Keeping the Books

“Small Business Success…Keeping the books”

A business, whatever the size, is like a wheel with many cogs. And each cog must be in good working condition to keep the wheel running at top speed. One of the important “cogs on the wheel” is bookkeeping, which is simply, keeping records of the business’ financial transactions.

Keeping track of income and expenses is one of these important cogs. An effective bookkeeping service will help guarantee the success of the business. Neglect it, and you may be caught by surprise by how things may unravel financially with the business. In fact, one of the main reasons why small businesses fail is because of the inability to manage the business’ finances.

Here are some reasons why bookkeeping is important:

It gives you a clear picture of your business’ financial standing. How are sales doing vs your operational expenses? Is the business making a profit? Is there some aspect of the business’ expenses that should be reigned in?
It makes you keep track of payables and receivables. Regularly updated records will point out to you information with regards to which invoices need to be followed up since these customers are past due. It will also ensure that you don’t pay penalties just because the business has overdrawn its bank account.
It helps you create your budgets and forecasts. Looking at the trends and seeing how an increase in sales, operational activities and so forth can help you make forecasts as to the budget you need. This will help you see if you need additional funding to ensure that your cash flows and operations are unhampered.
Preparation for tax returns and government-mandated reports. Let’s face it, bookkeeping and taxes go well together. Income tax returns are easier to prepare when your files and financial information is properly in place. This includes quarterly payroll tax reports and sales tax reports. When someone is not there to keep an eye on how much tax you owe and what reports to file, you may find yourself paying too much or too little in taxes or you may have to pay penalty fees for turning in your reports late.
It helps you make informed decisions for your business. Keeping track of your expenses and sales will provide you with trends to help guide you in your business decisions. For instance, how will hiring new staff or buying that new piece of equipment affect your bottom line? Which particular product is proving to be more profitable?
It helps you get funding for your business. The banks will usually require you to submit your financial statements and keeping your books on a regular basis will help you create these reports faster. You will need to submit your income statement, balance sheet and cash flow for the past years as well as the present year’s projections. In addition, if you are looking to taking on a business partner or investor, you will need to provide them with your business’ financial picture.

However, bookkeeping is sometimes a task that is left by the wayside. Maybe one is too busy running the day to day operations or just can’t be bothered by what may be considered as the tedious job of recording receipts and invoices. There are also times when one does not have the experience and the training for bookkeeping.

[ . . . . ] Is your bookkeeping under control? Do you know where your business stands so you don’t get any tax surprise. [ . . . . ]

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