When you first started in your garage, the last thing you wanted to worry about was the dreaded word…Accounting.
You had no rent, minimal costs, no employees, and business was easy. Accounting was simple then, too! You could pencil together and figure out how much you did in sales and subtract what you purchased in materials and supplies to find out your net profit.
While you might wish the numbers behind your business could still so simple you probably have grown quite a bit since then.
As your business grows financials become slightly more complicated. Taking a serious approach to accounting in your print shop will ensure that you run a clean, profitable, and sustainable business.
Get an Accountant
For starters, unless you are a sole proprietor you need to have a certified public accountant to sign off on your taxes and make sure your business is in good standing.
They know the law, rules of the road, and best practices within your governing body, so be sure to invest and build a strong relationship with an accountant. They will be responsible for filing specific forms with the state, such as year-end returns, sales tax, and quarterly withholdings.
The best way to find an accountant is literally asking around. Know of a small/medium-sized business in the area? Ask the owner what accountant they use. Get a list of 3-5 and interview them. Ask them about their costs, experience with similar businesses and research any reviews online about them.
Cash vs. Accrual
There are two basic types of accounting. Accrual & Cash Accounting. Cash Accounting is simple, and your business is tracked when money is physically received or paid out. Accrual accounting is more precise and is tracked when the expense is incurred or paid out. Your accountant will go over different types of bookkeeping with you based on how you want to manage your business. Cash Accounting is the easier of the two. It can be deceiving though because it does not give you a good picture of your cash flow. Accrual accounting will give you better numbers for your business at specific times over the course of the year. If you are a business that thrives though different seasons, accrual accounting is the way to go.
Beyond an accountant, your business needs a strong bookkeeping solution. Bookkeeping is charting and organizing the day-to-day bills, expenses, payables, receivables and any miscellaneous financials in your shop.
Make sure you are at least using something digital. Hand ledgers and notebooks are a thing of the past.
The more employees you have and the more variable costs you accrue requires an extra level of carefulness when running a business. A few wrong decisions and you can bleed yourself out of business.
Similarly to how you coat a screen the same way every time, or the steps you take to set up a job, accounting requires routines.
You may have weekly routines, like paying bills or depositing checks to the bank. Perhaps monthly, you go over your expenses and track them. Regardless, put down your accounting routines on paper and put them somewhere visible.
You do not want to get lazy about these! Especially when it comes to things like filing sales tax and payroll withholding. Fines can occur if specific reports are not submitted in time.
You should be watching your numbers like a hawk.
Do not go dormant on knowing your sales, costs, accounts payable, and accounts receivable. Your business can become dangerously toxic if you do not have a good system for accounts receivable.
Be certain that you are constantly checking your bank accounts and credit cards and monitoring them closely.
Be active, early
Don’t wait until November to start finalizing your financials if your year-end is December.
You could be spinning your wheels and blindly working in unprofitable situations.
You should be looking at your numbers each month and running them by