You probably don’t get excited about “bookkeeping.” But perhaps you should.
Below are three reasons why bookkeeping should be a priority in your business, no matter how small or large it is. It’s the foundation for a healthy, growing company.
1. Tax preparation and lender approval
Oxford defines bookkeeping as “the activity or occupation of keeping records of the financial affairs of a business.” It stands to reason that if you or a team member is keeping accurate records of the company throughout the year, preparing for tax season is less stressful. You have expenses and income noted, and you can meet with your accountant more confidently.
In addition, grants and banks require certain financial reports to prove the current health and financial practices of your business before granting or loaning you money. Without bookkeeping, creating those reports is nearly impossible.
Bookkeeping is about recording current spending and revenue in order to plan for the future.
2. Better decision making
A rudimentary analogy for bookkeeping is to compare it to the oil-change stickers put on windshields after vehicles have been serviced. Those stickers are one indicator of a car’s overall health and provide information if a car starts having trouble. (e.g., Is it time for an oil change? Or, it just had an oil change, so look elsewhere.)
Accurate bookkeeping is similar. When problems arise (and they will in a business) your “books,” if kept up to date, hold many clues to why issues are occurring. By reviewing thoroughly, you can make better decisions. You have information and don’t have to guess.
And on a positive note, up-to-date bookkeeping reveals areas of your business over-performing too.
3. Helps to Keep Business and Personal Separate
If you’re a small business owner or a team member who works for one, you probably know the battle of keeping business and personal expenses separate. Small businesses are tempted to use personal credit cards and bank accounts to pay for the business’s expenses and vice versa.
By setting aside time weekly and monthly to perform basic bookkeeping tasks, you are less likely to mix business with personal. Tracking expenses and seeing them recorded incorrectly is often enough reason to stop the bad practice mixing the two.
Morgan & Associates are Bookkeeping Experts
If we’ve convinced you to prioritize bookkeeping but you lack the know-how or the time, contact us. We’ve helped hundreds of small to mid-sized businesses with their bookkeeping practices. And we can help you too.
Use the form below to reach out.