Small businesses and ambitious entrepreneurs are the heart and soul of most industries in the United States. By 2016, there were over 25 million Americans who were starting or already running their businesses. As a small business owner, business accounting is a critical determinant for success. Here are five ways learning accounting and bookkeeping can improve your decision-making process.
Relevant Cost Analysis
Educating yourself on bookkeeping allows you to record, summarize, and report the stream of revenues, expenses, and transactions resulting from your business operations. Business accounting books equip you with the skills to effectively analyze the financial health of your enterprise. Understanding how to maintain clean records can help you avoid overspending, underspending, or plateauing your operations. Through cost analysis, your business can make better and more evidence-based decisions.
Fine Tune Your Marketing Strategies
Customer acquisition is critical to guaranteeing business success. Learning how to balance business accounting books can help you allocate the right budget to your marketing efforts. You can analyze where most of the revenue stems from and create a buyer persona of the ideal client. You can analyze the value of each customer group and pick out the most lucrative units. You can allocate your resources to markets that bring in more profit in the long term.
Define Your Budgeting
Small business accounting books can also help refine your budgeting process. Through relatable case studies and real-world examples, you will learn the best way to define your budget estimates for the next quarter or year. Budget-related decisions may need to reflect your sales history and marketing database. Analyzing your past financial health can help you create more relevant plans for each segment and project.
Assist in Allocating Scarce Resources
Approximately 22.5% of small businesses fail in their first year. Insufficient cash flow ranks among the top reasons that entrepreneurs with failed businesses say led to their downfall. You may need to closely monitor your allocation to the different segments of your business as you are starting. Learning bookkeeping with business accounting books can help you determine how best to allocate the scarce resources available to make it through the first year of operations.
Improve Your Borrowing Decisions
Your accounting books may also interest lenders, creditors, and financiers, affecting their lending decisions. Understanding your financial statements can help you accurately outline your assets, short and long-term debt which provides a better sense of your creditworthiness. Balancing your books can help you determine if it is worth picking up another loan to finance your business expansion.
Financial accounting is a crucial part to determine the financial health of your business. Business accounting books can help learn the basic bookkeeping principles that will shape your decision-making. If you are ready to take your small business to the next level, “How Much Does It Cost to Make A Donut?” can help kick start your journey with fun, real-life scenarios to learn from. Order your copy today!