Why Is Bookkeeping Important for Your Small Business?

As small business owners, we might sometimes be so busy, we don’t really have the time to organize important business paperwork. However, there are tasks that should never be ignored. Bookkeeping is one of them, and it's not as hard as people think it is to manage. If you are serious about entrepreneurship, here are a couple of reasons why your business needs bookkeeping.

Record Keeping

With everything organized, you will save yourself time and stress. You definitely don’t want to be looking for paperwork at the last minute to do your taxes. If you keep your books organized, it will be easier for you to communicate with your accountant about the transactions being made, especially at tax time. Applications like QuickBooks make this process super easy for you to track and share information with your accountant.

Audit Proof

Having great records shows the IRS enough evidence that all of your business transactions are legitimate. When you have a business, it’s very hard for the IRS to believe your transactions are real. For example, if there is no proof that you are using your car for business purposes only. How is the IRS supposed to know if you are not using the car for personal use? The IRS needs proof, and if you don’t have enough, your business will most likely get audited. Properly tracking everything your business is doing will give you the peace of mind you need as a business owner.

Better Forecasting

Tracking all of your revenues and expenses will help you budget, plan, and estimate for future growth. Budgeting can be done by tracking all of your revenues and expenses, resulting in a better understanding of your financial roadmap. With this information, you can plan for future revenues and expenses. Also, your books provide a nice history of the past. You can use this data to plan for the future, based on what works and what does not work. Finally, having data that you can rely on can help you estimate future growth of the business. If you know how much your revenue is growing every year, you will be able to calculate the next. Remember your books are reflected on the financial statements, which are essential to business forecasting.

Stronger Finances

With better forecasting comes better finances. Having a clear sense of where your money is going, and where you should invest will keep you disciplined. Your business needs money to grow, and if you are not tracking anything, how are you supposed to know how much you should pay yourself. Bookkeeping will help you have stronger finances, because it provides the necessary information for you to make educated decisions.

Investors' Confidence

When an investor wants to buy or invest in your business, they will look at the financial statements. The financial statements are very important to investors, because they show the financial health of your business. In the financial statements, your books will be reflected, meaning that if your business has been doing really well over the past year, your statements will show a positive cash flow, and not as many liabilities. This is great for investors and the business owner.

So there you go, bookkeeping is extremely important to your business success. Not only will it help your business growth, but also the worth of your business when you are ready to sell. If you don’t plan to sell, it's still very important, because having a clean accounting system will help you run your business smoothly. Also, It’s worth mentioning that you should not do bookkeeping on your own. Instead, you should hire an accountant who does bookkeeping for small businesses. The last thing you want is to not have time to run your business.