Bookkeeping and how to avoid falling behind
Bookkeeping, Among all the important tasks you have to do each day as part of your business, it probably doesn’t make it to the top of the list. You have customer queries to respond to. Products to launch. Employees to hire. Marketing to do.
As long as you are caught up on your bills, your payroll is being met, and your invoices are going out to clients, does it matter if the rest of your books are in disarray?
The answer is yes.
Nearly every aspect of your business is made up of transactions, from payments and purchases to sales, expenses, and payroll. Whenever money comes into or goes out of your business, it needs to be tracked, and if you wait until tax time to make sure everything is in order, you’re going to have a mess on your hands.
That’s not the only reason to keep up on your business bookkeeping. Here’s why it’s so important to make sure your books are in good order, whether you handle that yourself or hire an accounting professional to manage the day-to-day tasks for you.
You’ll get a clear view of your finances
Are you making decisions for your business based on facts and numbers? Or are you relying on guesswork? Without accurate financial records, it’s difficult to make smart business decisions. That’s because you don’t have a clear view of the financial health of your business.
Without accurate bookkeeping, you won’t be able to track your cash flow. You’ll miss issues like overdue invoices and unnecessary recurring charges. You may end up paying more in shipping costs or wages than necessary, simply because you aren’t able to see a pattern. When your books are up-to-date, it’s easier to see the story behind the numbers, which can lead you to make smarter financial decisions to help grow your business.
You’ll get a handle on your cash flow
Do you find yourself scrambling at every payroll period, or unable to make necessary investments that you know will grow your business?
You might take a look at your profit and loss statement or your monthly revenue and think, “I should have enough money for this!” But if you don’t have your books in order, it’s impossible to pinpoint where your cash flow problems are coming from.
You’ll keep more of your profits
When your books are in order, you won’t end up losing track of unpaid invoices or forgetting to pay bills. That means avoiding costly late fees and getting paid faster by clients and customers.
Also — and this goes hand-in-hand with having a better grasp on your cash flow — you’ll have less risk of overdraft in your bank account when your books are up to date. All those small fees for overdrafts and late payments add up. Keep more of your profits to invest in expenditures that will truly grow your business by keeping on top of your bookkeeping.
You’ll be confident in your salary
Calculating your salary as a business owner and understanding how much money you can take out from your business as an owner’s draw is incredibly difficult to do if you don’t have a firm grasp of your business’s finances already.
Hiring an accounting professional to keep your books in order gives you confidence when it comes to your salary. They can help you calculate exactly how much to pay yourself based on your cash flow and tax burden, rather than just guessing based on what’s currently in the bank.
Tax time will be a breeze
When you take the time to keep your books in order throughout the year, you won’t find yourself scrambling and stressed out when it comes time to do your taxes. (And your CPA will thank you.)
If you are already working with an accounting professional to manage your bookkeeping in accounting software such as QuickBooks Online, Sage One, or Xero, you’ll be one step ahead of the game. It will be simple to run reports for your CPA if your books are already up-to-date.
Remember. As a business owner or entrepreneur, your time is best spent on the things that move your business forward. Don’t waste your time or money scrambling because you haven’t kept your books up-to-date. Talk to the accounting professionals at MBSATA about how we can help. Let’s chat.
Images from: Tim Gouw