Whether you’re about to start a business or you’re setting goals for an existing one, an accountant can help you create a solid Business Plan with accurate financial calculations.
A Business Plan is a fundamental document for startups, with information that encompasses several aspects of your business. Business owners often create a plan to identify their goals, objectives, and strategies for success; they’ll often use the plan to pitch their business idea to potential investors and prove their ability to organize and accumulate resources.
It’s common for companies to include hard numbers in their plan to outline their company’s assets, production and operation costs, calculated profit margins, and loan or investment repayments. In some instances, companies will also attach their general financial statement.
So, when it comes to crunching numbers, business owners are faced with a decision: what’s worth more—time or money? On one hand, you could save money by managing your finances by yourself. On the other hand, you could save time by hiring a professional to crunch those numbers quicker than you ever could.
In this post, learn how hiring an accountant to organize and communicate the financial data can help you start a successful business.
Creating Financial Projections
Financial projections are a crucial aspect of a Business Plan because they provide a clear understanding of your current financial situation and a prediction of your full profit potential. However, a common problem associated with starting a business is being overly optimistic with financial forecasts. Although your calculations may seem conservative at first, achieving your business goals could take longer and cost more than you would think.
Accountants know that investors are looking for a realistic financial forecast, so they’ll follow certain procedures to come up with believable projections. For instance:
- They’ll examine your income statement, assessing the money you’ll earn (revenue) and spend (expenses).
- They’ll create an accurate cash-flow projection, showing investors or loan officers your low credit risk.
- They’ll summarize numbers in a balance sheet, painting a picture of your business’ net worth.
Finally, an accountant will present this information in a way that’s easily understood, often including charts and tables for demonstration.
Estimating the Cost of a Startup
After creating a comprehensive financial projection, an accountant will have a clear view of the costs for starting your business. Too many businesses fail because they don’t properly estimate the expenses for their startup.
For instance, an owner might plan for the costs associated with renting a work space, filling inventory, and hiring employees, but they may overlook the price of office equipment, marketing and advertising, and the legal fees involved in setting up a Limited Liability Company or Partnership.
An accountant can help you identify one-time expenses, like incorporation fees, from ongoing expenses, like taxes, so you can determine how much money you’ll need to run your business.
Further, an accountant knows that some expenses can be deducted (written off) from a business’ taxable income; they can help you write off certain expenses, lowering your taxable income and increasing the amount you save on taxes each year.
Managing Loans and Investments
The money you use to start your business may come from your personal savings, investments from a wealthy individual, a bank loan, or any combination of sources.
With multiple streams of money, it may be difficult to keep track of payment deadlines and how much you owe to whom. An accountant can help you pick a loan that works best for you and help you create an effective payment plan so that you can pay off that debt as quickly as possible. They can also help you decide if it’s worth it to refinance or consolidate your loans, or cut unnecessary spending so you don’t fall deeper into debt.
Do I Need an Accountant for My Business?
Effective money managing can be the deciding factor for a startup’s success or failure.
In the end, whether you choose to do your own calculations or ask an accountant will depend on your situation. You may feel confident in your own ability to manage your finances, or you may prefer to spend your time focused on other important tasks.
Just keep in mind that hiring an accountant can be worthwhile when it comes to creating realistic financial projections, estimating honest startup costs, and efficiently managing your loans and investments.