The importance of small business accounting
Have you heard the saying, if it doesn’t make any money it doesn’t make sense? I don’t know who said it, but when it comes to business, no statement could be truer. Most people who start businesses do so with the plan to make money.
How do you know if your business is profitable? The average person will say it’s because they have sales and focus on the amount of revenue that is being made from the sale of their products and services. But what is the cost associated with making the sales or costs of goods sold (COGS)?
COGS is an accounting term that helps a business owner to determine their costs of delivering a product or service and consequently what they should be charging their customer for the product or service to ensure that they are making a profit.
When you talk about COGS, you are referring to small business accounting. For most entrepreneurs, the idea of accounting is a daunting task, and some entrepreneurs that we work with at Sternbach & Rose, CPAs, avoid it like the plague. But without proper accounting procedures how can you be sure that you are running a profitable business?
Understanding basic accounting principles can be the difference between success and failure. Accountants can assist entrepreneurs with business planning and growth projections. Accountants use the numbers to forecast growth by analyzing historical data and sales to help entrepreneurs manage revenue, spending, and investment. Most financial institutions, investors, and business partners will require financial statements to be able to access the health of a business. By having a grasp of the numbers early on, you position your business for the best chance at success. In the end, it will ensure that you make money because if it doesn’t, it doesn’t make sense.