Thursday, October 25, 2012

How to Use QuickBooks to Your Advantage As a Business Owner

Have you ever purchased and used software that someone recommended to you, only to find out that, you were not using it correctly or to its full potential? I think that today, where computers and software basically run every facet of our lives, that we all have experienced this.
Now it might be easy for someone with formal experience with a certain software program to say, "Just read the manual and figure it out ". But in reality, if you have no experience with the software and no experience with the functions of the software, then the task of "reading a manual and figuring it out" can be very cumbersome.
Many business owners have invested considerable amounts on software to run their business only to find out that they were not using it correctly or to its full potential. In my opinion, one of the most important software programs that a business should utilize correctly and to its full potential is its accounting software.
Honestly, what could be more important to a business owner than keeping track of the business's profitability and or bottom line? This brings me to my point which is the significance of Quickbooks clean up. Quickbooks clean up is extremely significant for several reasons but there are two primary reasons that I feel are more significant than the others. These reasons are credibility and cost efficiency.
1st Primary Reason: Credibility 
After all, a non credible financial statement is basically a piece of paper with a group of numbers on it with no meaning at all. What makes a business's financial statements credible? There are several aspects, but in the essence of time I will cover what I think are the 2 major aspects:
Account classification
No matter how accurate your financial statements may be, if you are using a liability account as an expense account or an asset account as a liability account, you are going to lose credibility to whomever may be examining your company's financials. Having a professional look through your chart of accounts to make sure that you are using the appropriate accounts and that they in their suitable place might sound immaterial, but proper presentation goes a long way.
Accurate financials can help a company in various ways. When a company is looking to increase their capital, the 2 major ways of accomplishing this, is by looking for investors or by applying for a loan at a financial institution. Either way, the investor or the financial institution is going to want to examine your company's financials. These financials will be scrutinized to no end because no one is going to just give you their money. Having a professional look through your Quickbooks file to make sure that your transactions are recorded accurately and properly will insure that no matter how vigorous anyone's dissection of your financials may be, you will be confident in the fact that what you have provided is a proper presentation of the transactions that took place.
2nd Primary Reason: Cost efficiency 
As stated above, the main reason why a business owner wants to keep track of what happens in his or her day-to-day transactions is to increase his or her bottom line. Cost efficiency is assisted principally by accuracy. The "bottom line" can be affected through:
Budgeting & Tax Planning
No one can see into the future to know with 100% accuracy what the performance of their company will be. However, budgeting is a way of anticipating the performance of your company in the future and tax planning is a way of anticipating future tax consequences. Observing trends from accurate financial information can create budgets and tax plans that a business owner can rely on to make decisions to increase its profitability and decrease its future tax liabilities.
Ease of professional services preformed
Fees for services such as Tax preparation or Audits and Reviews of company financials can be significantly decreased. By having a professional clean up your Quickbooks file there is a good chance that the there will be less time spent by the tax preparer or auditor/reviewer to perform his or her respective services. He or she will spend less time having to clean up the file, will feel more secure with the accuracy of the recorded transactions, and will be able to spend additional time on the more important issues of the services that you hired them to perform. This in turn may decrease the amount that you will be billed for these services.
In conclusion even if you're not an expert at accounting or with Quickbooks accounting software, having a professional analyze your Quickbooks file annually or semi-annually, can ease any frustrations and inaccuracies that come about. I hope that these points were informative and bring to light the importance of Quickbooks clean up and accurate accounting records.

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