Bookkeeping is Essential
Bookkeeping is essential for your business. It is all too often overlooked as an important part of a business. It can measure true success or failure of your business. Understanding where the money comes from and where it is going is important to know what is
working and what isn’t. There are many benefits of bookkeeping and learning how to
properly manage it. Poor bookkeeping can lead to being turned down for financing, a
negative commercial credit rating or even lost tax deductions. However having your
books up to date doesn’t matter if they aren’t accurate and this puts your business at
There are many benefits to managing the books. When effective bookkeeping procedures are in place, making smart business decisions are at your fingertips. It would be hard to make business decisions based on limited information and knowing your entire financial situation is very important. A key component to business decisions is cash flow
management. Managing your cash flow involves recording every penny that comes in
and out of your business to find ways to increase income and decrease spending. This
tracking is also on the balance sheet and the income statement reports along with the
statement of cash flows. It is important to review all these reports together for proper
management of the books.
Poor bookkeeping can impact your expenses, income, your ability to pay your bills in a
timely manner and your banking needs. Expenses must be recorded to monitor your
overall spending throughout the year and receipts must be maintained to accompany
those expenses. You could be spending too much on expenses impacting your
profitability. Recording your income is very important for tax compliance. You do not
want report more income or under report income than was actually received. By not
properly recording your bills, this may lead to late payments, late fees, and unnecessary bank fees. Banking is a necessity for all businesses and poor records may hinder your
ability to receive financing and potential account closures.
It is important to keep the books up to date however if they are not accurate your
business could be at risk. The biggest risk is to your tax compliance. If your profit is
miscalculated, you may overestimate your profit resulting in paying too much taxes or
you may underestimate your profit and that may result in fines for the underpaid taxes. Assets and expenses can be miscategorized also resulting in paying unnecessary taxes.
An essential part of accurate bookkeeping is maintaining appropriate receipts and
uploading them to your accounting software. When it comes to tax time, you will have
all you need in order to claim writeoffs. Deductions can be identified quickly without
having to review a file folder full of receipts or depend solely on the business owners
inaccurate books. Your accountant will easily be able to review your books to complete
your taxes accurately.
Bookkeeping needs to be a part of your everyday business tasks. Bookkeeping is an essential to analyze your overall financial health of your business. Proper management is imperative to the success of your business.