Accounting is the language of business
Small business accounting can quickly become complex if you do it on your own.Our main responsibility as Chartered Accountants is to design and set up your accounting system and prepare and examine financial records. You should use your accountant’s expertise to help you analyze your financial statements so you make informed business decisions.
Have you generated profit? Is your business healthy?
The Income Statement helps answer the question. It provides a summary of how your business makes and spends money to arrive at its bottom line, including non-cash items such as depreciation, for a specific period of time.
The Cash Flow Statement shows incoming and outgoing of cash used for operating, financing and investing during a certain period of time. The cash flow statement helps you understand how soon your customers pay you after a sale and when do you pay your bills. Every dollar you don’t have can be a liability so you need to anticipate when you’ll receive payments and plan accordingly. You may have a great amount of sales but your collections are slow if will affect you financially in order to afford your payroll and payable commitments.
The Balance Sheet is a critical statement because it keeps business owners informed about the financial standing. It shows what the business owns and what it owes. On balance sheets, the assets are equal to the liabilities and the equity (Assets = Liabilities + Equity). Depending of the quality of the situation, this document let your bank know if your business qualifies for additional loans or credit.
A good information system allows business owners to effectively interpret and routinely check their financial statements in order to make better decisions. Request advice from your Chartered Professional Accountant regarding accounting software that helps record, classify and generate accurate financial statements.
Why are your tax returns and financial statements different?
Tax return and financial statements treat fixed assets differently. Depreciation is the reduction in value of an asset in time. For Canada Revenue Agency there is only one allowable depreciation expense, known as the capital cost allowance (CCA). So if you buy a property or a piece of equipment to use in your business, you can’t deduct the entire cost of it on your income tax for that particular year. Instead, you use Capital Cost Allowance to deduct a calculated portion of the expense as a tax deduction and continue doing this over a period of years as the property or the equipment depreciates.
Why Accounting Analytics?
Chartered Professional Accountants use analytics techniques to provide insights into your business financials. Accountants are able to report how and when your money is coming in and where is going out, how to keep track of sales collected and the cost of keeping inventory. They propose improvements in your process to better manage your business and determine the likelihood of future outcomes through forecasts.
Your accountant will suggest concrete actions — critical business decisions and recommendations for future growth or alert on poor choices.
Your accountant has a remarkable influence in your business success.