In this blog, we will discuss seven reasons why no business should neglect bookkeeping. Bookkeeping is the organization of financial information, and it’s crucial for the long-term success of any business.
1. Performance Analysis
Bookkeeping is a wonderful tool for analyzing business performance. This allows you to know your business’s current strengths and weaknesses.
Once you find the areas of weakness, you can improve them and optimize your company’s performance as a whole.
One important document needed for performance analysis is financial statements. Bookkeeping allows you to have accurate financial statements that you can use when analyzing your business.
2. Make Better Executive Decisions
Not having bookkeeping in place can lead to bad decision-making. There are many decisions you have to make as a business owner.
Many of those decisions, in some shape or form, require you to know important financial information about your business.
i.e., hiring your first employee, securing a business loan to expand your operations, etc.
That’s just to name a few, but bookkeeping allows you to make more informed decisions that can help you improve your business for the better.
3. Manage Your Finances Better
Bookkeeping allows you to take control of your business finances. It allows you to track how you spend your money and get a big picture of where the cash flows within your business.
For example, you can see outstanding invoices you and your customer owe. That allows you to never miss loan payments or other business expenses. It also ensures that your customers pay you on time.
4. Key To Organization
Bookkeeping helps you stay organized. Organization is important because important people depend on your ability to be organized within your business.
Here’s a small list to name a few:
Your Employees: Bookkeeping can help with payroll and other HR functions. Without it, you risk not paying your employees for their work or paying them the incorrect amount.
Lenders & Investors: Not being able to provide records requested by investors or lenders, you risk not being funded by them. That could lead to a stoppage of cash flow.
IRS: The IRS requires you to submit a business tax return every tax season, and the form you fill out must have accurate financial information.
Being able to provide accurate information to these various parties is vital to your business success.
5. Avoid IRS Audits
As mentioned above, many organizations require you to report your business finances accurately.
One of those organizations is the IRS. Failing to report accurate information to the IRS can lead to being audited by the IRS.
Being audited by the IRS can be a long and stressful process.
They will require you to send them various documentation to prove that the information you filed on your tax return is accurate and matches their data.
If you cannot provide the documentation requested or if the documents you provide
are inaccurate, you could face severe penalties and fees.
6. Tax Preparation
Having your records organized can help tremendously during tax season. That’s because, as a business owner, you will have to file a tax return every year.
To complete your tax return, the IRS will request several financial documents from you.
One way to prevent yourself from scrambling for these documents and be more efficient is by having a bookkeeping function within your business.
7. Improved Tax Strategies
Booking allows you to record the past financial performance of your company. This is important regarding tax planning and planning for your future.
Bookkeeping allows your accountant to use more accurate data to find the perfect tax strategy that will help you pay less in taxes and scale your business.
Tax planning without accurate or up-to-date financial information can lead to tax strategies that don’t work or give you less-than-desirable results.
Without the accurate financial information that bookkeeping provides, you could miss out on tax strategies you’re eligible to use, ultimately leaving more money on the table.
I hope you enjoyed reading this blog post. In short, bookkeeping is essential because it helps you stay organized, manage your finances, and grow your business.
If you need help with your bookkeeping, we’re offering a new service called Tax Advisory Business Builder to help you get your finances in order.
Here’s what’s included with this one service:
- Bookkeeping & Accounting
- Tax Preparation
- Entity Compliance
- Ongoing Tax planning
This is a brand-new service that we’re offering here at KDA. As you can see, this one service is the complete package, and it includes everything you need to pay less in taxes, manage your finances, and grow your business without any financial hiccups.
However, this first-class service is only available to a certain number of individuals.
If you’re interested in this service, click the link below to book a call with one of our team members here at KDA, and we’ll get back to you ASAP.