Keeping track of revenue and expenses are fundamental to the overall health and sustainability of your business. Effective bookkeeping produces the data you need to evaluate your current business, anticipate challenges, and set attainable future goals.
Despite their proven importance, many entrepreneurs dread and avoid accounting tasks. Are you wondering if it’s worth the aggravation?
Here are five reminders of why effective bookkeeping is crucial for business success.
Measuring profitability and planning for the future
To grow your business, you must be able to track and compare your finances from one year to the next.
In addition to reconciling the books and bank statements regularly, effective bookkeeping generates records you can use to gain a comprehensive overview of your business. This data can help you:
– measure year over year profits;
– identify opportunities to cut costs;
– plan for major expenses (such as new office space, equipment, or staff); and
– develop data-based strategies for expansion.
Preparing for tax season
Few things are more stressful for business owners than scrambling to get poorly maintained financial records ready for tax season. In addition to the panic of last-minute filing, inaccurate or incomplete documentation can lead to serious penalties, fines, and even an audit.
Save money and get the peace of mind with sound bookkeeping. You’ll be assured of compliance around regulations and will receive a reliable estimate of amounts owing long before your tax bill is due.
Easy Reporting to Investors
Investors want to know the financial performance of your business to quantify the value of their investment. Bookkeeping allows investors to have up-to-date and accessible information. Investors will be able to make better, well-informed decisions.
Bookkeeping is not only for current investors but for future investors too. Prospective investors are more likely to invest in your business when you have organised financial information. Think about it, if you were an investor, would you invest in a company that didn’t have up to date and organised financial records?
Keeping track of reimbursable expenses
A reliable system for tracking reimbursable expenses ensures you reap all the benefits you’re entitled to. Expenditures sorted into categories, such as “entertainment”, “travel”, and “office supplies,” can be catalogued quite simply with online bookkeeping software like Xero.
Using a dedicated credit card for business expenses, and updating your records every month, will put money back in your pocket come tax time.
Final tip: ask for help
Most entrepreneurs are passionate about developing new business ideas – not crunching numbers. Employing a professional bookkeeper, even on a part-time or as-needed basis, can help optimise your accounting and increase overall profitability.
There’s a good reason the majority of small businesses outsource at least one accounting function to help manage tasks like payroll, closing the books each month, and managing accounts receivable and accounts payable.
It’s well worth it. Invest in effective bookkeeping, and you’ll build a solid foundation for a resilient, forward-moving business.