Small Business Accounting

Reconciling your business banking account(s) each month protects you and your business by:

• Keeping your account balance and books up-to-date
• Revealing lost checks, unrecorded deposits, and/or unauthorized transfers
• Identifying excessive or erroneous bank fees
• Ensuring bank transactions are correctly posted
• Detecting embezzlement of funds within the company
• Facilitating more effective cash management
• Allowing you to object to unauthorized/fraudulent activities in a timely manner

An income statement itemizes expenses, lists all revenues, and calculates the difference (the profit or loss) for a given time period. Regular preparation of an income statement improves your bottom line over the long term by:

• Determining areas of your business that are overspending or under budget
• Revealing items or events causing unexpected expenditures
• Estimating your income tax liability
• Tracking fluctuations in the cost of goods sold
• Evaluating the operating performance of your business

In contrast to the “big picture” perspective of the income statement, a balance sheet provides an instant “snapshot” of your business’ finances at a particular point in time. Generating and reviewing a balance sheet identifies trends in accounts payable and accounts receivable, determines if your business needs to boost its cash reserves, and provides a financial report potential lenders can use to determine the amount of credit to grant your business.

The general ledger is the heart of your company’s financial records because all transactions flow through the general ledger. Therefore, errors in the general ledger result in inaccurate financial reports. A review of the general ledger each month reveals discrepancies such as double billings or unrecorded payments. Any discrepancies found must be adjusted.

Cash flow is the most critical concept in financial management. The difference between cash flow and profit is often a difficult concept to grasp. During periods of rapid expansion, small businesses often lurch from large cash balances to cash shortfalls and bank overdrafts. Regular analysis will help you understand and enhance your total cash flow by:

• Learning the nature and source of cash flow
• Developing cash flow forecasts
• Understanding bank financing
• Defining the role of working capital and capital expenditures
• Implementing cash flow-enhancing policies

Reduce your tax liability and eliminate nasty surprises at the end of the year by planning ahead. Wrobel Accounting will prepare annual income comparisons, regular cash flow analyses, income tax projections, and estimated tax payments to help you manage your cash flow more efficiently and reduce your tax liability.