Why Your Business Needs Bookkeeping
One of the biggest mistakes I see small business owners and young entrepreneurs make is neglecting to keep accurate books and records in the early stages of their business. As a CPA, entrepreneur, and business owner, I have seen the importance of keeping accurate books and records firsthand. I want to share why bookkeeping is important for your business.
Tax professionals are specialists who can help you save money on taxes. However, without proper bookkeeping, finding additional tax savings becomes more challenging.
Why is Bookkeeping Important for a Business?
It is important to keep accurate books and updated records because the IRS will disallow certain business expenses. Bookkeeping provides the evidence needed to prove your case. Working with a tax professional and having all the required documents quickly and efficiently will show the IRS that you are a prepared business owner who understands the standards of what the IRS requires for a business to be recognized.
Keeping accurate books and records for your business will show the IRS that you have made an investment and protect you from a further investigation from an audit perspective. If the IRS happens to audit your financial statements, a clean set of books will help you and your business be more prepared and protected.
What are the Benefits of Bookkeeping?
Gives you proof of accounting records
Allows you to plan ahead
Answers how much you should pay for yourself
Saves you money
1. Proof of Accounting Records
One of the benefits of bookkeeping is having proof of your accounting records.
Based on your numbers, your tax professional can help you identify missed expenses and identify additional tax savings. Your tax professional will also be able to help you plan on how to direct some of those funds and advise you on how to plan better for taxes in the future.
2. Planning Ahead to Become Successful
The most successful business owners have their bookkeeping done monthly and their tax planning quarterly. Planning prevents surprises and preparation for taxes. For most business owners, taxes usually become a large outflow of cash ever year. By keeping accurate books and records, you can project your tax liability and execute tax-saving strategies before the tax deadline.
3. Paying Yourself as a Business Owner
A question I see most business owners ask is the amount they need to pay themselves. Bookkeeping answers that for you! Bookkeeping creates a visual of your business operations, monthly expenses, and revenue. Overall, you will know what your net profit is, and that will tell you how much you should pay yourself.
4. Saving You Money
Bookkeeping will save you money in the long run! Bookkeeping is a fundamental part of your business. It is your financial home. Your financial statements will show you where the holes and gaps are in your business and show you where to improve. As mentioned above, bookkeeping will help your tax professional identify additional tax savings. I have seen clients miss out on thousands of dollars because of missed tax deductions due to inaccurate books and records.
In closing, bookkeeping will set you free and change your life and the trajectory of success for your business. Not only will bookkeeping save you time, money, and effort, but it will also help you sleep better at night as a business owner. Scaling your business starts with understanding your financial records. Implementing bookkeeping will make you a better business owner and a better financial decision-maker.
Do you want some FREE resources like a Financial Dashboard? If you are new to business and bookkeeping, check out our free resources page here!