As a small business or startup owner, you want to ensure your enterprise thrives. While you may want to focus on your company, you need to take care of those other matters, such as financial planning and taxes. It may be time to seek professional help. Working with a certified public accountant (CPA) is an excellent way to ensure you make the most of your financial success.

Not only will an accountant help you with the necessary forms and paperwork, but they can also provide you with valuable advice on financial planning and projections. Together, you can get help to set realistic and achievable financial goals for the future, ensuring continued success for your business.

Do You Need a CPA for Your Business or Startup?

Knowing when to hire a certified public accountant is half the battle. While there is no set time for every small business owner to hire a professional, some signs indicate you might need one.

No Experience With Financial Matters

If you are starting your business and are unfamiliar with accounting basics, a CPA can help you develop your financial strategy, teach you how to manage your finances, and ensure that you avoid mistakes that could cost you in the long run.

Need to Establish a Legal Structure for Your Business

When deciding on your company’s legal structure, an accountant can explain the options available, helping you choose the best one for your business or startup. Many business owners need to become more familiar with business taxes since most have only filed personal taxes in the past. A CPA can ensure you pay the right taxes for your business type and industry. They can also help you take advantage of tax credits and deductions to save money.

Require Help With an IRS Audit

If your business is growing rapidly, an accountant can manage your cash flow, help you use your money more effectively, and identify areas where you can cut expenses. Unfortunately, there are times when you could face an audit from the IRS. In that scenario, a certified public accountant can guide you through the process and ensure that you comply with tax laws.

Find Funding for Your Business

Finally, if you need a small business loan, an accountant can help you prepare the financial documents required by lenders and ensure that your loan application is well-organized and detailed. When looking for a company that offers small business accounting services, here are a few tips to choose the right professional for the job.

Finding the Right CPA for Your Situation

A business accountant can benefit your company at every stage of its growth. From managing finances to providing valuable insights and advice, the right accountant can be your business’s trusted advisor. You want to ensure you find the right fit for your small business or startup.

Search for Referrals

First, ask for referrals from lawyers, business advisors, bankers, and other professionals. Many of them have worked with CPAs that they trust for their financials. You may even want to attend local business events hosted by your Chamber of Commerce. Also, utilize your existing networks, such as family, friends, and colleagues. Someone is bound to know a reputable CPA to help your business or startup.

Skip the Internet

Finding a trustworthy business accountant is crucial for the success and growth of your company. While you may come across multiple options by doing a quick online search, you may want to avoid hiring someone you find on Google or online directories. Some CPAs may pay to add their names to a list of local business professionals. However, you don’t have to discount an online search completely. If you cannot find a personal referral, use the internet to read reviews about the local CPAs in your area.

Choose a Certified Public Accountant

Keep in mind that not all accountants are the same. Working with a certified public accountant can provide numerous benefits for your business’s financial health. CPAs have passed a rigorous examination and must be licensed. That ensures they possess the necessary knowledge and experience to provide reliable financial advice.

Additionally, a CPA’s certification must be periodically renewed to keep their skills and knowledge current with the industry’s standards. Many business owners and startups want to work with a CPA to get a handle on their business finances.

If you’re looking for a CPA, you can start your search by reaching out to the American Institute of Certified Public Accountants (AICPA). The AICPA maintains a directory of CPAs, accounting firms, and accounting organizations that can connect you with the right professional.

Once you have found a CPA, ask them a few questions. First, find out the accountant’s experience with small businesses or startups. A qualified accountant should understand the complexities of running a small company. Along with that, they should have references from past clients. Also, ask if the accountant has experience in your specific industry. You will want to work with someone who understands your business’s needs.

Make sure to also inquire about their services. Many of these professionals provide tax and auditing assistance. However, other CPAs can offer to help with bookkeeping, business valuation, or budgeting. Additionally, ask about the billing process. Most accountants charge by the hour or offer a monthly retainer.

Need an Accountant for My Small Business?

At TMD Accounting, we provide you with the flexibility, dependability, and affordability you need in an accounting firm. With over 40 years of experience serving Gloucester County, we have helped numerous small businesses and startups manage their financial health. If you would like to schedule a consultation, call us at 856-228-2205.

While running your business, you might not have time to analyze financial numbers. However, knowing how decisions affect your company’s financial health is crucial. When you review your books and records, you can make plans to grow your business. It is time to become familiar with a comparative income statement if you want to boost your profits. Here is how this financial statement can help your small business.

Is This Document the Same as an Income Statement?

Some people may refer to an income statement as a profit and loss statement. No matter the name, the report shows your sales minus any expenses. At the top of the statement, you will see the number of sales earned in a period. After that, the business expenses are deducted, giving you a net profit at the bottom of the statement. This income statement can show how your business decisions affect the net income for that period.

Looking at an individual statement will only give you the results for one specific period. In many cases, you will want to compare one period to another to see the long-term effects of your decisions. That is where a comparative income statement can help. If you need help compiling an income statement, any company offering small business accounting services can assist you with that document.

Is a Comparative Income Statement Important?

A comparative income statement will combine the information from several statements into a single report. This statement can help you measure your business performance and identify financial trends. It also allows you to compare your profits and losses to other businesses. The statement is usually organized into two or three columns representing an accounting period. The most recent periods are usually closer to the left side of the page.

A comparative income statement can assist with many types of accounting tasks, such as:

• Provide a review of the business’s performance
• Compare profit and losses to previous periods
• Determine a pattern in sales
• Measure your business against others

A comparative income statement makes an excellent tool for business owners. For instance, an income statement might tell you that sales dip every April. You can boost your marketing efforts for the month when you have access to that specific information.

When you compare several financial statements, you can see a trend in performance. Comparing reports is time-consuming and confusing, but this statement allows you to track your business’s performance trends. With a comparative income statement, you will not have to flip between the documents. You have all that information right in front of you.

How to Read a Comparative Income Statement

If you want to understand your business’s financial data, take a look at your comparative income statement. You will want to analyze the information in two ways: horizontally and vertically. With these types of analyses, you can understand the business’s performance. Additionally, the statement can help you see patterns to help predict future trends.

Horizontal Analysis

The horizontal analysis examines your business’s trends over a period of time. It can help you see growth patterns. To calculate growth rates, you need to analyze the change percentage between accounting periods. If you want to find the change in the percentage between two numbers, you need to determine the difference in dollar changes for each period. For example, if you gain $55,000 in 2021 and $60,000 in 2022, then your business’s dollar change is $5,000.

You can divide the dollar change amount by the year’s profit. For example, if the base year profit is $55,000 for 2021, then the result is 0.09 ($5,000 / $55,000 = 0.09). After getting that number, you will want to multiply the result (0.09) by 100. With that, you will have the percentage of change. For this specific example, there is a 9% change.

Vertical Analysis

Vertical analysis helps compare the size of different line items in a financial report. To use vertical analysis, you have to divide each line item by the total amount of revenue from a product or service. After that, you can multiply that number by 100 to get your business’s percentage. With that, the number tells you what percentage of each dollar was earned as profit.

Why Are Comparative Income Statements Crucial?

You have to measure performance when you are a small business owner. When you don’t understand a comparative income statement, you might not know whether your decisions work for your business. Additionally, these statements help you track profitability over several periods.

The comparative income statement shows you how your business has performed. For example, you can compare your return on investment (ROI) from last year to the current year. When it comes time to sell the company, some buyers will use comparative income statements to determine whether the business is a good investment.

Accounting is a challenging part of running a business. However, it can be an eye-opening experience, especially when you review your financial statements. You want to know whether the time and effort are paying off for your business. A comparative income statement will provide detailed insight into your business’s financial health.

Contact the Professional Team at TMD Accounting

When you need an accountant for my small business, call TMD Accounting. We’ve served the Gloucester County area for over 40 years. Our team assists small business clients with their bookkeeping and accounting needs. To learn more about what our professionals can do for you, give us a call at 856-228-2205.

As a small business owner, you need to manage your cash flow. Any owner should understand how cash moves in and out of their business. Being aware of cash flow can help your daily operations. All companies need to have a plan that focuses on cash management. Here are a few tips to help with these tasks.

Prioritize Your Bills

When you receive an invoice, you may want to pay it right away. However, that is not always the best course of action. You should extend your payable for as long as possible so that you can spread out your payment. It is not a good idea to pay all bills at the same time. It could drain your business’s cash, which can strain your supplier and employee relationships, especially if you cannot pay on time.

Instead of paying immediately, you need to review your bills and sort them according to priority. By staggering payment days, you can take care of the most important bills first, such as payroll and rent. After that, focus on the bills that are less important and have more flexible payment dates. In some cases, you can get a discount for paying a bill before the due date. With that, you should prioritize those bills to help save some money.

Be careful with this tip. You always want to pay on time. Late payments can affect your credit and require you to pay late fees.

Select the Right Payment Cycle

When you need to pay your employees, schedule the payroll to match your revenue streams. Some businesses, like retail stores and restaurants, generate revenue on a daily basis. They can cover those costs for the weekly payroll. However, for companies with a slow revenue stream, it can be a challenge to meet payroll obligations. Some businesses will adjust their payroll cycle to a biweekly or monthly schedule. Make sure to follow all applicable state laws regarding wages. Some states may have requirements that businesses must follow for payroll frequency.

Negotiate Supplier Payments

In many cases, you can negotiate with a supplier regarding payments. If you have a great relationship with a supplier, they are more likely to work with you. Think about flexible payment options to manage your cash. Many suppliers will offer special payment terms, especially if you order regularly or in bulk. With a payment agreement with your supplier, you can get more time to settle those invoices.

Collect Receivables Quickly

When you need to manage your money, you should look at your cash flow. You can improve that flow by collecting receivables on a timely basis. There are a few ways to expedite the process of collecting receivables. First, request a deposit from customers when taking an order or project. You could also offer discounts for customers who pay quickly. Also, you may want to move outdated inventory with discounted prices. Finally, use online invoices that offer more payment options for your customers.

Manage Your Credit Policies

When you offer any credit to your customers, you must establish a few credit policies to manage your cash. For example, you will want to take a look at your invoicing. It is crucial to quickly send out the invoices and follow up with customers for payments. Before you extend any credit, make sure to require a credit check for all new customers. Those customers who pay late can hurt your available cash. You will want to identify those late payers and develop a cash-on-delivery policy for those who don’t pay on time.

Use a Business Credit Card

Many people might not want to open a new credit card. However, a business credit card can free up your cash to pay everyday expenses. When choosing a business credit card, you should find one with a rewards program. In some cases, you can reduce your costs and get a percentage back on a few purchases.

Track All Expenses

You must keep track of all your business expenses. Make sure to check your monthly statements. If you need help with this task, small business accounting services can help you keep track of your expenses and cash flow.

Open a Line of Credit

If you want to maintain a balanced cash flow cycle, consider opening up a line of credit to get quick access to cash. Many businesses have a line of credit to bridge any gaps between their receivables and payables. Also, a line of credit can help cover unexpected expenses, buy equipment, and help with growth opportunities.

Use the Latest Technology To Accept Payments

When you want to accept receivables quickly, consider using online payment methods to collect those bills. Along with that, the latest technology can help you track the payments of every customer.

Manage Your Business’s Cash

When you can monitor your cash flow, it can help with your business’s short- and long-term success. By collecting payments quickly, monitoring expenses, and negotiating with suppliers, you will have a few options to manage the cash flow in your business. If you want someone to handle these vital responsibilities, make sure to find an accountant for your business.

Find an Accountant for My Small Business

TMD Accounting has been serving the Gloucester County community for over 40 years. Our accounting firm is a family-owned and -operated business. We are an affordable, reliable, and flexible way to help manage your company’s financial health. Schedule your consultation by calling 856-228-2205.

During the 2022 tax year, small businesses did not face major changes in tax laws. However, there are several things small business owners should understand when it is time to file their business tax returns for the year. One thing that is critical for small businesses is to ensure they always make their estimated tax payments on time each quarter and understand their tax liability. Here are some of the tax laws small businesses need to understand for the 2022 tax year and how they might affect their tax returns when it is time to file from TMD Accounting.

Small Business Tax Deduction

Partnerships, sole proprietorships, LLCs, and S-corporations are all pass-through entities that can benefit from the small business tax deduction. For the tax year 2022, the owners of small pass-through companies can claim a deduction of up to 20% on their portions of the income earned by their business up to $182,500 for single filers or $364,200 for joint filers. If the business’s qualified income exceeds the threshold, limitations will be applied. However, companies with significant capital expenditures and those that employ a lot of employees might still be able to benefit from the small business tax deduction.

Standard Tax Deduction

Small business owners that do not itemize their expenses can claim the standard deduction on their returns. in 2022, the standard deduction for individual filers is $12,950. Joint filers can claim a standard deduction of $25,900.

Estate Tax

Small business owners might benefit from the estate tax exemption, which is $12.06 million for individual filers and $24.12 million for those who file jointly in 2022. The increased estate tax exemption offers protection to a greater number of small business owners who have accumulated substantial assets and want to avoid potential tax issues when they pass away and leave their estates to their families.

Deduction for Expensing Equipment

Small business owners can immediately deduct the costs of purchasing business equipment up to a maximum deduction of $1.08 million in 2022. The spending cap for equipment purchases in 2022 is $2.7 million under Section 179. This tax relief is permanent.

Certain assets that depreciate over time might be eligible for bonus expensing in 2022. This involves expensing the entire purchase cost at once instead of only a fraction of the cost per year. The ability to benefit from bonus expensing will be phased out in 2024.

Tax Credit for Paid Family and Medical Leave

Under the Tax Cuts and Jobs Act, businesses that provide paid family and medical leave as a benefit for their employees can claim a tax credit. Under the Consolidated Appropriations Act of 2022, the credit was extended through 2025.

Deferred Social Security Taxes Due

In 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act. This law allowed employers to defer the employer portion of their Social Security taxes due between March 27, 2020, and Dec. 31, 2020. Businesses that benefited from these deferments had to pay one-half of the deferred amounts no later than Dec. 31, 2021. Those businesses also must pay the remaining one-half of the deferred amounts no later than Dec. 31, 2022. If you don’t pay the deferred amounts on time, your business will face assessed penalties on the total amount of the deferred taxes.

What to Do

As a small business owner, you likely have learned that tax preparation for small businesses is a year-round process. This makes it important for you to regularly meet with your accountant and bookkeeper and provide them with accurate financial records each month. Doing so allows your small business accounting services provider to develop a good tax strategy for your business and avoid potentially negative surprises.

Make Sure to Keep Your Tax Records for the Right Amount of Time

Make sure that you understand the tax return retention requirements in your state. While most states require businesses to keep their records for seven years, some businesses retain their records for longer periods in case they are audited. Talk to your accounting professional to learn about your tax retention requirements in the jurisdiction in which your business operates.

Have a Separate Account for Taxes

If your business is new and isn’t earning much revenue yet, you might not think you need to open a separate account for taxes. However, having a separate account for business taxes can help your tax filing process to be simpler and establish good tax habits that can protect your business’s future health.

On average, around 30% of your profits will go to taxes of some type. Open a separate account for your taxes. When you complete your account reconciliations and learn your profit amounts, move 30% of that amount to your tax account. Setting aside 30% of your monthly profits in a tax account can help your business avoid huge tax bills when it’s time to file your tax return.

Find an Accountant for My Small Business

Small businesses should keep in mind how tax laws affect them year-round. Planning for taxes can help to minimize how much you might have to pay. Working with an experienced accounting professional at TMD Accounting can help you develop a sound tax planning strategy to reduce your taxes and ensure you comply with all of the laws that apply to your business. To learn more, contact us today to schedule an appointment at 1-856-228-2205.

You open your mailbox to find a letter with a return address from the IRS. You open it to find that your small business is being audited and your heart sinks. No one wants to have their finances reviewed by the Internal Revenue Service, a prospect that is nerve-wracking, stressful and complicated. Small business accounting services say that getting a letter from the IRS does not have to mean fear and stress, however.

If you have prepared properly and documented your business expenses thoroughly, the fear of the audit may be more stressful than the audit itself. Use these tips to guide you through an IRS audit in order to make the process as painless as possible.

Understanding How Companies are Chosen for Audit

The first step in reducing the stress of an IRS audit is to understand what led to your business being chosen for one in the first place. Most small business owners have no idea why they were chosen and that is an indication that they likely have done nothing wrong. If the first things that comes to mind is “the accountant for my small business must have made a mistake,” you are likely correct. Most audits are due to minor errors that were picked up when tax returns are reviewed. There are some common red flags the IRS looks for when reviewing tax forms as well.

If you operate a business that is cash-intensive, like a café, the IRS may take a closer look. Deductions that seem excessive, such as for meals or entertainment as well as claiming 100 percent use of a company vehicle could trigger an audit.

Other triggers include:

• Inflated salaries to employees who are also owners or stockholders
• Reimbursed business expenses that are excessive
• Paying or filing taxes late in multiple years
• Very large charitable contributions

Even if those expenses are legitimate, they trigger a review by the IRS which is why small business accounting services suggest you change your operations, so these items are not part of your annual tax filing.

Keep Good Track of Your Finances

One question to ask yourself is “would the accountant for my small business be able to understand this expense?” If the answer to that is no, you may not be keeping good track of your finances. You should follow approved accounting practices throughout the year which will make it less likely your company will be audited. You need to review your financial accounts regularly in order to look for possible errors. Keep accurate records all year long, so you are not scrambling on December 31 to organize things for your small business accounting services. They are likely not going to be excited about a shoebox full of unsorted receipts. If your financial documents are organized and in order, even if you are audited, you will be able to provide details to the IRS.

Anticipate What Will Be Asked

An IRS auditor is likely not interested in seeing your entire financial picture. They are usually looking for particular information due to something that caught their eye in a review. Take the time to go over your financial details before the audit to see where they may have questions. If you had higher than normal meal and entertainment expenses one year because you were expanding your customer base, organize those receipts and any notes you may have about what you discussed during the meal. By cooperating and coming forward with a known problem area, the audit process can go much more quickly.

What Paperwork Do You Need?

There are standard documents the IRS will want to see, regardless of why the audit was triggered. They will want to see bank statements, receipts and canceled checks. The IRS will accept electronic versions, but they must include the name and address of who was paid, the date of the payment and the amount paid. If your company keeps formal books, such as ledgers and journals, you will need to turn them over to the IRS as well. Some businesses may be required to provide an appointment book, such as car service or hair salon owners. If one of the issues is higher than normal meals and entertainment, your appointment calendar may help prove the expenses were legitimate. Equipment and vehicle records may be requested along with travel and entertainment documents.

Small Business Accounting Service

The best way to reduce your risk of audit or to successfully prove that your tax returns were accurate is to work with an accounting service like TMD Accounting. One thing to ask is “does the accountant for my small business offer audit services?” If you have an accountant who files your taxes, they should offer audit protection and, if they make the mistake, many will cover any penalties and fees for you. Working with an accountant can not only help you manage the stress of an IRS audit, but they can also reduce the chance that a red flag will appear in an IRS review at all.

If you are in need of a small business accountant, contact TMD Accounting today to see how we can help. You can arrange for a no obligation consultation by calling 1-856-228-2205 or fill out the easy online form to see how our tax experts can help. Find out why our motto is “where numbers matter and people count. With 40 years of experience, you can trust that we will get your company’s financial world in order.

Your business’s financial statements can be a key tool for managing your business. However, many businesses are confused by financial statements and don’t know what they mean or how they can be used. Here is some information from the professionals at TMD Accounting about your financial statements and how they can be used.

What Financial Statements Include

A financial statement tells you where your business money is, including its origin, how it was spent, and the current financial standing of your company. You can see this information by using the three primary types of financial statements, including your income statement, balance sheet, and cash flow statement.

These documents give you the following information:

• The assets you currently have
• Your business’s liabilities
• The value of your ownership
• Total sales/gross revenues
• Losses and expenses
• Net income
• Cash flow, including the sources of money and how it has been used
• Cash on hand at the start and end of a period

All of these types of information are crucial for your business so that you can make better decisions. Financial statements are an important component of running a financially stable and profitable business.

Why Financial Statements Are Important

Your financial statements will provide you with your business’s operational results, its current cash flow, and its current financial standing. They are important for all of the following reasons:

• Documenting your business’s financial activities
• Summarizing important accounting information about your business
• Providing stakeholders with an accurate picture of your company’s financial situation

Lenders use financial statements to assess your level of risk when determining whether to extend credit to your business. They also include information that might be required under accounting standards and the law and contain the data that you need to complete your business tax returns.

What Is In Each Type of Statement?

You can analyze how your company is performing by using your financial statements.

The income statement will include information about your business’s total revenues, the cost of the goods or services sold, and other costs during a set period. It will then provide information about your company’s net income or a net loss.

Your balance sheet will provide data about your total assets, liabilities, and equity.

Your cash flow statement gives you information about your company’s financing, operations, inflows and outflows, and long-term debt.

How to Use Your Financial Statements

When you receive your financial statements, take a look at your income statement and treat it as a report card for your business. This might also be called a profit-and-loss statement and tells you how your business is doing over time. In the income statement, you can see the expenses your company has incurred and the revenue it has generated during the relevant period.

Income Statement

Your income statement can be used to gain an understanding of your business’s profitability and the steps that you can take to increase its profits. For example, you might see that you should cut back on some unnecessary expenses or focus on more profitable products or services. If you are searching for funding, investors will want to see your income statement to assess your degree of risk when deciding whether to give your company credit or venture capital.

However, your income statement won’t reveal the overall strength or weakness of your financial condition, show a list of your assets and liabilities, or show how money is flowing in ad out of your business.

Balance Sheet

Your balance sheet lets you see how strong or weak your business’s current financial condition is. Many investors typically begin by reviewing a business’s balance sheet to get an understanding of its financial condition. Your balance sheet includes key information on a specific date rather than your business’s profitability over a set period. It helps to show your business’s stability and how much liquidity it has. A balance sheet will include a list of your business assets, its liabilities, and the equity you have in it. The information included in a balance sheet can help show your business’s net value, your debt, how well your assets are being managed, and whether you are easily able to convert assets into cash when necessary. You can also see changes in your equity, earnings, inventory, and accounts payable and receivable by comparing information from your balance sheets.

Cash Flow Statements

You can use your cash flow statement to determine whether you have enough money coming in to sustain your business operations. Even if your business is profitable, it can still fail if you have cash going out of your business faster than it’s coming in. Reviewing your cash flow statement can help you to better manage where your money is going to increase your business’s chance of success.

Investors want to see cash flow statements to see evidence you can manage your business’s cash and have the resources to handle times when gaps in the in-flow of cash occur.

Find an Accountant for My Small Business

TMD Accounting offers small business accounting services and can help you set up and understand your business’s financial statements. Working with our experienced South Jersey accounting professionals might help to improve your business’s profitability by identifying areas that need work. To learn more, schedule a consultation by calling us at 1-856-228-2205.

Many business owners are intimidated by those financial statements. However, you need to learn some of the basics of these statements to get a clearer picture of your financial health. No matter how big or small your business, these three financial reports are vital to your success. The balance sheet, income statement, and cash flow statement are must-haves for your business. Let’s break down how these sheets work and affect your small business.

Balance Sheet

The balance sheet is also called the statement of financial position. This financial statement tracks your liabilities, assets, and owner-held equity. The balance sheet can indicate the approximate cash value of the business. Lenders will look at your risk and collateral, which can affect if you will receive funding for your business when you need it. There are two vital parts of the balance sheet: assets and liabilities.

Assets are everything that a business owns. For example, some assets can include signed service contracts or showroom stock. There are two types of assets: short- and long-term. Short-term assets will last for one year or less and can include cash, prepaid expenses, and inventory. On the other hand, the business must own its long-term assets for over a year. These examples include tools, property, and equipment. A company may also own intangible assets such as trademarks, copyrights, and patents.

Liabilities are everything that the business owes to a vendor or creditor. A liability may include a business loan balance. Like assets, there are short- and long-term liabilities. A business must pay all current liabilities within a year, including small business loans, payroll, and lines of credit. Long-term liabilities, including deferred income tax and mortgages, are paid over longer periods.

Along with assets and liabilities, owner-held equity is equally important. This equity is the cash value of the company. It is calculated as the assets minus those liabilities. The amount left over is the owner-held equity.

Income Statement

The income statement is often called a profit and loss statement. This statement accounts for the business’s revenues, gains, expenses, and losses. With this statement, you can gauge the profitability of the current operations. You can also use this statement to decide whether to cut or expand operations.

There are several parts to an income statement. Revenue is the income from operations and accounts. You can gain revenue from primary activities or secondary activities. Some primary activities include services rendered or product sales. Secondary activities include rent from a vacated space or accruing interest from an account.

Gains come from other future income, such as selling your assets. Expenses are derived from operations. Like revenue, these expenses can come from primary or secondary activities. Primary activities include expenses incurred from maintaining normal operating revenue. Secondary revenue often includes expenses incurred outside of the operating revenue. Losses are the value loss from selling assets, such as settling overdue taxes.

With this statement, you can see the profitability of the company. Income statements are formatted in two ways: single-step or multi-step. In a single-step statement, there will be one category for income and the other for expenses. However, these statements are not always reliable as they cannot calculate the profitability and efficiency ratio. For that reason, many small businesses use multi-step statements to separate the expense account based on their functions. Multi-step statements give owners a more rounded view of their financial health.

Cash Flow Statement

The cash flow statement is a detailed accounting of the cash generated by the business. How does a cash flow statement differ from an income statement? The income statement shows what the businesses have generated on an accrual basis. The cash flow statement will show the actual funds that have come into the business accounts. With these statements, you will know how much money is available to pay expenses or invest in the business. Any significant discrepancies between the cash flow and income statements could mean problems in business operations.

There are critical points in the cash flow statement. The operating cash flow statement is the cash paid from and to your account from the actual business operations. The income and expenses from selling and buying assets are called the investing cash flow. Investing cash flow can include buying operating equipment or selling real estate assets.

The cash actions related to the company’s stocks and bonds are called the financing cash flow. This cash flow might include paying dividends to the owners of repurchased stocks. When an owner draws on a small business account, that is known as a financing cash flow.

Cash flow statements can include other details, including document losses and gains of non-cash assets and miscellaneous cash actions. When you put this information together, you can see the location of the cash and how it moves in your business.

Understanding your financial statements can be complex. Finding reliable small business accounting services can help you to create and decipher these statements for your business. Knowing your finances is vital for any business. Without these statements, you will not know the financial health of your small business.

Need a South Jersey Accountant for My Small Business?

At TMD Accounting, we have small business solutions for you. Our family-owned and -operated South Jersey accounting firm has helped those businesses in Gloucester County for over 40 years. Whether you need help with payroll, taxes, accounting, or bookkeeping, we are your flexible and affordable way to manage your business. Schedule your consultation by calling 856-228-2205.