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5 Reasons Your Business Needs Bookkeeping

October 10, 2019

Ignoring the basic building blocks of your business can cause even the best entrepreneurs to falter

Back office administration of your business isn’t always glamorous, but it’s always necessary if you want your business to thrive. Building your company on a strong foundation of fundamentals sets you up for continued success. One of the most important business fundamentals your business relies on is bookkeeping. Check out below for five major reasons your business needs to keep great financial records.

 

Good decisions require good data

Every day you make dozens of important decisions for your company. Everything from big picture concerns like setting overall strategic vision and the core values of the business to day-to-day management and operations decisions.

The only way to make these decisions effectively is to have good data.

Bookkeeping is the key to keeping good, accurate financial information on your business. This information is vital when making decisions relating to your company.

Can you afford to hire a new employee? Are there places to slash expenses to generate more profit? Even decisions concerning expansion, growth, and outside investment opportunities all rely heavily on good financial data.

Without bookkeeping, this data is missing. Without the data, you can’t make the best decisions for your business.

Monitor expenses over time to protect and grow profits

In personal finance, there is a phenomenon called “lifestyle creep” that explains why even high-income earners still find themselves in financial stress. Frequently, raises in income are offset by equal raises in spending, so even earning more, there’s no additional money left over.

Businesses must be on guard for the same thing.

As revenues and profits grow in a business, the problem of what to do with the money grows as well. Far too often, business owners that begin with lean businesses designed to limit costs and maximize profits eventually oversee spend-thrift companies adding expense after expenses, needlessly.

Even if revenues are rolling in, the business might not be keeping a dollar in profit at the end.

By having good bookkeeping, vigilant business owners can keep their expenses at a minimum, identifying areas where spending may have gotten out of control. This helps maximize profits you can put in your pocket. That’s always a good thing!

Better cash flow

For a business, cash is king. How cash flows into and out of your business is a vital part of understanding the health and well-being of your company. Bookkeeping can help with that!

By accurately tracking both the invoices you owe to your vendors and the invoices your customers owe you, you can make better decisions regarding the cash flow of your company. To maximize cash flow, you want your customers to pay you as soon as possible, while managing your vendor payments to keep your business running and avoid late payment fees.

Bookkeeping is a major tool that gives you the information necessary to implement policies that will keep the most amount of average cash on hand for your business.

Makes tax preparation a cinch

Picture it: it’s tax time. The deadline is approaching and you’re taking time away from managing your business to frantically search through drawers, cabinets, and files for your missing paperwork so you can get your taxes done. And worse yet, until your business’s records are reconstructed, you can’t even file your personal return!

There’s no need to allow your business (or yourself!) to suffer this way. With bookkeeping, you keep all your financial information in one system, allowing you to get your taxes filed easily, efficiently, and fast.

And better yet, instead of a frantic process taking you away from your business every spring, you can keep your focus exactly where it should be: growing profits.

Know your profit

You got into business to make money! But are you?

Many business owners have no idea at the end of a month if their business has made money or not. This is no good! In order to be a successful business owner, you must know what your business is bringing in and, more importantly, how much of that is going in your pocket!

Bookkeeping is the key to that.

By having good books on your business, you know what you’re making, what you’re spending, and what you’re keeping. And there’s nothing more important than that.

Are you a business owner that needs help with their books? We’re here to help! Contact IFSMoney today and get on top of your business’s vital data so you can make great decisions and know your profit!