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Unless you plan to wholly bootstrap your business endeavor from start to finish and never need any outside capital like a line of credit from the bank, you are going to need a set of accurate books.
If you are a new business owner, you may question if the benefits of bookkeeping are worth the hassle and time commitment. Every business owner is required by law to keep a complete and organized set of books and records, but the government and its regulations should not be the only reason that you keep accurate records. Here are a few reasons why accurate bookkeeping is really important:
Better Financial Records
Good bookkeeping gives you more accurate financial records. This is essential if you want to keep your business as profitable as it can be. Knowing each source of revenue and every cost and having those numbers quantified allows you to fully know the true financials of your business. More accurate records also prevent the likelihood of making mistakes that will be detrimental to your company.
Better Able to Make Sound Business Decisions
By constantly looking over your accurate and up-to-date financial records, you are able to make better educated business decisions. Through successful bookkeeping, you are able to act according to the numbers that you likely would not have known otherwise. If a source of income is generating more costs than revenue, it means you should turn your attention to turn that source more profitable or to shut it down.
Separation of Personal and Business Funds
Not separating personal and business funds causes many businesses to be penalized by the government because of the mistakes made based on the mixture of the two. Missed deductions and penalties are preventing you from making your company as successful as possible. By keeping your personal and business funds separate through accurate bookkeeping, you prevent the possibility of losing everything in your personal account to business expenses as well as make your company more likely to be profitable.
Necessary for Capital Needs
Unless you plan to wholly bootstrap your business endeavor from start to finish and never need any outside capital like a line of credit from the bank, you are going to need a set of accurate books. We see small businesses every day who are struggling to obtain the business financing they need because lenders cannot accurately ascertain how the business is performing.
Prepared for Audits by IRS
Should you get the dreaded notice from the IRS that you are being audited, it is going to be important that you have accurate books. If you are not able to present the information that they request, your business will only be hurt further by the IRS requiring more money from you and/or your business. If your books and records were not accurate, then it is almost certain your tax returns were no accurate. This can lead to a series of costly mistakes that often surface at the worst possible time. Is there ever a good time to find out you owe more money to the IRS in taxes?
Conclusion
Accurate and up-to-date bookkeeping is paramount to running a successful business. If you are a business owner and are failing at keeping these types of records, it may be best to look for an external service that can help you out. With good bookkeeping, you have more accurate financial records, are better able to make sound business decisions, access needed business Capital, ensure that your business and personal funds are separate, and are prepared with accurate tax returns in the case you get audited by the IRS. With proper bookkeeping you are increasing your business’s odds of success and adding a level of transparency your business performance.
