Throughout human history, we have used stories to share information and learn about our world. The stories get passed down from generation to generation in order to teach the newbies about important societal norms and dangers that they may face out in the world.
Research has shown that stories are one of the best ways for people to learn, and retain new knowledge. It’s much easier to remember a good story than simple boring facts and figures.
You can think of bookkeeping as the story of your business.
It shows your history so you can learn and grow from it. You can use it to predict disasters and prepare for the busy season.
Keeping accurate financial records may seem like a pain, and it may stress you out, but it can only help you to succeed. You will never hear anyone say,”Dang!, my bookkeeping information is too accurate!”. But trust me when I say that more than one business has gone down the drain because they just didn’t have a good record-keeping practices.
So, here are just 5 of many reasons that you should be staying up-to-date with your bookkeeping.
Plan for the future
As an entrepreneur, you have goals. Without good financial data, those goals are almost impossible to reach. How can you get where you are going if you don’t know where you have been? Or more importantly, where you are right now?
Your financial records can become a crystal ball, giving you clear view of what the future holds. The value of your historical data is immeasurable. It provides you with a thorough guidebook for what the future may hold and allows you to learn from past mistakes so you don’t repeat them.
It’s normal for businesses in any industry to experience ups and downs. If you are accurately tracking what happens within your business throughout every year, than you will have the information at your fingertips to figure out what to expect next and how to prepare for it.
Accurate view of profitability
It’s just not possible to know how profitable your business is without accurate and thorough record keeping. You may have a general idea, but close only counts in horseshoe and hand grenades.
Your bank account balances provide you with good, but very general information. You have to understand why your bank balance looks the way it does and how the decisions you make affect it.
Knowing exactly how much your business is bringing in and how much it is spending is the only way to truly know where you stand. You’re flying blind without this information, which can easily lead you to disaster.
Easier decision making
Every day, you make decisions that affect your business and it can be challenging to not know how those decisions will play out in the long run. Fortunately, accurate bookkeeping can help to relieve some of the stress of not knowing.
When your financial records are telling the whole story of your business, it becomes much easier to make any decision, big or small. You can easily see the decisions you have made in the past and where those steps led you.
Every decision you make is based on data, even the robotic decisions that you don’t have to think about anymore. Turning left out of your driveway every morning is a decision, but not one that you have to consciously make because your brain has all the data it needs to make that decision automatically.
You need to be fully informed about the current state of your business if you want to have any hope of making impactful decisions that will help you on your path to success.
IRS compliance
The most obvious benefit of accurate bookkeeping is that it keeps you compliant with IRS requirements. Keeping tabs on where your money comes from and where it goes keeps you able to easily provide proof of any transactions.
Keeping your receipts is an incredibly helpful aspect of your finances. It is important to remember the IRS WILL NOT ALLOW you to use your bank or credit card statements to prove your transactions are real and necessary. Your bank statements show the total amount and the name of the place that charged the transaction, but it does not show any further details. And the IRS is all about the details.
Making sure that you are recording transactions, keeping records of those transactions (like receipts), and reconciling your books with your bank statements will allow you to quickly provide proof if the IRS were to come knocking. A little work on the front-end can help you avoid major headaches in the future.
Catch all deductions
Taxes aren’t fun. This is true for the general population, and especially for business-owners. You can make it a little less painless by making sure that you are utilizing all the deductions that you qualify for.
How do you know if you are hitting all those deductions? Accurate record keeping of course!
Unless you have a tax professional working full-time with you, they will need your help in determining which deductions you can use. The best, and easiest, way to do this is to make sure that you are tracking every expense as it happens and backing them up with records. This allows your accountant to comb through your data and easily pull out the bits of information that they need.
There are a lot of deduction possibilities and the best way to ensure that you aren’t paying more taxes than necessary is to make sure that your financial records are up-to-date. Every cent in and out of your business should be accounted for so you can save some major dollars come tax time!
I know that bookkeeping can be stressful. It’s unfamiliar territory to most people and sometimes the hardest part is just knowing how to start. So you put it off and put it off until it becomes this massive problem that you don’t know how to fix, but somehow must.
You’ve worked way too hard to grow your business to lose it all due to shoddy financial records. Good bookkeeping will only help you to achieve your dreams.
So do yourself, and your business, a favor and just start!
If you don’t have the time to give your bookkeeping the attention it deserves, please contact me for a free, no-obligation consultation. We can figure out where you are at and how to get you where you want to go.