What should my accounting records tell me?

SCORE counselor J. Mitchell Sincoff, C.P.A., QuickBooks Certified ProAdvisor, shares with us his thoughts on the basics of reporting your income properly.

The first basic of keeping an accurate set of books and records is that you know whether you can stay in business. Maintaining accuracy is important to determine your cost of goods sold, and thus what the true gross profit of your business is. This will enable you to pay your overhead and most important your salary. Determining your costs and profits can also be programmed per item or service performed. It is important to see if you are priced right in the marketplace.

Can you afford loss leaders and do they bring business in to your establishment? Is your service or labor charges priced correctly to take into consideration all the additional costs of employees? Without accurate records, you can easily guess wrong and go out of business.

Based on this information, major decisions can be made on how your company is really performing: what changes need to be made, where to raise prices, where you can lower prices, which items are selling, and which are not. Plus what costs are too high, where to trim, or cut back on coverage, is it time to expand, and what else needs to be done now or in the immediate future.

Other advantages of keeping accurate books and records that indicate you are properly operating a business are: increased line credit of from financial institutions to help finance additional inventory, renovations, and additional locations. A local banker in Jamesburg recently commented that most of the people who are looking for loans have no idea as to the profitability of their business and are not really clear as to how the loan will be used. When tax and business records are not reconcilable, how can the lending institute grant a loan?

Keeping accurate books and records is also a definite advantage if you are subject to audits by the I.R. S., the State Sales Tax or Income Tax or Unemployment Tax divisions.

In the event you are currently losing money, do you realize you could take those losses off your taxes in the future, or get it back from past taxes you have already paid? A good Certified Public Accountant, or a Public Accountant, using Congressional guidelines can reduce any increase in taxes you may owe and help get you the relief necessary to save your business. He or she will save you, many times, more than their fee is.

So, there are many positives to keeping an accurate set of books and records.


Richard Strug
Greater Princeton Area SCORE (Chapter 631)
Serving Mercer and Middlesex Counties