Skip to content
small business

Jun 30, 2020

Why Now is The Time to Rethink Your Accounting

You need to understand your cash flow, income statement, and the story the numbers are telling. There have been a lot of changes going on in the world right now. In the past, we may have been able to get away with swiping the card and just knowing there is “enough” in your bank account. But that is not going to cut it anymore.

Warren Buffet is credited with the phrase, “Accounting is the language of business”. However, for many business owners, it can just look like an overwhelming amount of information. Why not create a new account for every type of purchase? What is the difference between a P&L and Income Statement?

Accounting can be confusing and it takes getting your hands dirty to achieve organized books that tell the story of your business. So what do you do when the story is...all over the place?

 

How do You Rethink Your Accounting?

You contact a CPA. A certified accountant that can help you get your books organized and translate what the numbers are telling us about your business. Once you begin to see your financial statements as a report card and not a burden, a new way of analyzing your business opens up.

 

Why Now?

There have been a lot of changes going on in the world right now. In the past, we may have been able to get away with swiping the card and just knowing there is “enough” in your bank account. But that is not going to cut it anymore.

Now you need to understand your cash flow, income statement, and the story the numbers are telling. 

 

Preparing For Economic Downturn

Build a Savings

This may be one of the most obvious but hardest things to do. Building a savings account can help protect your business from dips in the market and give you some time to rethink your contingency plan.

Let’s say you want to build a 3-month savings. This is a good start for small businesses and should be achievable in the beginning. Begin by calculating your monthly expenses. Everything from rent to your website maintenance. When you have the sum, multiply it by 3 (or however many months of savings you would like to build). That is your goal.

This gives you enough time to recognize the economy is in trouble, refocus your efforts, and make any necessary changes while not having to sacrifice your electricity or worse, your employees!

 

Renegotiate Debt With Your Vendors

When the economy goes south, it is no secret. There is no doubt your vendors will be aware their customers will be pulling back on their expenses and thinking about the future. Give each vendor a call and ask to renegotiate the payment terms. 

Some may be locked in, while others would be more than willing to renegotiate if it means keeping you on as a client a little longer.

 

Build Multiple Revenue Streams

Being able to diversify your business portfolio is what can help support your business when another area is suffering. Look for ways you can expand your services without needing to implement high research and development costs or begin an entirely new branch of your business.

For example, when the 2020 COVID pandemic took over, most restaurants closed completely. However, some were able to continue to operate because of the offered delivery services. This was possible for other businesses as well with services like GrubHub and UberEats, but it likely took some time to set up the processes. 

Plan for the worst, hope for the best. This is an optimistic way to power your business through whatever the world has to throw at it. Find ways to continue to be sustainable whether that be a recession or pandemic. It is never too late to start.

 

To talk with one of our accounting consultants, schedule a free consultation with us here.

 

 

Disclaimer:

This publication is designed to provide information on federal tax and accounting laws and/or regulations. It is presented with the understanding that the author is not rendering legal or accounting services.

This text is not intended to address every situation that arises or provide specific, strategic tax and/or accounting planning advice. This text should not be used solely to answer tax and/or accounting questions and you should consult additional sources of information, as needed, to determine the solution to tax and/or accounting questions.

This text has been prepared with due diligence. However, the possibility of mechanical or human error does exist and the author accepts no responsibility or liability regarding this material and its use. This text is not intended or written by the practitioner to be used and cannot be used by a taxpayer or tax return preparer, for the purpose of avoiding penalties that may be imposed.

Latest Articles

Gift, Inheritance & Estate Taxes: What you need to know
Taxes

Gift, Inheritance & Estate Taxes: What you need to know

Last week, we discussed personal and business gift tax deductions. This week, we'll look at the ins and outs of inheritance and estate taxe...

November 22, 2022

Gifts, Taxes, and Deductions: What You Need to Know Before Giving
Taxes

Gifts, Taxes, and Deductions: What You Need to Know Before Giving

Gift-giving is a generous way to show business associates how important they are in your life. In this post, we explain gift tax deductions...

November 15, 2022

How the Inflation Reduction Act Could Affect Your Taxes
current events

How the Inflation Reduction Act Could Affect Your Taxes

The 2022 Inflation Reduction Act has been called “one of the most significant laws in our history.” It could have repercussions for your bu...

October 05, 2022