Inadequate or a lack of small business accounting services in Toronto can cause even a successful business to fail.  Therefore, it’s very important that you hire the right Expert in Small Business Accounting in Toronto for your business. 

Here’s how a Small Business Accounting expert in Toronto can help with your business’ success:

1.  Prevent financial disasters, by reviewing financial statements regularly

 

It’s imperative that you review your company’s financial statements with an expert in small business accounting in Toronto.  When performing a review, you should answer the following questions:

-          Is there sufficient cash to pay for operating expenses?

-          Can my company meet its financial covenants on bank loans, or has there been a breach?

-          Are revenues and expenses increasing or decreasing and why?

-          How many months can my business survive based on current cash reserves?

-          Why are profits decreasing and how can they be improved?

If you fail to address these fundamental questions with an expert in small business accounting Toronto, then there’s a real financial risk to your business.

2.  Monitor KPI’s to improve financial performance, says Small Business Accounting Toronto

 

A key performance indicator (KPI) is a formula or ratio that measures the success of an important part of your business.  The following key performance indicators should be reviewed periodically with a Small Business Accountant Toronto:

Gross margin

Gross margin is the profit realized on the sale of a product or service, and is computed as: selling price minus cost of product/service.  Increasing gross margins mean that the product/services are priced appropriately and the cost of inventory purchases are being kept low.

Inventory turnover

Inventory turnover is a key performance indicator that measures how quickly inventory is selling and is computed as:

        Cost of inventory purchases / Inventory

The higher the turnover, the faster inventory is selling.  Companies with a low inventory turnover either have too much inventory on hand, obsolete inventory, or need to improve their sales and marketing efforts.

Days sales in receivables

‘Days sales in receivables’ is a formula that indicates the number of days in sales that are tied-up in accounts receivable.  It is a measure of a company’s liquidity.  This key performance indicated is calculated as:

         Average Accounts Receivable / (Annual Sales / 365 days)

For example, 45 days sales in receivables means that the company’s accounts receivables are equivalent to 45 days of sales revenue.  The higher the number, the more company cash that’s tied up in accounts receivables, making liquidity a problem.

Number of new customers acquired

The number of new customers acquired in a given month should be tracked, in order to assess whether the company’s marketing efforts are paying off.  This key performance indicator can be broken down further by tracking the number of new customers by product line, the number of new customers by income level, the number of new customers by age, etc.

3.  Compare yourself to the competition

No one wants to be behind the competition.  Therefore, it’s important that you review your company’s financial statements and key performance indicators against those of your competitors.  This will tell you whether there is room for improvement or if you’re ahead of the competition.

An expert in small business accounting Toronto should have financial statistics available for various industries.  Alternatively, this information can be purchased from companies specializing in statistical analysis of businesses.

4.  Keep accurate records and receipts

Keeping accurate records and receipts may not seem like a top priority, but it should not be taken lightly at all.

Inadequate financial records and receipts will make it difficult for you to manage the financial aspect of your business, result in unreliable financial statements, and a lack of quality key performance indicators.  In fact, keeping inadequate records and receipts is why many, many businesses fail.

For further information on the benefits of keeping accurate records and receipts, please see Business Accounting Services Oakville

5.  Minimize income tax – Small Business Accounting Toronto

One of a company’s biggest expenses is income tax, yet it is often overlooked until it’s time to pay the taxman.  However, proper tax planning with an expert in Small Business Accounting Toronto can help you reduce your company’s income taxes drastically.

A proper tax plan should be created at the beginning of each year and revaluated periodically or as circumstance change.  The tax plan should address key areas such as:

1. All possible tax deductions (see 10 Best Tax Tips)
2. Whether or not to incorporate
3. Paying dividends vs. Salary
4. Income splitting with family members
5. Tax savings strategies Accountant Toronto – 5 Secrets to Saving Taxes for Canadians

About the Author – Small Business Accounting Toronto – Contact Us Now

 

Allan Madan is an expert in Small Business Accounting in Toronto.  Allan has worked with many small businesses in various industries, helping them with tax and accounting.

To learn more about Allan Madan, please see Small Business Accounting Toronto

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Tags: tax tips

This entry was posted on Sunday, September 12th, 2010 at 3:19 pm by superAmin and is filed under Tax Tips 2010. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.