When growing your moving company, you’ll make countless decisions that will influence the growth and sustainability of your company.
Some of these decisions are absolute requirements if you want to create a moving company that lasts through economic trials and changing industry trends. One of the biggest decisions to make when setting your company up for long-term success is how will we financially track and fund our company growth?
Our friends over at Pro Mover Accounting gave us their top 5 reasons why accurate accounting is essential to your moving company.
1 - Taxes
The word that every business owner dreads. Though we all must render unto Caesar that which is Caesar’s we still do not want to pay him more than we must! Having accurate accounting ensures that you are only paying tax for applicable revenues, net of applicable expenses. Not only is sorting out revenues and expenses important, but tax structure is equally important which is why it is imperative to have a tax accountant that you trust early on in the life of your company. Instead of immediately getting a CPA (Certified Public Accountant), as CPAs can be expensive, we recommend researching local tax accounting firms in your area to find the right fit for you.
It is important to note that there are certain circumstances that require a CPA (most notably in the need to be represented in court and to submit audited financial statements). Therefore, business tax accountants that are knowledgeable in your local and federal tax laws are recommended in order to keep your professional fees at a minimum when possible.
2 - Lending
Leverage from a bank or low interest lender can be an extremely powerful tool to help grow your moving company. Loans for trucks or a LOC (Line of Credit) to fund the slow winter periods in this industry can be extremely useful, but are often not freely given without verification of your company’s financial stability. For a lender to provide you a loan, a commercial underwriter will want to verify that you have the ability to repay the loan.
To do this, they will require you to have adequate collateral as well as meet certain requirements to verify your repayment ability. This is where accurate accounting is extremely advantageous. Being able to provide a lender accurate and easily legible data will be a major determinant of whether or not a lender will provide you the leverage you need to grow your moving company.
3 - Plugging the Holes
Not only will accurate accounting allow you to pay your taxes and take out loans, but it also allows you to run your business and make a profit. We use the scenario of filling a bucket with holes in the bottom; no matter how much water you put in a bucket with holes, the water will never stop running out until you plug the holes. The same goes for your moving company.
For example, at Pro Mover Accounting, companies will come to us with 4, 5, or 6 million in sales per year, yet never make any net profit. That is because as their company continues to grow, they never plug the holes. As their revenue goes up, their expenses go up with it and they never plug the holes in their company’s proverbial bucket. Use accurate accounting to plug these holes early on.
4 - Reporting and Cash Flow Review
Cash flow is a metric used by many small business owners, yet some do not fully understand its effects and how best to use it. Many companies look at their bank statements each month and make decisions based on is there cash in the account or not? This is an ineffective way to make decisions and usually leads to companies going into high interest debt or even shutting their doors. Even more experienced company owners sometimes do not understand the Balance Sheet and Profit & Loss function and feel that their Net Income at the end of each month is what they have to cash flow expenses. Again, this is not a true representation of cash flow and is another reason why it is imperative to work with your accountant to understand the reports you are reviewing, so you can make decisions based on accurate data.
On the contrary, having accurate reporting and accurate cash flow metrics that you understand allows you to see exactly what your free cash flow is at the end of each month. By reviewing budgetary data and historic monthly trends, you can make the most accurate cash flow based decisions that are best for your company.
5 - Projecting and Funding Growth
Finally, accurate accounting allows you to project and fund the growth of your growing moving company. For example, let's say you want to reach $1 million in sales next year.
- How many people will you have to hire, and when?
- How much money will you need to spend on advertising to bring in enough sales to reach your goal?
- Even if you do reach your goal, will you actually make any money, or is your bucket leaking more water then it's even being filled with?
When you know the answers to these questions, the question changes from How do I reach $1 million in sales next year? to How do I pocket $200k next year?
Your focus completely shifts when you see the effects of accurate accounting and how it will positively impact the growth and long-term success of your company.
If you’re looking to get accurate reporting from your moving company activities, visit Pro Mover Accounting and schedule a meeting to see if their services are the right fit for you!