Opening your own business may seem straight forward, but there are many aspects in a small business that can be difficult. One such aspect that can prove to be challenging but is one of the most important pieces in any business, is flawless financial statements. Having accurate and organized financial reports can help keep a business running smoothly.
Up to date bookkeeping keeps you informed and helps you understand your business, without it a business risks its wellbeing. There are numerous ways in which proper bookkeeping can help a business flourish. It helps your business with attaining funds, handling working capital, following tax laws, and staying organized. Good Bookkeeping is essential, although not identical for every business, and remains the foundation to any successful business.
Bookkeeping can help with attaining funds.
At some point in time, you will reach the moment where your company requires additional funding. Investors most likely will not being interested in helping you if you are not informed when it comes to your financials nor current on your books. It could be detrimental to your business if you need cash and cannot get funded before taking care of your backlogged books. Most likely you will try to rush through updating the books, which may cause mistakes and incorrect data. On the other hand, if your books are done properly, investors will be impressed and more likely be willing to provide you with the funding you need. Unfortunately, brand new small businesses tend to be inexperienced when it comes to good bookkeeping.
Bookkeeping can help with handling working capital.
Bookkeeping helps you stay informed when it comes to your daily transactions. If you don’t record your finances on a daily basis, it is easy to lose track with what your cash is doing. Bookkeeping allows you to see exactly where your cash is going and helps you evaluate important features such as burn and run rates, which tell you the amount of cash it will require to get through a certain time period. This type of information is so important to a successful business.
Bookkeeping helps you determine how efficient your business is.
Looking at just the overall revenue of your business is not always enough. With proper books, you can examine the individual aspects of your business and determine if there are parts that are losing profits, or if there is potential for profits in other areas. You will be able to see if there is an area of your business that is bringing in a significant amount of profits and reallocate more sources to that area. Always having accurate and up-to-date books will allow your business to realize every opportunity there is for growth and success.
Bookkeeping allows for a business to recognize profitability and other Key Performance Indicators (KPIs).
Picture yourself out with your fellow entrepreneur friends, when they start talking about KPIs and you are unable to contribute to the conversation because you have no clue what yours are, that will be uncomfortable. Knowing the price tag you put on your product/service, and how much is costs to produce said product/service is not enough. You need to consider the cost of labor. You should also be aware of the indirect costs like fees on credit cards, or overhead expenses. If you are not tracking your business transactions and taking care of your business’s bookkeeping needs appropriately, the profitability you are seeing could be inaccurate. Similarly, if you are not considering all your expenses, even the indirect, you will not be able to properly understand any part of your business. If you ever need help making business decisions, this type of information is exactly what an advisor would be looking for.
Proper Bookkeeping helps a business follow all tax laws.
Nobody wants to get a tax bill in the mail and think, wait did I already pay that? Having your books up to date means you can easily check if and when you paid that bill. The last thing anyone needs it a massive fine and penalties to deal with and that is exactly what you will get if you do not comply with the IRS. Proper bookkeeping means you will always be ready for any possible tax bill that comes your way, and you will know exactly when you paid it.
Bookkeeping allows you to be audit ready at any time.
Your turn has come, and you got the letter saying your business is being audited. Wouldn’t you rather breathe easily knowing everything is in order since your bookkeeping system is top notch? You will be able to hand over your financials and business records with ease if your books are correct and current. Investing in your bookkeeping needs is easily paid off by being prepared in the case of an audit, as it could easily require 60+ hours for your bookkeeper to play catch up. Save yourself from the stress and get your books in order from the start.
Bookkeeping is a great way to help your business stay organized.
One question that you hear that you always want to be able to answer confidently is how your business is doing. If you don’t know what your financial status is, this question will be difficult to answer. Keeping your books current and correct will allow you to answer that question with ease. Good bookkeeping will give you a picture of the current status of your business and will allow you to know how it is performing and if it is growing. Bookkeeping is essential to knowing your business, and helps you make good decisions when any issues may arise.
Bookkeeping will allow you to see your business’s buyout potential.
What if an investor approaches you and is interested in buying your company? Knowing what your finances look like can help you determine the value of your business. This means you will also know if the offer said investor gives you is fair. If your books are not current or accurate, it could stall the buyout process and may even cause the buyer to lose confidence in the sale.
Keep in mind, your bookkeeper does not necessarily need to be a full-time employee. There are bookkeeping services that cater to business that are small to medium sized. Growing a business is hard work, knowing that your time is valuable, handling the bookkeeping yourself can be challenging. It is easy to overlook the fact that when your business grows, your bookkeeping needs do as well, and usually become more complicated too.
In the business world today, bookkeepers and accountants are becoming indispensable financial advisors. Bookkeepers are the front-line defense for the financials of your business, they examine your data and are quick to make a suggestion or mention a concern.
The data a bookkeeper gathers is transformed and used to make valuable assessments, and this can be seen by reading about the connection to cloud partners in platforms. Outsourcing your bookkeeping needs will help your business grow and help overcome future financial challenges.