6 Reasons Good Bookkeeping Matters for Small Businesses
Small business owners wear a lot of hats. It’s no wonder bookkeeping is not always top of mind.
Some small business and franchise owners are actually fuzzy on what bookkeepers do. But skipping the chore of recording financial transactions and leaving it all to your accountant at tax time is a risky practice.
Professional bookkeeping help allows you to organize, store and analyze your financial information. With this data, you can accurately draw conclusions about the health of your business and plan strategically.
But, that’s not the only reason bookkeeping matters. The IRS requires you to report
- gross receipts,
- purchases,
- expenses,
- assets,
- travel, transportation, entertainment and gifts, and
- employment taxes (if applicable).
Without accurate bookkeeping, it’s hard to track and report these amounts to the government. Inaccurate reporting or failing to file can lead to penalties and fines.
Here are 6 ways an expert bookkeeping service can help your business grow:
1. By Keeping your Records Organized
When it comes time to budget, apply for loans or grants, or see if you’re turning a profit, bookkeeping allows you to find the necessary information quickly.
Good bookkeeping gathers all your financial data into one easy-to-read system.
2. By Giving you Information to make Wise Decisions
Business owners constantly need to make decisions about the future of their company, such as whether/when to apply for a loan, submit a grant application, hire new staff, buy new equipment, open or close a location, change hours, etc.
Business owners and their trusted bookkeeper—whether in-house or outsourced—can evaluate financial trends to make informed decisions. Look through your monthly financial statements to determine if you can afford to make the change you are contemplating.
3. By Putting Financial Data at Your Fingertips
The decisions you make are only as good as the timeliness of your information. By having organized information, you can create accurate financial records. Those records allow you to perform a variety of tasks.
- For example, if you needed to know how much you spent last year on advertising, you could gather up all the appropriate receipts and spend hours adding up every dollar.
- Or, you can record each transaction in your books as you go (or have your bookkeeper do it), and pull the data instantly when you need it.
4. By Simplifying Tax Filing
Tax time can be stressful. But if your in-house bookkeeper or outsourced bookkeeping firm has kept accurate records, they can give your accountant exactly what is needed in one email.
Instead of going through a pile of documents, invoices and receipts, your bookkeeper can present organized financial statements to your accountant, saving time and money.
And if you ever face an audit, well-ordered books will streamline the process.
5. By Making Planning Easier
With clear and accurate records, you can review trends to make a plan for the coming year. Questions like the following can be quickly answered:
- Did I have a record year, good or bad?
- Did sales go up, stay steady or fall?
- Did my suppliers increase their costs?
- Which clients were most profitable?
- Which locations?
- Which months?
- Which hours?
When it comes time to budget and forecast, you need to know how your business performed in the prior year. Overspending shows up on your books, and so do cost-cutting measures.
6. By Helping You make Your Case to Investors
Businesses need money to grow. That funding can come in the form of owner’s equity, grants, business loans and/or investments. But grant-makers, banks and investors will want a good idea of your past business performance before they will take a risk on you.
Funders will demand up-to-date, accurate and quickly-accessible information. If you don’t have well-kept books and financial statements, your data may not be available when you need it.
Reach out for a FREE, no obligation consultation and we can help you decide whether our Cincinnati based virtual bookkeeping and accounting service make sense for your small business at this time.