Good financials are important – and not just for you, but for your entire professional circle! But what constitutes “good” financials and how do they help your professional relationships?
Good Financials are the Key
Your financials provide an accurate account of where your finances stand. They should cover your profit and loss statements, balance sheet, and cash flow.
Often, your communication with outside professionals hinges on this information. Your financial advisors and accountants use your them to know whether you’ll owe tax or will be making contributions to your retirement, and to review your overall financial goals. Lenders need them when you open a new line of credit, like a home mortgage or car loan. If you want to sell or bring a new partner into your business, your attorney will need your financials.
Basically, they are the basis used to make major financial decisions. That means it’s incredibly important to have timely and accurate financials available.
Good Financials Should Be…
If your accountant is only updating your financials annually, then it’s likely that when you need them, they will be out of date. This leaves you with two options. Either you move forward with out-of-date financials (which sometimes isn’t an option) or you’ll have to pay someone to update them quickly.
A good rule of thumb is to update them at least quarterly. This means at any given time, the most your accounting team would need to update is three months, which is manageable. If you have a larger business, consider hiring your accountants to update them monthly so that you’re never caught without them.
It should go without saying, but it’s essential that they are always accurate. Without accurate financials, you can’t make quality financial decisions. This can lead to over or under paying your taxes, not utilizing tax strategies properly, not qualifying for a loan, and not making the right business decisions strategically. Proactive decisions are only as good as the information used to make them.
Don’t Fall Behind
Keeping your financials up-to-date may not be your favorite way to spend your time, but it is essential to keeping your business and professional relationships running smoothly. While there is some additional cost to more frequent updates, it doesn’t compare to the cost of last minute updates or missed opportunities.
Outsourcing your accounting is an investment, and if you are ready to level up your accounting we’d love to help. If you want to make sure your financials are in order, try setting a meeting with us.