A bookkeeper can help you with financial reports that must be submitted to the IRS for tax purposes, but they can also help you with the financial reports that will go to management to be used as a reference for effective decision making. Both reports are directed towards determining profits, of course, but filing your tax returns is to determine what portion of your profit you must pay to the IRS, while management accounting is to measure what produces
profit in your business.
The only way for your bookkeeper or accountant to help you make meaningful and accurate management decisions, is to ensure that your accounting records give you the following information:
Some aspects of sales costing are easy to calculate; a certain amount is paid to bring in a product, which is then sold at a higher price. Under the umbrella of sales cost, can be the costs of shipping, packaging, sales commissions and storage, and unless you have appointed a form of cost accounting, salary costs will be added together under ‘overheads’.
These are the costs that remain constant irrespective of whether anything has been sold on any given day, or at any given time. Often these overheads will include mortgage interest, property taxes, telephone, basic utilities and the costs associated with non-sales or production staff.
Determining your company’s net profits will require calculations based upon taxes collected and payable, expenses for employees that doesn’t include their wages, and income tax profits.
Having an effective cashflow management system is another vital element that must be present of you and your accountant are to be able to make informed management decisions. Spreadsheets are effective enough for smaller companies, where cashflow statements are more suitable for larger businesses, and both should be updated regularly to enable you or your accountant to reference them at any time.
Financial reports are a great tool for helping you, as a business owner, to make important and effective decisions for your company, but your books must be set up in a way that allows you to use them as such a tool. A good bookkeeper or accountant will help you with this.
If your bookkeeper or accountant is worth their salt, they’ll ensure that your financial reports are timely to enable you to review them often enough. When such reports are produced in a timely manner, you’ll soon begin to pick up on trends within your business, and you’ll find yourself being able to read between the lines to better predict and analyse the findings.
If you find yourself called up for a tax audit by the IRS, you should ask your bookkeeper or accountant to be your primary person of contact; they can then communicate with the IRS on your behalf, relieving a lot of the time, effort and stress from your shoulders.