January 27, 2013
Accurate bookkeeping is essential to every business. Below are some examples of bookkeeping benefits, by establishing proper bookkeeping practices:
- You will be able to maintain and grow your business where others have failed. There are many benefits to having accurate books for your business, and the goal of this post is to go over some of these benefits.
- You will be able to provide information regarding the financial affairs of a business.
These financial affairs are represented in the form of various reports, the most commonly used reports are the Profit & Loss (income statement), Balance Sheet and the statement of cash flows. These reports provide a wealth of information ranging from the profitability of a company to its net worth.
- Once your company’s financial reports are available on a routine basis, you will be able to take this information and analyze it by comparing your current progress to previous periods and other businesses in your industry. Comparing the current profit and loss statement with that of the previous period will provide you with the information needed to spot areas and trends that need attention.
- Whether your company needs to increase sales (prices, quantity etc.) or lower expenses, these financial reports are your key to problem solving and prioritizing internal issues. Eventually these records will allow you the opportunity to construct the best strategy for your business, which is truly priceless.
- Keeping accurate books will also help when the time comes to file taxes. By having the proper reports to give to your tax preparer, you will save time, money and the stress of having to go through receipts and bank statements with the hopes of coming up with accurate figures for your tax return. Being prepared for tax time with reports that have been reviewed on a routine basis helps to ensure that there will be no unwanted surprises.
- Inadequate bookkeeping will also inevitably result in the oversight of revenue coming in, or expenses going out which can lead to disastrous consequences. In the fast paced business world of today, it is all too common to forget about a transaction that could have a big impact on your financial records. Reconciling your accounts and reviewing your financials habitually will decrease the chances of this occurring.
Unfortunately, a common mistake that businesses make is to short change their accounting/bookkeeping budget. This mistake is very costly because improper or inadequate bookkeeping will often result in more expenses down the line in the form of the agonizing, time consuming repair process of your company’s financial records. When it comes to bookkeeping, just like many things in life, it is a best practice to do things right the first time around. Please feel free to contact us if you need support or have any questions regarding your company’s bookkeeping.
Written by Ofir Gabay