I hope you had a great July 4th weekend! Besides celebrating this great holiday, I have two other reasons to celebrate. DM Accounting has added some new staff members and we retained some new clients. Recently, one of my once-a-year accounting clients became a monthly bookkeeping client.
After reviewing his 2013 financial statements, I realized my client didn’t know his numbers, which was preventing him from making more money. In fact, knowing your numbers is crucial to any business; here’s why:
- CASH FLOW IS KING. If you were asked what your accounts receivable are today, would you know the answer? Do you know what your revenues were last month? If you answered no to both of these questions, then you have a problem. If you know sales are slow, then as a business owner you could increase collection on receivables to boost your cash flow. If you know you have a surplus of cash flow, you could purchase a needed product or make a new hire to help with sales. Knowing your numbers is key to a successful business. Keeping your cash flowing is the best sign of a healthy business.
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- LLC OR S CORP – Knowing your numbers can also help you decide if your corporation structure is the best fit. After reviewing my client’s financials, I realized that even though his income was high and his expenses were also increasing, his net income was staying steady year over year. We recommended he change his corporate status from an LLC to an S Corporation.
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- PAY YOURSELF – Because we changed the corporation status of my new client, we also recommended he set himself up on a monthly payroll in 2014. The IRS requires all owners of an S Corporation to pay themselves a reasonable salary. The regular salary will result in an increase in my client’s yearly net income.
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- PROPER RECORDKEEPING – Knowing your numbers means you can’t afford to wait months to send out invoices and reconcile your bank accounts. Proper recordkeeping means staying up to date daily or weekly with accounts receivable, accounts payable, gross profits and so on and so on. If you have an in-house bookkeeper you need to make sure this is happening. If you have any doubts about your financials, then call us. We ensure our clients that we know every detail about their business.
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I used to say at DM Accounting we are the bookkeepers who happen to be CPA’s. But one of my new clients says we’re more than that, we’re like his CFO without the six or seven figure salary. If you want your very own CFO without the high salary, contact us! We ensure our clients know every detail about their business. Now that’s a great reason to celebrate!