Use Accounting to Identify Business Trends

For any small business, accounting is a critical aspect which needs to be considered right from the very start, and used as a powerful tool to help monitor business trends at regular intervals. All too often beginner entrepreneurs embark on a new business venture, excited by the prospect of shiny new business cards, a flash new website and a slick new name, but overlook the fact that at heart, any successful business needs good, solid accounting practices.

However, there’s no need to be anxious about maintaining accurate financial statements of your business’s cash flow. Contrary to popular belief, you do not need to be a monetary genius or have a university degree in order to balance the books. It may well be that in the early days of your small business you have very simple records which need little maintenance… even a spreadsheet will suffice. But even in the larger businesses the maths is pretty much the same. You simply need to know how much is coming in, how much is owed and how much you’ve spent. If you can grasp these three concepts, then you’re well on the way to coping with your accounts.

Of course, if you’re taking other things into account like credit loans and wages then you may find these figures needing to be adjusted, but essentially it’s nothing much more than a pocket calculator and a few minutes can achieve. By all means, employ an accountant, but in most cases this will be either unnecessary or just not financially viable. For a small business, a bookkeeper may be a better option, but it’s also worth investigating the many free accounting software packages available on the internet.

But remember – don’t put this off. You may think that it’s more important to grow the business, design the brand, the products and services, promote it and get the name out there before worrying about the finances. However this will only breed problems for the future. Start proper book keeping immediately and find some accountancy software to use.

However, there is more that keeping regular accounts can do for your business besides showing profit and loss. By analyzing your accounts at the end of each month, it is possible to extrapolate data which suggests trends or patterns. These may, in turn, help you to establish directions, in which the business can be turned to make more profit, adapt its marketing or push in new way. By checking your figures at regular intervals you can identify clients who don’t pay on time, clients who always pay on time, jobs which take in most money, jobs which make very little profits and products or services which are becoming more popular.

Sometimes in the busy day to day rush of keeping the business running, getting the products delivered or the services provided, it can be difficult to stand back and view your business more objectively, understanding how it may be changing, the way in which it is being used and possible ways in which it may be turned to make more profit or work more economically. However, doing this regularly is an excellent idea, because you can pick up on trends very quickly.

Checking your accounting records every day, or even every week, may not provide enough information to reveal a trend. Similarly, looking back over a whole year means that any trends will be drowned by the overwhelming amount of data. But monthly and quarterly accounting checks and statements can certainly produce patterns and reveal a good deal about the viability of your business. They will also help you to implement changes so that by the end of the year you are in a much stronger position, and more aware of the direction your business is taking.Tweet

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