Why Small Business Owners Need To Know The Basics of Bookkeeping

Here’s why business owners need to know the basics of bookkeeping. Image: Unsplash

While no business can survive without bookkeeping, numerous business owners dread this task because it’s seemingly time-consuming.

However, bookkeeping is an important part of any small business because it helps keep track of the business’s financial transactions.

Numerous business owners depend on their accountant or bookkeeper to inform them on their financial statements. However, it’s imperative that a small business owner takes the time to know the basics of bookkeeping for these reasons:

Growth and Profitability

Precise bookkeeping is essential to establish the profit your business is generating. A number of business proprietors don’t track this yet it’s vital. Bear in mind that bookkeeping allows you to have a better grasp of the progress you make annually.

It also allows you to evaluate past performance and make comparisons as a result. This provides a greater understanding of the areas that generate profits and where you can cut costs. Small business owners can also learn how to avoid future pitfalls and problems through monetary analysis.

Ease of Tax Payments

An important aspect that has a direct connection to bookkeeping is the manner in which you pay your taxes. If your balance sheet is organized and you know everything about your business’s cash flow, it becomes easier to calculate annual taxes.

You won’t need to search for the bills and you’ll also save your tax adviser some time and effort. In this case, the adviser will simply issue tax-related advice rather than rectify your statements.

Beware that the failure to remain current with your taxes can result in severe consequences-the government can enforce fines and penalties that could affect your business negatively.

Covering Business Costs

Bookkeeping ensures your business can cover expenses sufficiently and consistently. The business practice enables you to track spending and profits by providing an updated view of your current income, assets, and costs. This way, you’ll eliminate issues related to unexpected or unwanted debt.

Bear in mind that tracking and identifying possible cash flow problems early can help you decrease costs in a timely and suitable manner to decrease economic concerns in the future.

Development of Performance Charts

Small business proprietors should know when to increase their staff personnel and bookkeeping could help them understand the best time to do so.

Business owners will be in a position to compare their current financial standing against the previous status, allowing them to analyze the losses and growth. In turn, this will enable the development of performance charts, which are helpful in establishing a business’s standing.

Cash Flow

Businesses often work hard at building their brand yet overlook the cash flow. It’s crucial for a business to track its spending regardless of its size and this is only possible with precise financial records.

Numerous growing and seemingly lucrative businesses have failed because of a sudden and unexpected cash flow crisis. Irrespective of how busy you are, delayed invoices and lack of follow-ups on client payments could have a considerable impact on success.

Prevent IRS Audits

The IRS frequently targets small businesses due to common errors linked to poor bookkeeping practices. Therefore, you can avoid an audit from taking place by making sure your records are precise and updated when filing taxes.

If you’re audited you’ll have the information needed by the IRS to prove your returns are accurate and resolve the audit fast.

Reporting to Investors

With regular and precise bookkeeping, you’ll no longer have to worry about reporting to investors and sharing your company’s financial status. From charts to graphs, you can easily make a presentation to your investor.

Final Thoughts

Regardless of how skilled you are at offering a service, developing a product, or marketing your business, you’re likely to face cash flow problems, waste money, and miss out on opportunities if you don’t know the basics of bookkeeping.

Dailey Bookkeeping Services is a Xero Certified SILVER Partner and a QuickBooks Online Certified Advisor, so if we can help you with your bookkeeping needs, just give us a call, we would love to help you!  The owner, Jacqueline Dailey is a Certified Public Bookkeeper, an Advanced Certified QuickBooks and QuickBooks Online ProAdvisor, a Sleeter Group Certified QuickBooks Consultant and a Xero Certified Silver Partner. We work remotely so we can work with any company located in the U.S. If we can help you with this process or provide you with custom reporting, please give us a call. If we cannot help you, we will refer you to someone who can!  Feel free to visit our website at http://www.daileybookkeeping.com.

Dailey Bookkeeping Services
Dailey Bookkeeping Services

 

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