Updated: Aug 3, 2020
Have you ever wondered why you should find a professional bookkeeper?
As US Small Business Administration states, “half of all new small businesses fail within the first five years, and the number one cause of failure is financial mismanagement.” Bookkeeping is essential for keeping track of a company’s financial status, but what is bookkeeping and exactly does bookkeeping do? Here are some reasons why you should pay attention to bookkeeping to maintain your profitable businesses.
What is bookkeeping? Bookkeeping is the process of keeping full, accurate, up-to-date business records. It involves making a record of the monies received by a business from providing services as well as the monies paid out to vendors, employees, tax agencies, contractors, lenders, and any other individual or entity. Equally, accurate records of amounts owed to a company by outside individuals and organizations are also recorded in a company's books.
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Bookkeeping keeps a clear picture of your company’s financial health By maintaining accurate books, bookkeeping allows you to see the inflow and outflow of your assets and gives you an idea of how to plan the next step. One main goal of a company is to earn profits. Even though your bank account is in debt, it does not represent your end-of-the-year profit. By recording every transaction, you have the picture of your business status and then make decisions.
Reporting to Investors is Easy Clean transaction reports give investors and business partners a good understanding of how your business is doing. For example, by using QuickBooks to record income and expenses, you can get concise charts of balance sheets to present all the information others need to know. Bookkeeping helps organize all listed transactions.
Payless in Taxes Expenses reduce your net revenue. Since bookkeeping helps to organize Account Receivable (A/R) and Account Payable (A/P) for your company, you get a better sense of calculating your tax bill from all small to big transactions in your book.
Avoid and limit the paint of an Audit In 2010, 14% of small businesses were audited by the Canada Revenue Agency (CRA) and this may just be the tip of the iceberg as the 2013 Federal Budget announced an additional $100 million toward CRA compliance programs. Messy records and books are one of the audit triggers that could get you audited, and the process of audit takes time. Keeping good records of your invoice, cash inflow & outflow, asset & liability, etc. helps save time for your business plan.
If you need advice or services on any aspect of bookkeeping, accounting and tax, our specialists are ready to help. Get in touch with us for free quote.