Poor financial management is the leading cause of business failure. “When running a business, it’s crucial to have a solid understanding of your finances. You must know not just where your money goes but also how to manage and invest it wisely,” asserts Wahaj Siddiqui, Managing Director, Oblique Consult, one of UAE’s top financial advisory firms.
Financial mismanagement can result in cash flow problems, funding difficulties, or bankruptcy. “Without the expert guidance of a business accountant, poor financial management will sink your business sooner than you had imagined,” Wahaj adds.
What Business Accountants Do
An accountant is responsible for overseeing the financial stability of your business on a daily basis. They manage accounts payable (payments owed to suppliers) and accounts receivable (payments due from customers).
A good business accountant also tracks cash flow, maintains comprehensive balance sheets of your assets and liabilities, ensures accurate financial statements, oversees payroll, and provides reliable income forecasts. Other than that, they diagnose and resolve financial issues as and when they arise while also guiding your business towards growth and increased profitability.
So, it’s important to hire the right accountant or choose the best accounting service. Here are five top reasons why.
1. Save time and money.
Many small business owners mistakenly believe that their tight budgets don’t allow hiring a specialized resource to handle accounting-related matters. However, when you factor in the number of work hours you spend in managing your business’s finances yourself, the benefits of hiring a professional become clear.
As a business owner, especially in a startup, your time is precious. Hiring an accountant can save you time and frustration, ensure timely invoicing, and provide valuable insights for strategic decision-making.
An accountant not only saves you time but also money. Focus on your core business functions and let your accountant manage your budget, taxes, and expenses.
Even if you run a one-man startup, when you expand and hire employees, accountants can handle payroll and benefit deductions efficiently. With their extensive experience managing payroll for numerous clients, they ensure deadlines are met and avoid costly penalties.
2. Maximize tax savings.
Tracking potential deductions is vital for filing business taxes. Many new entrepreneurs miss out on savings by forgetting to account for mileage, out-of-pocket expenses, or home office costs. A professional accountant can help monitor these deductions throughout the year, so that you maximize your tax savings when it’s time to file.
They also identify potential tax benefits as they arise and provide strategic advice for year-end tax planning. They ensure you don’t overlook items like depreciation, out-of-pocket costs, and home office space. In short, by having an accountant on your team, you can confidently manage your finances and optimize your tax deductions throughout the year.
3. Monitor financial health.
Instead of waiting until year-end to review financial statements, accountants offer monthly updates that help you stay informed about your financial health. This ongoing monitoring allows you to address issues proactively, manage cash flow effectively, and make informed decisions about growth opportunities. They also provide objective advice on critical, real-time decisions, such as hiring additional staff, equipment purchases and inventory management.
Their expertise, drawn from seeing many businesses rise and fall, ensures you avoid common pitfalls and position your business to thrive. Thus, while saving on professional fees might seem appealing, the value of continuous financial oversight and strategic guidance from an accountant far outweighs the initial cost.
4. Determine the right business structure.
Different regions around the world offer various business structures, each with its own set of benefits, tax implications, and legal requirements. For instance, in Australia, businesses can choose from sole traders, companies, partnerships, or trusts. Similarly, in the UK, common business structures include sole traders, partnerships, limited liability partnerships (LLPs), and limited companies. The UAE offers choices such as sole establishments, partnerships, limited liability companies (LLCs), and free zone companies.
Choosing the right business structure depends on your specific activities and goals. A proficient accountant can help you compare these options and consider factors like tax implications and legal requirements. As your business grows, your accountant can also advise if changing your business structure is beneficial to adapt to new needs and optimize financial performance.
5. Provide a solid business plan.
A skilled accountant will make revenue projections that consider industry trends and economic conditions at regional and national levels. These projections, in turn, will give you actionable insights into the future direction of your business. You’ll also get more clarity on your business’s trajectory, potential factors influencing customer acquisition and retention, and adjustments needed to improve your market position.
Moreover, if you are in the pre-launch phase, an accountant can help you develop a robust business plan. They will help you estimate achievable sales numbers, project revenue for upcoming months and years, and understand necessary startup costs and investments. An accountant can also guide you through maintaining operations during periods of reduced or negative cash flow. Furthermore, if you are planning something big like launching new products or expanding into new markets, an accountant can evaluate the financial impact of these moves, highlight potential risks, and ensure accurate valuation of your commercial property to assist in negotiations and investment decisions.
