A bookkeeping business plan was recently presented by a young entrepreneur for his software startup to an angel investor.
The angel investor was very impressed with his determination to streamline mundane processes and revolutionize a niche segment of the agriculture industry.
However, the investor noted that he was missing two key components from his business plan – bookkeeping records and projected financial statements.
Unfortunately, you can have the best idea in the world, but the odds of succeeding are low if you can’t manage your finances.
Your company will have difficulty maintaining profitability and has almost no chance of receiving investor funding.
Your business plan needs to include detailed financial documents and an overview of your bookkeeping strategy.
John W. McKinley, a CPA and attorney with Cornell University, recently discussed the importance of accounting competencies for starting a business. McKinley stated that understanding accounting is more important to entrepreneurs than any other profession other than accounting.
McKinley states that every entrepreneurship curriculum needs to emphasize the importance of accounting. Unfortunately, his advice provides little benefit to entrepreneurs that have already completed business school.
It also fails to help the over 90% of entrepreneurs that never attend business school. The good news is that any entrepreneur can learn the basics of bookkeeping before writing their bookkeeping business plan.
When writing a do it yourself business plan, bookkeeping strategies need to be carefully emphasized. Here are four key components that need to be covered.
Every business is subject to local and federal tax authorities. Earlier this year, the National Small Business Association reported that the average small business owner spends nearly 80 hours on their taxes.
Despite the amount of time they spend handling their own taxes, the businesses that are audited make a number of serious mistakes. Data from the IRS shows that small businesses paid $4.5 billion in penalties for payroll tax mistakes alone in 2013.
Learn the most important elements of the tax code very thoroughly before ever launching your business, especially if you plan to hire an accountant.
You should also consult with a professional bookkeeper and CPA on a regular basis to deal with any tax problems that you face.
Most businesses need to borrow money to expand. Data from the Small Business Administration (SBA) shows that the default rate on SBA loans is about 18%.
However, some industries are much more likely to default than others. Institutions that handle larger sums of money tend be more risky.
Investors and lends will want to see that you have a sound credit management strategy in place. Outline all sources of funding and provide a clear strategy to pay it back.
Your sections bookkeeping business plan needs to include sound bookkeeping records to show that you have recorded all of your liabilities and payments that you have made.
Business coach Joe Dager and other experts have cited numerous evidence showing that poor cash flow is the biggest reason that small businesses fail.
A recent study from FinPacific showed that 68% of small businesses didn’t conduct any cash flow analysis. As a result, many growing businesses lack the funding they need to remain solvent.
Every small business owner needs to assess its cash needs and have a plan to meet them. Here are some components of your cash flow strategy that need to be covered in the bookkeeping section of your affordable business plan:
Your cash flow analysis will be one of the most detailed parts of your accounting section. Make sure that you have a clear approach to manage it properly.
There are a number of essential aspects of running a business. Most entrepreneurs focus primarily on their strategic vision and marketing plan.
These factors are critical to their success, but accounting is equally vital. While creating a business plan, bookkeeping strategies need to be highly emphasized.
Please feel free to contact us if you are creating a business plan and need accounting guidance. We look forward to hearing from you!