Why Bookkeeping Is So Important to Small Businesses
Regardless of the size of your business, bookkeeping is something you need to stay on top of. Even if you're self-employed, it's necessary to keep track of the financial side of things. It's the best way to ensure that your business grows and remains profitable.
Continue reading to find out more about why bookkeeping is so important to small businesses. Some of the reasons may surprise you.
1. Paying Bills on Time
A bookkeeping system, even the most simple one, goes a long way in assisting you in paying your bills on time. This includes loan payments, invoices, rent, utilities, etc. Falling behind on bills is generally the number one reason why small businesses fold.
2. Planning Ahead
Every business owner needs to plan ahead, to some extent. Think of it as budgeting. Accounting helps you do this by allowing you to look at your current cash flow and earmark funds for future purchases.
Proper bookkeeping also allows you to think about downsizing, if necessary. Many times, businesses don't show a profit as quickly as anticipated. It's just a fact of life. By keeping an eye on your finances, you'll know if and when you have to cut back.
3. Avoiding a Tax Audit
Unfortunately, one of the quickest ways to get audited is by having messy and/or incomplete tax records. This type of juvenile bookkeeping is one of the biggest triggers when it comes to CRA audits.
It's far better to take the time and energy to keep your books up to date, rather than spending countless (and unnecessary) hours complying with an auditor. In the event you still get audited, having everything in order makes the process go much more smoothly.
4. Getting Deductions
As a small business owner, it behooves you to take advantage of every legitimate tax deduction you can. The money you save on taxes can be put back into the business to help it grow. When you don't keep track of financial details, there's a greater chance that you'll overlook some of the deductions that you qualify for.
5. Setting Goals
One of the best ways to be successful with a small business is to set goals for yourself. Ask yourself questions like, "How am I doing?" and, "Can I really afford to expand?" Adequate bookkeeping helps to answer these questions and allows you to set realistic goals for the future.
If you're not good with numbers, there's no reason to panic. There are several excellent accounting software choices which you can use to manage your own books. Online versions make it even simpler. They include:
You also have the option of hiring a bookkeeper. The money you spend is worth it when you consider that he or she will help to ensure the highest degree of business success.
These are just a few reasons why accounting is so important for every small business. Competition is tough, regardless of the industry. It's vital to do all you can do to persevere.
