Bookkeeping is critical to the success of any business as it helps to maintain the financial records and allow you to track the ins and outs of the business. Moreover, you are required by law to maintain accurate books and records, which will save you frustration down the road. In fact, one of the main reasons businesses fail is due to “poor accounting”. So if you are not sure about going this route, below are 10 reasons why you should consider doing your bookkeeping.
1. Helps You Budget
Bookkeeping helps you plan out your budget better. When income and expenses are reconciled, it makes reviewing financial resources hard. With a budget, you can create a financial roadmap for your business, plan future expenses and determine what resources required to cover those expenses are.
An important skill required of every successful business owner is to be organized. This makes it easy to find information regarding your business at any time. Being able to provide the required information to interested parties in your business such as the IRS, investors, customers, and lenders is vital to your ongoing operation. Bookkeeping makes it easier to keep financial records, locate and provide them when needed.
3. Tax Preparation
Every year, millions of business owners scramble through their desks trying to find missing paperwork but proper bookkeeping can make the tax filing process more efficient.
With a bookkeeping process in place, you can have financial information ready for tax time. You can have all of your financial information organized under one central system, rather than scrambling for receipts or invoices.
4. Business Analysis
Bookkeeping helps with business analysis. Many businesses are able to analyze business performance. Financial statements are the product of bookkeeping and should be used regularly for analysis. It allows you to analyze the business lines that are working or not so you can know the strengths and weaknesses of your company.
5. Better Decision Making
Analysis improves decision making. Accessing all the available information helps in making the best decisions. This comes from bookkeeping. You can’t expect to make profitable decisions without the right financial information to back it up.
6. Planning Purposes
Bookkeeping lets you see the past financial performance of your company. If you don’t understand the past, you can’t plan for the future. Not only does it help with planning for strategic purposes but it also helps in tax planning. With bookkeeping, you and your CPA can structure expenses to be more favorable.
7. Easy Reporting to Investors
The performance of your business is crucial to investors as they want to be able to know if their investments are worth it. Bookkeeping allows you to make financial statements that keep investors up to date and help them make better, well-informed decisions. Bookkeeping isn’t just for current investors but for future ones as well, as organized financial information can help prospective investors decide whether to invest in your business.
9. Peace of Mind
Disorganized books can unsettle your mind. That added to all the issues of running a business shouldn’t keep you up at night. Complete books give you rest knowing you have your company’s financial information review ready. You don’t have to be anxious about banks or the IRS anymore. Instead, your mind will always be at ease allowing you to focus on other aspects of your business.
10. Required By Law
Lastly, the law requires you to keep financial records for your company. Depending on the legal structure of your business, financial records should be kept separately from your personal expenses. Failure to do this can lead to termination of your business.
Now you have some good reasons for bookkeeping. It will save you money, time, and a headache. If you find the need to implement bookkeeping, it will help to hire professional bookkeepers. Accounting and bookkeeping can be a complicating and convoluted process and you can’t go at it by yourself.