Most SMES repeat the mistake of preparing accounts for the sake of Malawi Revenue Authority. This in turn forces them to lose the tangibility of financial statements. Before you get excited with your accounts you should be able to enjoy the benefits below. If you are unable to meet the benefits below, then you are an employee of Malawi Revenue Authority and no wonder you worry about your boss (Taxes) all the time.
1. Decision-Making tool: Ask the Accountant who will be preparing your financial statements to assist you with an interpretation of your financial statements. Financial statements will be historical, getting the meaning will help you set plans for the future. The historical records are there to aid you in predicting the future of your business.
2. Trend Identification: You should be able to identify trends in income and expenditure lines. For Example, if you sold 5000 items in the previous year and 8000 this year, what is the cause? what about if it has dropped? Why you paid more than double this year on fuel and transport? This is your duty to identify the trends and take it into action.
3. Prepare Budgets: Financial Statements should be good enough to aid you with the preparation of budgets for your business. Have you ever prepared a budget for your business? Why not? So you don’t have a vision, goals and objectives? By analysing your past financial statements, you should be helped to prepare blueprints for the future. Not preparing budgets implies that you are expecting nothing from the future. You are ready for any outcome. You can’t control what you did not plan.
4. Financing Options: Most businesses suffer from this angle. You might be a successful businessman but history will tell you that there were successful businesses that went down within a short period because of loans. Are you doubting? ask your friends, many examples are out there. You can not be wise than your financial records when it comes to planning about the future of your business. Ask your financial records whether it’s necessary to finance your business through loans. I always advise SMEs to seek guidance from an Accountant when it comes to obtaining loans to finance their businesses. S/he will always forecast the viability of the loan.
5. Compliance: Lucky enough most businesses prepare accounts for compliance. But its unfortunate that the other benefits are omitted, unfortunate not so? This is one way to ensure you are operating without fear but it lacks completeness. Just submitting your accounts to the Malawi Revenue Authority and waiting for more than 10 months to get feedback from them sounds bad. You need to know your tax stand and seek guidance from a Tax advisor. For Non Profit organisation the accounts are also essential when renewing membership with the authorised boards.
Most SMEs don’t keep complete information and that hinders them to have accurate financial statements even from the best Accountants. The reason is simply simple, they undermine the value of records.
Your business is in your hands. If it fails it’s you, if it reaches mountains it’s you again. For guidance and assistance contact us on 0888295137/0997241351 or email;email@example.com