IMPORTANCE OF BOOK-KEEPING FOR A SMALL BUSINESS
When you’re running a small business, you often have to wear many hats. One day you’re helping customers, putting together your marketing strategy, and meeting with team members. The next day you might be ordering supplies, fixing broken equipment, or simply filing paperwork. As a business owner there’s always a lot going on.
One of the most important tasks you have is overseeing the financial operations of your company. Bookkeeping plays an essential role when it comes to financial management.
Let’s take a look at why bookkeeping is such a crucial part of running your business.
GUIDES YOUR DECISION MAKING
In order to make prudent financial decisions about the direction your business is going, you have to have the information at your disposal to support the decision-making process.
Bookkeeping provides you with detailed insight in areas such as revenues being generated or what your biggest expenditures are. You can use this information to look for patterns in your operations, such as whether your income is seasonal, how expenses are changing over time, and whether they can be adjusted. You can also use your financials to make decisions such as whether you can afford to hire a new employee or expand your business. Having timely bookkeeping allows you to create a budget that helps to support all of these decisions.
Business taxes. This is something that business owners must comply with each and every year, but most business owners don’t look forward to. Filing your tax returns can be complex, but by focusing on bookkeeping, you can make that process a smooth one by having financial records that reflect the business’ activities for the tax year in question.
Keeping your records organized and up to date will also prove to be very helpful in the case of an IRS audit as you will have the evidence to support the information provided in your tax return.
TRACKING PROFIT AND GROWTH
Bookkeeping allows you to maintain your financial statements that reflect your business activities over your years in business. You will be able to track your profits and growth over time. This also makes it easy to identify the customers or clients that are contributing the most to your bottom line.
Reviewing your financial statements also provides you with insight on expenditures that may no longer be necessary, opportunities to find more efficient alternatives, or line items that are having the most significant impact on the growth of your business.
Good bookkeeping allows you to plan, budget, and create a strategy for future opportunities for your business.
If you ever plan to seek out individuals or companies to invest in your business, having solid financial statements is essential. Potential investors will evaluate your income statement, balance sheet, and other relevant information about your business to determine whether your business represents a good investment for them.
Is critical as it will help your stakeholders determine whether or not they are receiving an adequate return on their investment.
IT’S A REQUIREMENT
Regulations require that you keep financial records related to your business operations. In most cases, you must (and should) keep your personal finances separately from your business finances. Failure to meet this requirement could result in the involuntary dissolution of your business.
Bookkeeping is a routine, yet essential component of your business’ operations. Without accurate financial records, you would be unable to make informed, prudent business decisions to continue your growth.
If you have any questions about the importance of bookkeeping for your business or you would like to learn more about our services, please feel free to contact us for more information.