Why Bookkeeping is CRITICAL for the health of your business
1. Better Financial Analysis & Management For small businesses, cash flow management is one of the most important things to keep an eye on. Delaying invoices, not following up on customer payments or not paying a supplier can bring down your business. Most importantly, good bookkeeping serves as an essential tool to get an accurate financial picture of your business, which helps you make better business decisions by allowing you to analyze profitable and unprofitable products or activities.
2. Tax Returns Tax returns are much simpler (and less expensive) when you do not have to rush around to find bills or try putting expenses down from memory come tax time. A simple click in QuickBooks is all it takes to create Financial Statements or view reports of Profit & Loss, Balance Sheet, or Cash Flow.
3. Asking for Funding from a Bank requires financial statements Eventually, if you want to sell or exit – you need financial statements for at least a few years. Messy or erroneous statements will cause every buyer to run a mile away!!
4. Business Planning Well-kept books make planning or budgeting so much easier. Sitting down to check your Balance Sheet and P&L and compare against budgets and estimates to see if you are on track is critical to your success.
5. Separating personal and business funds Not separating your personal funds from your business funds causes many businesses to be penalized by the IRS or even fail. A jumbled mess of transactions over the long term will make you miss deductions you are entitled to, or put in wrong ones and be penalized, or take on much more risk with your hard-earned personal savings than you realized that leads to personal bankruptcy!
6. Record keeping is required by law Records such as receipts, canceled checks, and other documents that support an item of income or expense (deduction) should be kept until the period of limitation expires for that year’s tax return.
Most small business owners are extremely busy just running their business. When they come home the last thing they want to do is to do bookkeeping or accounting. However, given how extremely important this function is to a business, investing in a professional bookkeeper is something all businesses should do. If you keep all bills and invoices, and make sure to keep your business and personal finances separate – outsourcing a professional will not take much time to prepare the books each week/month depending on how big the business is, and will definitely pay for itself over the year.
