You did it! You have thought through and tested your business idea, designed a business plan, and collected start-up capital, then you took the plunge. Finally, after many sleepless nights, worries and headaches, you have started your own company. Your passion has become your profession.
On your first day, you sit down excitedly in your office and then – the accounting. Only few entrepreneurs look forward to it. Hardly anyone has ever set up a company for their love of paperwork, after all. At this point, most people ask themselves: Why is accounting so important in the first place? Do I really need it?
The short answer is yes. The longer answer is: for several good reasons. Let us introduce you to a few of them.
Basis for tax calculation
The first and most important reason is that it is required of you by law. In Switzerland, accounting is mandatory. According to the Swiss Code of Obligations (CO), all sole proprietorships, partnerships and legal entities that have achieved a turnover of more than CHF 500, 000 at the end of the business year must keep double-entry accounting. If the proceeds are any less, you only need single-entry accounting, which only records income and expenditure and the asset situation.
Why is the state so interested in your accounting? Because you must pay taxes to the state, and they are calculated based on your accounting. That is why transparent and accurate accounting is important for both the state, and you. If you make even minor mistakes in your accounting, at best you will pay more tax than necessary, at worst you will find yourself in legal problems.
As you can see, you too have good reasons to be interested in your accounting. Even for small entrepreneurs who are not legally obliged to do so, it is advantageous to keep detailed records.
Information on profit and loss
To start a company, capital is needed, i.e., the financial means to purchase machines and raw materials, etc. Some people can raise these funds themselves, but most look for investors. Whether you have self-financed your start-up or received help, a return is expected.
You may not always like to hear it, but at the end of the day, owning a company is also about profit. How do you show your investors that their profit targets have been met? By keeping a complete and accurate record of all financial developments – accounting that is.
Future planning and strategy
In order to achieve these profit targets, you have to make many decisions and formulate strategies for your business. However, it is impossible to take any meaningful action, if you do not know how your company is doing. Accurate accounting gives you a clear overview of your financial situation. What measures are working well? Where are you losing money? Which customers spend a lot of money, which spend less? Which marketing strategies have been particularly successful? Accounting gives the answers to all these questions. Base your decisions on this information and success is already guaranteed.
Overview of debts and receivables
Nowadays, many transactions are carried out digitally. Businesses no longer buy and sell with cash, but with invoices. So, there is often a certain time gap between the moment you send the invoice and the moment it is paid. You therefore need to make sure that you still have enough in your bank account at the end of the month to pay off your own debts. To do this, you need a proper accounting system that records every invoice created, open or paid, giving you control over your financial situation. You can also provide the necessary evidence in the event of disputes with customers or suppliers.
Pricing
Additionally, accounting helps you with pricing. To stand out from the competition, you might want to offer a certain discount occasionally. How much can you deduct without making a loss? A good overview of your own expenses and income helps to choose exactly the right price. This allows you to gain more customers and motivate them to stay.
Long story short: There is no way past accounting. It is crucial for the success of your business. That being said, we at Atlanto know all too well that it is not always easy or interesting. That is why we offer the module “Sales & Accounting” which allows you to keep records online, quickly, and easily – with or without an accountant. We offer a 30-day free trial; why not give it a try? If you are still completely lost when it comes to “accounting”, then take a look at our free course “Introductory course on accounting”. We look forward to meeting you!
