As a business owner, keeping records of your finances is essential. This includes all income and expenses, as well as tracking your assets and liabilities. It is what we call, accurate bookkeeping. But is bookkeeping really that important? The answer is yes. In fact, many have already suffered the consequences of not keeping their financial records up-to-date. Let’s talk more to find out why businesses should not take bookkeeping lightly.
Reasons why accurate bookkeeping is so important:
1. Budgeting
It is critical to note whatever is coming in and out of your business. A small business bookkeeper helps you manage your income and expenditure to ensure you do not exceed your financial ability. Budgeting makes it easier to forecast your expenditure and plan on the expected resources.
Accurate bookkeeping allows you to smoothly analyze your expenses while creating room for adjusting your budget. For example, a payroll company helps streamline your workforce to ensure you work with the best systems and few employees. As a result, you cut down your expenses and work with a minimal budget.
2. Accurate recording of financial transactions
A small business bookkeeping firm understands the importance of a business having accurate records. Without having accurate records, it is easy to make the wrong decisions and pitch inaccurate information to potential investors.
Investors depend on the accuracy of your financial records to make an investment decision regarding your business. They need to understand the financial performance of your business through proper accounting procedures.
3. Financial analysis
It is vital to analyze your business performance periodically. It helps you know which direction it is taking, giving you ample time to rectify problems and develop better solutions. Financial statements help you to keep track of the different transactions taking place in your organization.
Analyzing your business inflows and outflows helps you know what is working positively or negatively for your business. A small business bookkeeper can perform a SWOT analysis to identify what you need to focus on and which improvements you should make.
4. Financial organization
Being organized at home or work is never easy for many people. Financial organization is a skill necessary for small business owners. It helps you to find information about your business easily. Financial organization is vital, with parties such as IRS, creditors, investors, and clients being on your case about your business’s financial records.
Hiring a bookkeeper helps you keep your records organized, enabling you to provide them on request promptly. As a result, you can evade penalties and fees from the IRS. You also get to build a good relationship with your investors and creditors by providing your financial records on time.
5. Taxation
Small business owners are usually jacks of all trades. They try to juggle accounting, marketing, customer service, and many other areas of their business. Consequently, they hardly get time for other things like taxation. The tax filing process is one activity that most small business owners dread.
Qualified bookkeepers should handle your business and personal tax returns since your income comes from the business. They should ensure you do not have to scramble for receipts and invoices when it’s time to file for tax returns. Furthermore, they will also make sure you do not miss out on potential tax deductions.
6. Better and quick decision-making
Small businesses need to make the best decisions, to have the edge over their competitors. Proper small business bookkeeping enables a business owner to make accurate decisions for the profitability of the business.
Keeping your business records organized helps you to make decisions in real-time. You easily access accurate information that helps you to make quick decisions. For that reason, you can save your business from going under.
7. Financial planning
In business, you must have a well-thought-out plan to survive the cut-throat competition in most niches. Having your books in order helps you to analyze your past and present financial performances. As a result, you can make calculated and strategic plans for your business.
Hiring the right bookkeeper helps you in tax planning. A bookkeeper can properly categorize your expenses and revenues to ensure it favors your business during taxation.
8. Track profit and growth
Business owners need to know about their business’s financial standing in order to gauge whether their business is financially ready for expansion. The best way to determine that is to check your books.
Bookkeeping enables you to track your business’ growth and profitability. Accurate financial records help you know whether you are on the right track to achieving your ultimate goals. By tracking your business’ growth and profits, you can make necessary adjustments to achieve your optimal targets.
9. Peace of mind
Peace of mind is critical in the running of business operations. You need to make sober decisions for the smooth running of your company. To achieve this, you need to have your books in order.
Disorganized books can gnaw at you, keeping you worried day and night, knowing your financial records are not review-ready. Hiring a reputable accounting firm gives you peace of mind and plenty of time to work on other equally important activities.
10. Improve cash flow
Small business owners recognize the importance of cash flow in their organizations. Accurate bookkeeping helps you to track your payments to vendors and account receivables. That being the case, you become aware of your customers’ payment patterns and when you need to pay your outstanding vendors’ invoices.
Keeping your books in order helps you ensure you have the sufficient cash flow to make timely payments to your vendors. It also helps you track when customers should pay, and you can shorten this time to ensure you have ample cash flow for effectively running your business.
11. Easier IRS audit
Keeping your financial records organized prepares you for an IRS audit. It makes it easier to answer any questions that the IRS may have when they pay you a visit. When your books are not in order, it prolongs the auditing process, resulting in penalties and fees.
Nobody wants the IRS to dig deeper into their records because it exposes them to more penalties and fees. Therefore, it is critical to have your financial statements up-to-date, which shortens the time that the IRS spends on your books.
12. Requirement by law
The law requires small businesses to keep their personal and business records separate. It also requires businesses to take their financial records into account. Since bookkeeping is required by the law, it is essential to ensure that your financial records are up-to-date. Consider hiring the right experts who can ensure your books are in order.
13. Knowledgeable and informed about accounting procedures
As a business owner, you will find yourself learning more about the various departments in your organization. Your accounting department plays an integral role in your business’s survival. You may not be an expert in accounting, but sufficient knowledge about the inflow and outflow of your money will help you make the right decisions. It can also help you identify gaps and loopholes in budget spending.
14. Reporting to investors
Having your business records in order is essential when it comes to seeking financial assistance. Investors want to know what they are getting themselves into by checking your financial performance. Previous and current records help them to make informed decisions.
When reporting to investors, your financial records need to be up-to-date and accurate. Investors make their decisions based on the performance of a business. Keeping good records increases your chances of getting the investment you’re looking for.
Summing up
Small businesses need to up their game and put their best foot forward to compete. They need to give it their best shot to have a chance at succeeding among veterans. Accurate bookkeeping is one of the ways they can achieve this goal and remain competitive within their industries.
Gone are the days when bookkeeping was all about paperwork. Today, accounting software has facilitated the bookkeeping process, resulting in more efficient methods of operating. With most companies going digital, it is crucial to digitize accounting processes to ensure you remain relevant.
If you want accurate bookkeeping for your business, consider hiring a reputable accounting firm. One of the trusted accounting firms in Florida is Swiftbooks, LLC. Call 786-204-2881 today to help your business keep its financial records straight!
