Every small business owner should be borderline obsessed with getting the nuances of accounting right on the initial attempt. Crunching the numbers to perfection on the first try prevents a litany of problems down the line. Do your accounting right the first time around and you’ll avoid all sorts of potentially time-consuming projects ranging from IRS audits to tax penalties and more.
Consider the Merits of DRIFT Accounting
DRIFT is an acronym commonly used by those in the accounting world to refer to Do It Right The First Time. In other words, the best accountants are hyper-focused on performing accounting the right way the first time without exception.
DRIFT managerial accounting is best described as a practice or technique designed to minimize waste and heighten efficiency throughout the production process. This approach also has a component of inventory management centered on strictly ordering only the inventory materials that are absolutely necessary to fulfill the overarching quest of minimizing inventory costs yet it also delves into other areas of accounting including paying close attention to the subtleties for 100% accurate accounting processes.
Getting It Right the First Time Conserves Resources
Use your mind’s eye to envision a scenario in which your small business accountant or manager makes significant accounting errs on the first go-round. These mistakes have a domino effect in that they will lead to all sorts of additional projects down the line. Take a moment to consider the negative impacts of getting accounting wrong on the initial attempt.
An accounting mistake sets the stage for scrutiny from business partners and those who own a share of the business. Furthermore, if you plan on selling your business at some point down the line and the accounting is incorrect, prospective buyers will perform their due diligence, find those errs and request that the numbers be re-crunched for accuracy’s sake. It is quite possible accounting mistakes will stand in the way of a potential acquisition.
Additional resources will also have to be invested in the event of an IRS audit. If the IRS determines your small business has not paid its tax bill in full, this agency will coordinate an audit. The ensuing audit will chew up your time, money, personnel and other resources. As is commonly said, your time is your money.
There is no sense dedicating your time, that of your small business manager and your accountant to satisfying the demands of an IRS audit when you can avoid such a problem in the first place with accurate accounting. Add in the fact that there is the potential for a punitive penalty from the IRS for underpaying your taxes and there is all the more reason to crunch the numbers the right way every single financial quarter without exception.
Clarity in Terms of Your Small Business’s Financial Position
If your accounting is not 100% correct, you’ll lack the clarity necessary to understand your company’s financial position. Even slightly inaccurate financials will paint a picture of your small business that does not represent the company’s financial reality. You need accurate accounting figures to make sound financial business decisions moving forward. If your business decisions are based on flawed numbers, there’s a good chance you’ll miscalculate and end up spending that much more time in the red than the black.
Inaccurate accounting also has the potential to lead to fractured relationships with suppliers and clients as it prevents your small business from fulfilling financial obligations as well as other demands in an accurate and timely manner. Instead of taking the chance that your inventory, revenue, cash-on-hand and other accounting metrics are accurate, invest the time necessary to crunch the numbers right on the first try and you’ll be able to move forward in full confidence.