Basic accounting is an unforgiving unyielding world of debits, credits, depreciation, payroll, and government forms. But as you get more experienced in running your business, you should factor in a more intangible phrase from Management Accounting; OPPORTUNITY COST.
Opportunity cost is easy to define, but a lot of business’s don’t consider it often enough. Pretend you own a 20,000 square foot farm and milk 50 cows, ending up making a profit of $2000 a month.
Another farmer has the same size farm filled with alpacas, and makes a profit of $10,000 a month, giving tours and harvesting alpaca fur. The first farmer had the OPPORTUNITY to make $8000 more in the same amount of space.
Probably not many of you are going to start an alpaca farm next week, so how does opportunity cost fit into any business, and small business accounting in Denver?
Any small business can identify with the owners in the latter examples. Owners frustrated with costly accounting errors, and trying to find a few more available hours in the week to make profits.
If you’re missing opportunities because your business is getting too big to handle the paperwork by yourself, but too small to hire a full-time accountant, do consider working with an outsource bookkeeping provider like LUXA.