As a small business owner, choosing the right accounting services is crucial for managing your finances effectively. When doing so, you might consider whether monthly or annual accounting is the better fit for your business. Each approach has its own set of benefits, and understanding these can help you make an informed choice.
Monthly Accounting: Growth Centric
Monthly accounting provides you with frequent updates on your financial status, ensuring you have the most current information to make decisions. This approach offers several key benefits:
Benefits:
- Timely Insights: Regular updates help you stay informed about your financial health, allowing for quick adjustments and informed decision-making.
- Enhanced Budgeting: Monthly reviews of your budget can help you make timely changes and improve financial planning.
- Effective Cash Flow Management: By monitoring cash flows on a regular basis, you can identify trends and address potential issues before they escalate.
- Improved Accounting Relationship: We talk about this often. You need to know and like your accountant so that you are faster to call them when the need arises. Talking through potential business decisions with your accountant can save you time and money later down the road.
Considerations:
- Higher Cost: Monthly accounting services generally come with a higher price tag due to the increased frequency of interactions.
Time Commitment: More frequent meetings or calls with your accountant require a greater time investment from you. However, this can be customized to fit your preference. We have clients that prefer monthly in person meetings and others who we see twice a year, communicating mostly via zoom, email, and phone.
Annual Accounting: Report & Inform
Annual accounting offers a broad overview of your financial status once a year, which can be more cost-effective for small businesses with stable finances. This option is ideal if you prefer less frequent updates and are focused on long-term goals.
Benefits:
- Cost-Effective: Annual accounting services are typically less expensive compared to monthly services.
- Less Frequent Updates: Requires fewer meetings, allowing you to focus on other aspects of your business.
Considerations:
- Delayed Insights: Less frequent updates might result in missing out on timely financial insights and trends.
- Risk of Oversight: Potential issues may go unnoticed until the end of the year, which can have an impact on your business.
- Tax Consequences: If you’re not reviewing your company’s numbers and speaking to your accountant regularly, you have the potential of paying more in taxes. By the time annual accounting is done, you’re usually already out of time to implement strategies to lower your tax bill.
What’s Best for Your Business?
Choosing between monthly and annual accounting services depends on your business’s specific needs and preferences. If you require regular oversight and timely financial updates, monthly accounting might be the better choice. We always recommend this route for businesses who are looking to grow.
However, if your business has a stable financial situation, you’re happy with the status quo, and you prefer a more cost-effective option, annual accounting could be suitable.
If you’re ready to discuss your specific situation, schedule a consultation with our expert team today. We’ll work together to create a strategy that aligns with your business goals.
Joy Lutz, CPA, CTP
As the founder of Aligned CPA, Joy has built a firm that is your strategic financial partner. With a growth centric approach, we build meaningful relationships with our clients because we value their success as much as our own.
Positioning ourselves as the tax and financial strategists for your business, we help you make empowered, financial-based business decisions that lead to long term success.