Making Businesses Understand why They Need You as their Accountant

A little under half of businesses have never worked with an accountant and have no plans to! On the other hand, in the same study, those who have worked with an accountant, just under 75% of them are very satisfied with their accountant. If a large majority of businesses are happy with their accountant, why are there so many businesses without them? As an accountant, it’s crucial to figure out what these businesses need & help show them why your work is beneficial to them.

So, what do businesses really want?

There are many different things a potential client may be looking for when it comes to wanting an accountant. For starters, every relationship is built on trust, and relationships can not last without it. In the aforementioned study, 78% of business owners said they want a trusted advisor, making this the top rated answer. The next top answers, tying in at 74%, are that they want accountants to understand their industry and respond quickly. Finally, being affordable comes in at fourth at 70% and communicates clearly ranks last at 69%. 

In addition to what clients say they want, it is important to know what the top, long-term issues that your clients face with money are. At the top of the list, and perhaps the most obvious, is cash flow problems (32%) If you have bad cash flow problems, most of the other common issues clients face will follow suit. This is shown by the second top answer being low profitability at a close 31% as well as the fourth and fifth ranking answers, needing capital (21%) and too much debt (11%). Your job as an accountant is to take all these worries and advise your clients to the best decisions they can make.

How do you help as an accountant?

The most considerable hurdle for accountants is that many business owners do not know why they need you. Clients need to understand that you bring more to the table than help in filing taxes and making the books look clean. There is no better place to start than being a great listener and truly understanding their issues as well as being sympathetic towards them. Furthermore, ask open-ended questions to let the client steer you in what they really need and to grasp a better understanding of what to do to help your client. Next, we all know that prompt responses are important but it is also important to streamline finances and ensure your accounting software is efficient too. If a client hasn’t moved onto the cloud-based world, it is time for them to move to online accounting software. There are many different choices out there, like QuickBooks Online or Xero, but no matter the software you will want to see to it that it fits the client’s needs, they understand it (and/or can learn too), and that is within a client’s budget. Using an accounting software reduces the chance of human error, subtracts the amount of work that has to be done from manual adding in information, and overall streamlines processes in day-to-day accounting. Additionally, as the financial advisor, you can help a client develop better financial procedures and systems to really help all these processes. On the topic of quick responses, it is vital to ensure that you have an easy, yet secure, way of communicating. You will want something where it makes it simple to send and view any financial reports, ask questions, and see if any tasks that either side (meaning you or the client) need to be done. Finally, clear communication means being able to talk to your clients in a way they can understand. This means taking your time to ensure they really comprehend what you’re doing and you are not confusing them with common work jargon. (Check out our blog here for very common accountant words when it comes to reviewing financials for some on how to explain these!)

Businesses need your accounting!

Trust comes from taking the time to get to know your client’s needs and delivering quick & efficient solutions. By guiding them through their finances at every step, and learning with them as you deliver great service, trust is bound to happen, and you will have clients who love you!

Financial Reports – P/L & Balance Sheet

When it comes to the world of accounting, some of the most common reports include the profit and loss report and the balance sheet. Whether you are working with someone or trying to figure out your finances on your own, knowing all about these reports can be beneficial to improving your finances.

What is a P/L and Balance Sheet Report?

A profit and loss (P/L) report can capture how much money you’re making (or losing) within a certain time period. (A month, quarterly, a year, etc.) A P/L report may also be known as an income statement, statement of earnings, or statement of operations. Some key components of a P/L report are revenue, cost of goods sold (COGS), Gross profit, Expenses, and Net profit(loss). Revenue is how much money you’ve made without including any COGS or expenses. COGS are the costs for your business to deliver goods and services. This includes things like materials, labor, and shipping. Gross profit is the money you’ve made by subtracting COGS from your Revenue. Expenses are split into two categories: Direct & Indirect. Direct expenses are typically COGS as they are the items needed to make/deliver the service. Indirect expenses include things like utilities, rent, and fuel. Indirect expenses will never be counted as COGS. Net profit is the remaining money after you have subtracted COGS & expenses from your revenue. Net profit would be the actual profit (or loss) for your business in said time period. nn The balance sheet is the overall financial position of the business. It shows what you owe as well as what you own. This is determined by assets and liabilities. An asset is something you own. There are two types of assets: Current and noncurrent. Current assets are anything that can be converted into cash within a year whereas noncurrent is anything that takes longer than a year. There are also current and noncurrent liabilities as well. With current liabilities being items due within a year and noncurrent due after a year.

How do these reports help me determine my finances? How do I use them effectively?

The P/L report is a clear way to see whether you have gained or lost money that month. Additionally, the P/L report allows you to see what expenses are costing more and see how often money is coming through. This is beneficial because it can make predicting future revenue trends more accurate, thus allowing you to budget better and stay on track with your goals. nn The balance sheet is helpful for quite a few reasons. For one, it can help you decide if you are able to expand your business by knowing if you can manage the money that floats in and out or if you need to focus on receiving more cash. Another way the balance sheet is useful is by helping the company see if they are prospering or failing. This can give way to a company changing its policies, correcting more mistakes, and refocusing its goals to better align with the state of the business. Additionally, the balance sheet is important to potential investors or those looking to buy your company because it allows them to see whether the business is worth the investment since you can see everything due, paid, and what the business is like without these things.

Financial reports are helpful

Although there are many ways to look at financials in a business, knowing the fundamentals of the P/L report and the balance sheet is a very helpful step in knowing the state of your business

Accountant Lingo & Finding the Right Accountant

In last month’s blog, we covered the benefits of having an accountant and what the difference is between CPAs, accountants, and bookkeepers. Now the question is “Where do I even start when looking for the right accountant?” Everything in the accounting realm can be confusing at first or it may simply take up too much of your time. Gaining an understanding of basic terms in accounting may help you feel more secure in your business and even help you find the right accountant.

Finding the right Accountant

If you’re considering an accountant, you may have no idea where to start. A good place to start is overall communication and guidance. Having an accountant should be a vital part of your team and they should be willing to work with you and help you really understand the money side of your business. This means detailing the explanations for any questions you may have and teaching you aspects of money handling so you are able to do some things on your own later on (if needed/desired.) Having good communication goes in hand with availability. Having someone you can never get ahold of can make it frustrating for you in the long run. Remember that relationships are a two way street and everyone should have a good relationship that works for both parties.

Although there are many questions to consider asking an accountant before you hire them; we are only going to review a few that will aid in finding the right accountant for you. Are they willing to teach you about finances and do they offer additional consulting if needed? Do they offer standard packages or can they customize services based on your needs? Are they able to help with 1099s and any further subcontractor needs? Do they have any specialities? When looking at bigger firms it may also be worthwhile to ask if they outsource any of their work or if they perform it personally and if they don’t perform it personally, will the person you deal with change? Will you get a regular person to discuss your finances with?

After hiring an accountant, you’ll want to really dig deep and work towards the best financial plan you can for your business. Here are some things to think about when deciding what you need. For one, contemplate what taxes you’ll need done and what records you need to keep for filing and in case of audits. Whether you do or don’t know what taxes need to be done for your business, an accountant can help you figure it out or even file for you (in most cases.) Next, you’ll want to work with them to better manage your cash flow and know your breakeven point. A break-even point is when sales and expenses are equal. It’s essential to know your break-even point because it can help you figure out a pricing strategy and make your budget more accurate. Working with an accountant should improve your business by figuring out what changes your business needs.

Understanding common terms in Accounting

When you’re new to the accounting world, there are many terms that you may be lost on. Although your accountant should be willing and able to review any terminology you don’t understand, learning some of the basic accountant lingo for yourself can be beneficial to helping you grasp more of the financials of your business. Let’s begin with assets and liabilities. Assets and liabilities show how much your business is worth. Assets are property (either tangible or intangible) that adds value to your business. Assets could include things like inventory, (paid off) vehicles, and even your brand value. Liabilities are any long-term or short-term monies your business owes. Examples of liabilities include credit card payments, bank fees, and loans. Additionally, accounts receivable is an asset while your accounts payable is a liability. Accounts receivable (AR) is the money you owe to any person/vendor while accounts payable (AP) is the exact opposite (so money owed to you by people/vendors).

Another thing you’re going to see or hear about a lot is P/L reports and the balance sheet. P/L stands for Profit and Loss. A P/L report is a report showing all the expenses and income you had in a certain period of time. The balance sheet shows the business as it currently stands including all assets, liabilities, and equity. Equity is money remaining after all liabilities are gone and all assets sold. It basically shows the owner(s)/investor(s) stake in the company. Just like there are different types of assets and liabilities, there are also different types of equity in a business. You can run both P/L reports and balance sheet reports by month, week, yearly, or any other custom setting to find a time you’re looking for.

Accountants and all their terms

Knowing what you’re looking for in an accountant can elevate your business even higher. Don’t forget to check out last month’s blog for all the reasons why having an accountant is valuable in your business! Additionally, having a basic understanding of frequently used accounting terms helps you better understand the money going through your business and further your involvement in your finances with your accountant.