Maintaining exceptional books for your small business is crucial. Keeping excellent business books will provide the following benefits.
1. Keep on top of your tax obligations
Appropriate accounts are needed when taking care of tax regulations and laws. Your accounting records are useful in calculating your tax obligations as well as lodging tax returns for the business.
2. Assisting in company solvency
Studies show that a significant factor of company failure is attributed to poor financial management. The owners of any company have to show that the business can pay what it owes and this means appropriate bookkeeping records are maintained. Good bookkeeping helps the owner establish the return on investment but more notably, a company owner needs the ability to pay accounts as they become due or the company is considered to be insolvent.
3. Assisting in financial performance
Bookkeeping also provides crucial data about financial performance in the financial reports that include a Balance Sheet and Income Statement.
4. Detecting mistakes and scams
Mistakes and fraud can often be detected through the accounting records. That is why it is important to keep records up to date and for the owner to understand what the financial statements mean. It is also good practice to separate activities such as receipting payments from customers and then depositing it in the bank, and also ensure that workers have stringent spending limits that are monitored.
5. Support to management and stakeholders
To make planning choices and business decisions, management need to keep on top of the finances. As such, bookkeeping helps the owners or the management to strategize and plan company tasks. Correct bookkeeping is useful in making contrasts of current and prior performance, which is essential in identifying aspects that are influencing the performance of the business, and doing something about it. Good bookkeeping records are also vital when offering a business for sale.
6. Enhancing memory
It is not easy to always recall business financial transactions no matter how good one’s memory might be. Therefore, there is should boost the memory power so in order to. Doing your bookkeeping on a regular basis and recording additional information about transactions can counter constraints of memory and save you lots of time.
7. Managing cash flow
It is often difficult to get banks to make loans to smaller businesses. Good accounting records give you a much better chance of being successful in acquiring a loan when you need it. It is far better to be proactive rather of delaying cash flow is really a problem.
So these are just 7 benefits that come from good record keeping. Financial management is something that many business owners do not understand. But it is vital to your success.
More about bookkeeping
Here is a video with small business bookkeeping tips.