, take steps to reduce it.
Growth: An accounting review also involves assessing your company's growth over the past year. This includes looking at revenue and profit growth, as well as identifying any areas where your business may have struggled. By regularly reviewing your growth, you can identify areas for improvement and make adjustments to your business strategy to drive growth in the future.
It's important to note that while these five areas are crucial to consider during an accounting review, it's essential to seek the help of a licensed professional if you don’t feel that you can do an accurate accounting review of your own small business. This is especially true as we approach tax season, as accurate accounting records are crucial for filing your taxes and avoiding any potential issues with the government.
A annual accounting review is a crucial step for small business owners to ensure that their companies are on the right track financially. By regularly assessing cash flow, working capital, cost base, borrowing and growth, you can make informed decisions to improve your financial situation and drive growth in the future. However, if you're not comfortable with doing it on your own, it's always best to seek the help of a licensed professional to ensure that your accounting review is accurate.
