So, you’re starting a business. Pretty daunting, right?
If this is you, chances are you’re probably in the throes of organizing your day-to-day activities and the last thing you’re thinking about is preventing your business from going bust in the future. We’re talking about things like understanding your legal agreements, managing risk, and familiarizing yourself with numbers on financial statements.
We hate to say it but these are things you’re going to eventually have to deal with. And if you don’t take them seriously now, your business could fall down before you’ve had a chance to get it up and running. Let’s face it: that’s something that nobody wants – ever.
But since everyone is human and no one person can be expected to know everything, you can thankfully turn to a business advisor for help. Vancouver-based accounting and advisory firm Manning Elliott LLP is home to a number of qualified professional advisors who can help you focus on the less-inspiring, but no-less-essential specifics, like compliance and getting money back from your expenditures.
So, what are the key elements that businesses should address in their early stages? Daily Hive sat down with accounting specialist and business advisor at the firm, Gurdev Chandi, to discover what he thinks.
Just because you recognize a gap in the market for an ice cream delivery app, doesn’t mean that it’s going to work. “We work with a lot of people in the tech sector, and when they have an idea to expand a product line, right away we’ll ask them questions to make them justify doing that both from a tax and a profit standpoint. I think they find that helpful because they’re being questioned on the overall potential profitability and if they can justify the idea, that helps their business to move forward. And then of course there are structures that we put into place to maintain any hard-earned wealth so it all comes back full circle.”
In order to start a business you need an idea and the capital to bring that to life. Unless you’ve won the lottery, chances are you’ll be using some kind of financing. One big problem that arises here is that the bank gives you an agreement full of legal jargon that you can’t make sense of but that you’re required to sign off on. Instead of signing a binding agreement that you don’t understand, bring it to a business advisor who looks at those kinds of documents every day. They can basically translate it for you. “Financing is one of the reasons an entrepreneur will lose sleep. Even if you don’t need the money right away it’s better to have financing organized in advance in case you need it, and that’s a key thing for entrepreneurs to understand.”
You really don’t want something terrible to happen to your business at any stage. But this can easily happen in the fast stages of growth where you just don’t have the time to examine what everyone is doing. According to Chandi, understanding the internal financial controls that you need to have from the onset will allow you to expand without things happening down the line like “fraudulent issues, theft, and misappropriation of cash.” As an example, “the person who receives your cheques shouldn’t be the person entering the transactions in your accounting software and depositing them. They could be tempted to do something wrong and easily manipulate that system. I’ve seen this mistake lead to hundreds and thousands of dollars being misappropriated over a number of years.” And yes, this can lead to the failure of a business.
Audits are a real thing for startups and more established companies. And if you don’t have your relevant accounting and property documents in order, you could face big tax issues for not having your company set up appropriately. “Those that are operating as sole proprietors are definitely at risk of these issues, and asset protection becomes key before taking on any sort of venture. When you’re starting up a business your objective is sales, you’re trying to build your business, you’re trying to make revenues, and build your company up so you’re not really thinking about schedule nine of a tax return. I’ve seen passionate entrepreneurs but that doesn’t make them successful; what does is understanding that there are practices that businesses have to go through with.”
We hate to say it, but you really do need to work on understanding financial statements if you want your business to make it. Don’t panic if numbers are like foreign objects to you, though – that’s where a business advisor comes in. “Every time I finish off a compliance engagement for a client I sit down with them and go through the financial statements with them to make sure they understand how to interpret the numbers. If you do that over and over a couple of times, they start asking you questions and they’re questioning those results so that helps them make decisions that impact their business. If you don’t know if you’re making money or not, how can you make those decisions and expand? How can you hire someone if you don’t know how much you can pay them? It doesn’t make any sense if you don’t know the numbers.”
Turning your idea into an operational, successful business could be a lot easier if you work with an external business advisory firm like Manning Elliott LLP.
Manning Elliott LLP is one of the province’s largest independent regional accounting and business advisory firms with offices in downtown Vancouver (604-714-3600) and in Abbotsford (1-604-557-5750). The firm has been around for more than 60 years and employs over 150 professionals and staff.