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Love Your Bean Counter

Tuesday, July 29th, 2008

I posted a blog on the 4 people every business owner needs a few days ago. As I was munching on my toast this morning, I thought I needed to add to the article by recommending two more “experts”, who any small business owner absolutely wants to have, and needs to pay for if your circle of free experts does not yet include them: an accountant, and a lawyer. These people will help you start on the right foot and keep you out of trouble. In this posting, let’s first talk about the wonderful benefits of having an accountant on your team:

Someone to Track & Make Sense of Your Book for You

Not every business owner has the time to learn about bookkeeping, or more so, understand the different financial statements. But it is absolutely critical that one keeps an organized and up to date book. An accountant will not only be able to help you organize and record all the business transactions, he or she can most importantly analyze the figures and translate them into useful financial statements and hence understandable business information.

Help Grow Your Business

Some people may prefer keeping the books themselves. But by hiring an accountant, you’ve just freed up your time to worry about other business growing activities. As much as keeping a good record being important, you’re dealing with the past. The numbers have happened. They are history. With an accountant helping you analyze the historical figures and learn the successes or the mistakes, you can now be forward looking and spending your time on business planning and growth.

Experience in Dealing with the CRA and any Tax Situations

The tax men are tough. Not that we want to cheat, but there are tax saving tips that only accountants would know about. Many small business owners are reluctant to pay money for an accountant, but unless you’re a studious student of tax laws, you’re better off getting an accountant up front. Your accountant will also be able to provide invaluable advice on how to structure your company for any tax benefit up front. In the case that you’ve fallen into trouble with the CRA (which is another reason for hiring an accountant right from the beginning, as one would’ve prevented you from being in this situation), your accountant would have the experience of dealing with the CRA on your behalf.

Having a knowledgeable and reasonable priced (yet very available) accountant on your team is invaluable. My wonderful accountant, Irene, has been one of my best resources in the duration of my business operation. I have since recommended her to some of my clients, who also fell in love with her and highly recommended her. Please find yourself an Irene if you don’t yet have one.

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Posted in Accounting, Finance, Getting Started, HR, Small Business | No Comments »

Book What?!

Thursday, July 24th, 2008

I bet only 0.001% of the world popular know who the father of bookkeeping is. You’re about to become one of them. And yes – I was curious and I googled…

The wonderful world of the Internet tells us that while Luca Pacioli, an Italian monk of course, did not invent the system, he described a method (double-entry bookkeeping) used by merchants in Venice during the Italian Renaissance period. Following the dark ages, business in Europe boomed and it is believed that merchants began using the double-entry bookkeeping system to handle the volume and complexity of transactions.

Those smart Italians.

I had recently just helped a couple of small businesses clean up their books. One of the business owners was artistic and said, “Who needs proper books…” until the staff’s pay cheques were bouncing for several months in a row. Another was creative. ”Poo poo to you, CRA. I don’t need to file taxes…” until the company was delisted.

The less extreme stories are small business owners who hire an accountant only at the end of the year and bring out the cheque book and the shoe boxed receipts to do taxes.

I’m sure all of the above reasons for not keeping up-to-date books make logical sense to the owners. At the end of the day, as long as you fulfill your tax obligations (and CRA will ensure of that), no one’s concerned.

On the other hand, I can think of a few sensible reasons that small businesses WANT to keep proper books beyond just satisfying the tax men. Here are two good ones:

For keeping a pulse on your business

Unless you keep track of all of your business activities, you will not be able to get a true picture of how your business is doing. By having the accurate figures at your finger tip, you can pull up your statements at any time and know the basics, such as how much revenue you’ve made this month? Where did all the expenses go this quarter? Are you breaking even? Having an up-to-date book gives you control over your business.

For decision making and business planning

It is important to know what, where, and when to take business actions in order to run a successful business. By knowing how well you are doing financially, you can take appropriate actions to not just make sure your business is on track, but push it to the next level. Without the accurate picture of where you are financially, you can not make the right decisions.

There must be a reason for all the bookkeeping those successful Italian merchants followed religiously. Be a smart Renaissance business person.

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Posted in Accounting, Getting Started, Small Business | No Comments »

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