The foremost duty of a bookkeeper is that there should be proper documentation of financial transactions taking place daily. The foremost duty of an accountant, however, is to study the documentation made by the bookkeeper and conduct an analysis of the financial statements as well as other duties.
To run a business is not just to document the finances involved. The business managers have to see other aspects of finance, such as cash flow management, preparation of financial statements, compliance with taxes, analysis of expenditures, and so on. All this may prove difficult without any professional assistance, especially if the business begins to grow. This is where an accountant proves helpful for the business.
Understanding what services an accountant provides can help small businesses identify the financial support they need and determine whether to work with in-house professionals or hire an accountant.
Why Do Small Businesses Need Accounting Services?
There are small enterprises that lack internal resources and also face different financial constraints. The proprietors conduct sales and handle the client relations, conduct their business as well as make financial decisions while maintaining good accounts.
Without an accounting process, the business may find itself with problems such as insufficient financial reports, tax preparation, cost control, and cash flow management.
Accountants will assist a business in organizing its financial records and monitoring its performance as well as maintain records for accounting purposes. The accountant can advise the business owners on their financial status.
What Services Does an Accountant Provide?
Accounting services vary depending on the nature of the organization, type of industry, and the level of financial complexity. Some engage in basic accounting services while others venture into business advisory services.
Bookkeeping and Financial Recordkeeping
One of the core functions of accountants is bookkeeping. Bookkeeping involves recording of all the financial transactions in relation to the activities of the business.
The functions of bookkeeping can be done directly by the accountant himself or he may direct the bookkeepers.
Some of the tasks included in the bookkeeping function are:
- Recording of the income and expenses of the business.
- Recording of purchases and sales.
- Keeping record of the transactions of the vendors and customers.
- Balancing of bank and credit card accounts.
- Organization of the financial papers.
- Classification analysis of the transactions.
Preparation and Planning of Taxes
The tax services of accountants come in handy in the organization of financial records, filling of the tax forms and determination of the tax liabilities of the business.
According to their experience and specialization, accountants may provide tax preparation services such as that for the federal and state income taxes, estimates and tax planning.
They may also assist the business in analyzing deductible amounts and the concept of depreciation. Tax planning is especially important since the type of business, sources of income and expenses and the laws of the state dictate the tax liability of the business.
Financial Statement Preparation
The financial statements provide details about the financial position and performance of the organization. The accountants can help in preparation, review, and analysis of financial statements based on the accounting records of the firm.
- Profit & Loss Statement: This statement reflects income and expenses that show the profit or loss generated in a particular time period.
- Balance Sheet: The statement provides details regarding the assets, liabilities, and owners' equity of the organization in a particular period.
- Cash Flow Statement: The statement reflects cash flows coming in and out of the organization due to the operation, investment, and financing activities.
These statements help the entrepreneur in evaluating the profitability, financial stability, and cash flow of the organization.
Payroll Accounting and Processing
Payroll accounting deals with the accounting of the payment to employees and costs related to this. Depending on the nature of the services required, the accountant may help in payroll accounting, payroll reconciliation, payroll taxes, and payments to employees.
The organization can also hire specialized services for payroll processing for calculation of salaries, direct salary payment to the accounts of employees, deduction of taxes, and payroll taxes.
Payroll processing requires compliance with federal and state laws. Organizations should check the activities that are handled by their accounting service provider.
Accounts Payable and Accounts Receivable Management
The process of Accounts Payable and Receivable Management is essential for the business to control payments to suppliers and receipts from customers.
This process can be carried out by an accountant, but they can collaborate with bookkeepers too.
Some of the tasks within accounts payable may include recording invoices from vendors, checking balances, controlling payment schedules, vendor's account reconciliation.
Within the scope of accounts receivable some activities may include invoice preparation, customer payments monitoring, overdue balances detection, collection reports analysis.
Effective management of these processes provides better awareness about the financial status of the company.
Budgeting and Financial Forecasting
Budgeting and financial forecasting provide companies with a way to create a plan of usage of their financial resources.
An accountant will help in creation of a budget based on forecasted revenues, operating costs, payroll costs, and other financial needs of the company.
The process of financial forecasting implies analysis of historic information and projections, which enables the owners to evaluate future expenses, investments, and possible cash flow problems.
Cash Flow Management
An organization may be profitable and facing cash flow issues because of delayed payments by the customers or costs that should have been paid but lack sufficient funds.
The accountants will help the business to evaluate cash flows, accounts receivable levels, payment schedules, and cash flow statements.
Sometimes they may help in analyzing periodic payments and the adequacy of working capital for the operations of the business.
Cash flow analysis on a periodic basis helps the business owners make informed decisions on spending, employment, and growth.
Financial Advisory Services to Businesses
Apart from providing usual accounting services, there are accountants who provide financial advisory services to help businesses in making important financial decisions.
Depending on their level of expertise, they may help in:
- Analyzing the financial performance of the business.
- Identifying unnecessary operating expenses.
- Determine profit per product or service.
- Financial forecasting.
- Help in planning for expansion and investments.
- Financing requirements for the business.
The advisory services help the business owners interpret their financial information.
In everything from bookkeeping, payroll accounting, financial reporting, and business advisory, there is an accounting service that is right for the business based on its size and industry.
For those businesses who need help in professional accounting services but not in terms of a complete department for it, hiring an accountant can be helpful. The Fino Partners helps businesses satisfy their accounting and bookkeeping needs through expert hiring support.
