6 Reasons to Keep Bookkeeping Up to Date
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In my years as a professional bookkeeper, this scene played out all too often. A small business owner chooses DIY bookkeeping. That decision works if – and only if – the business owner has the know-how, time, and technology to keep accurate records. I’ve seen the alternative! A business owner gets occupied by so many other responsibilities that bookkeeping falls to the wayside. They tell themselves, “I’ll get to my bookkeeping next week,” and weeks turn into months. Stacks of invoices, expense receipts, and paperwork pile up. At tax time, they spend their weekends feverishly playing catch-up, trying to remember and recreate past financial transactions. Their procrastination leads to stress and frustration, and potentially, inaccuracies that can result in costly tax penalties and overdraft fees.
Oftentimes, small business owners turn to Prosperity Bookkeeping when they neglect their financial records. Although we’re ready to lend a hand, this scenario is far from ideal. Instead, I encourage small business owners to keep bookkeeping up-to-date. Here are some reasons to keep up with financial records.
Know Your Company’s Cash Flow
Your financial records represent a snapshot of your company's viability. That snapshot will be out of focus if your records are inaccurate. Your business may be struggling with cash flow, but without accurate records, you won't be able to identify the problem. Worse yet, you may not know there is a problem. If you’re spending too much, you’ll have the records to know where money is going so you can reduce expenditures.
File Accurate, Timely Tax Returns
Your tax preparer will thank you for being conscientious about your bookkeeping. Filing tax forms will be much simpler and less stressful if your books accurately represent income and expenses. By keeping up-do-date with your accounts, you’ll avoid the time crunch of getting everything in order at the last minute.
Increase Your Lending Options
Small business owners with messy books limit their options for loans. Lenders analyze a business’ financial accounts to determine if a company has the wherewithal to repay a loan. The chances of acquiring a loan are much higher if your financial statements are in order.
Forecast Your Financial Future
When planning a business strategy, the best way to know the future is to know the past. Business owners can use financial data from the previous month, quarter, or year to forecast months or years ahead. Forecasts help businesses manage their money, cash flow, and business operations down the road.
Avoid Expensive Bookkeeping Mistakes
Even a small mistake in bookkeeping can snowball if it’s not caught early enough. Business owners who don’t reconcile their books to their bank statements may end up with duplicate or missing transactions or other errors. Even a small mistake damages the integrity of a financial statement.
Hire a Professional Bookkeeper
For anyone who operates a business, it’s incredibly important to keep an eye on the finances. I recommend weekly follow-up for accounts payable and monthly follow-up for reconciling your books. If your financial records are out of date or in total disarray or if you consistently fall behind on your bookkeeping, it’s time to hire a professional bookkeeper. A professional bookkeeper like Prosperity Bookkeeping can update your current records and create a bookkeeping system for the future. Prosperity Bookkeeping safeguards your business finances, providing accurate records on which to base business decisions. Without an organized, accurate bookkeeping system, your risk of business failure increases dramatically. Contact Prosperity Bookkeeping.