Bookkeeping is important for helping you maintain accurate financial records. However, many businesses fail to implement this integral process. You are required under law to maintain accurate books and records. Doing this will also save you from frustration later on!
In fact, “poor accounting” is one of the top reasons businesses fail. Without bookkeeping or accounting, you are blindly driving your business.
Still not convinced that your focus needs to be on bookkeeping? Below are just a few reasons why bookkeeping is important:
- Bookkeeping Helps You Budget - When income and expenses are properly organized, it makes it easier to review financial resources and expenses.
- Tax Preparation - You can have financial information ready for tax time. Instead of scrambling for receipts or invoices, all of your financial information is organized on one central system.
- Organization - Being organized is a skill every business owner should have. You should be able to find information regarding your business at any time. There are a few parties that are interested in your company’s financial records – the IRS, employees, customers, investors, and lenders. Being able to provide the information requested by these parties are vital to your ongoing operation.
- Analysis - Business analysist is a tool used by management to analyze business performance. The product of bookkeeping is financial statements which should be regularly generated and used for analysis. While analyzing financial statements, you can track your cash inflows and outflows.
- Easy Reporting to Investors - Investors want to know the financial performance of your business to be able to want to quantify the value of their investment. The balance sheet, income statement, and cash flow statement all present the value of your business.
- Financial Management - Take control of your business’ finances. Bookkeeping paints a clear picture of how you spend money. It's this delicate balance of cash inflow and outflow that will keep your business going.
- Peace of Mind - Disorganized books can weigh heavy on your mind as a business owner. With all of the other factors of running a business, your bookkeeping should not be keeping you up at night.
- Easier IRS Audit - In the unfortunate circumstance, you are audited by the IRS, you want to make sure your books are in order. Messy books prolong the auditing process, making your business more susceptible to fees and penalties.
Bookeeping also allows you to make better business decisions, track growth and profit, and plan for the future of your business. It can lead to better cash flow, peace of mind, and provide a snapshot of your business. The law also requires you to keep financial records seperate from your personal expenses.
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