4 tips for organizing company finances

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As a busy owner or manager of a pest management firm, you have to juggle operations, management and marketing, as well as customer service and several other functions. Unless you have someone on staff with all the requisite skills to manage finances and accounting, this important function can be a massive source of frustration. The key is to stay organized. The following four tips can help you organize and control your finances:

1. Talk to a certified public accountant (CPA). When most people think of a CPA, they think of taxes. A competent CPA, however, should not only be able to file taxes, but also prepare financial statements for banks, creditors and other stakeholders in your business. The overall goal of your accountant should be to help you accumulate and preserve wealth. Saving taxes is just a small part of this overall task. A competent CPA is a member of your management team and can provide many more added-value services than just tax preparation.

2. Look at your business entity structure. There are a variety of ways to organize a company legally. While choosing a business organization should be one of your earliest business decisions, changing the legal structure as you grow may be advantageous.

For the most part, there are three business structures that may be set up in different ways: sole proprietorship, partnership or corporation. A fourth choice, which is an excellent fit for how our industry conducts business, is a limited liability company (LLC). For accounting purposes, an LLC can be set up like either of the first three and taxed accordingly. Under the current law, S corporations can minimize your federal taxes. You should consult your CPA or lawyer, as they are in the best position to assess federal tax consequences. They can also consider how your state tax laws fit into your overall picture.

3. Separate your personal and business finances. Seems obvious, right? For legal purposes and to keep tax records straight, however, you want to ensure both are separate. This starts with tracking your business expenditures accurately without commingling your personal expenses. The easiest way to
do this is to maintain separate bank accounts.

Make sure your business expenses and revenues are transacted in your business account. Personal items like home mortgages should be transacted using your personal account. Use a business credit card separate from your personal credit cards, and only use that card for business purchases.

4. Set up your chart of accounts to match your objective. Financial statements are the culmination of the accounting process. They are used to convey a concise picture of your company’s profitability and financial position.

The two most important financial statements that allow you to get an accurate snapshot of your business results are the profit-and-loss statement (P/L) and the balance sheet (B/S). The P/L shows your firm’s profit or loss for a given period. The B/S shows what you own, what you owe, and how much accounting equity you have in the company.

More importantly, financial statements show how the profit or loss was derived and how the assets, liabilities and equity are categorized. The categories are defined by the chart of accounts set up when you begin your business; they are constantly updated to provide helpful information. It is extremely important that the person setting up the general ledger chart of accounts understands accounting concepts and the pest management industry so items such as direct labor, material percentages, marketing expenses and sales expenses are appropriately tracked.

Understanding your finances is a crucial success factor in operating your business. The more you know, the more effective you’ll be at guiding your company through seasonality, growth and times of complex cash flow.

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from Pest Management Professional https://www.mypmp.net/2024/10/21/4-tips-for-organizing-company-finances/
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