How do you avoid failing with a great business idea? Do everything by the books.
We’re talking about the law, but really we’re talking about keeping your accounting books in order. Keeping a tight hold of your financials will help you make informed decisions for your business.
At the end of the day, can you really afford that million dollar idea, or will it stretch your company so thin that it sinks the company at the first sign of rough waters?
Keeping your books in order is the key to success, so let’s see why you should account for success.
Budget & Finance
As we mentioned before, it’s important to know if you have the financial means of making a successful business from that, “brilliant idea” of yours. To do that, you need to understand the numbers it takes to make your idea come to life, and the numbers it takes to pay off your idea with your profits.
Taking that into account, you should be prepared to think of every last thing that will come out of your pocket. Employee pay, building expenses, equipment, property tax, cost of goods sold, utilities, and so much more should make their cost known on that spreadsheet you’re making.
Having the entire cost of a year will help you adjust your end pricing, so you can make a profit and create funds for future projects.
Say you took out a loan for your business, how long will it take you to pay that loan back? Now you shouldn’t worry if you can’t pay back that $500,000 loan right away, but make sure you are all paid up and making a profit by year 5. That’s really the “make it or break it” point for a business. Remember, the faster you can pay that off, the faster you get to making a profit.
Taxes
From sale number one and beyond, you need to make sure you are accounting for your taxes. Those pesky little percentages the government takes out can quickly turn into lump sums you owe the state if you aren’t careful.
Having a proper tax plan in place to handle the money you need to grow your business is a must. Failing to take this into account will lead to certain destruction for your business, and leave you in a hole you can only hope to climb out of.
Buy Used if You Don’t Need New
Just like a loan, buying new can leave you in a hole if you don’t choose what you buy wisely. To account for this, make sure you decide what has to be new and what can be purchased used. Once you know where you have to spend the money, you can budget the other money to get new equipment or fund other projects.
An example is getting a company work truck. A new landscaping company with no following might not want to start with the newest pickup truck because landscaping can be a sink or swim industry. Start with a used truck that is easy payoff. Once it’s yours, you can upgrade your equipment and have your trusty starter truck to give to your team.
On the other hand, you might want to invest in a new lawnmower with the money you saved getting the used truck. Having an efficient mower with a warranty would be invaluable to any new landscaping company.
Conclusion
Accounting for Success can be applied to every part of your business because it’s the best way to plan for the worst. When you plan for the worst and hope for the best, you are sure to stumble into success.
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