Importance of Bookkeeping for Small Businesses

Do you feel lost about your business’s financial records? Does the tax season make you feel dreadful? If it sounds familiar, then you have been neglecting the importance of bookkeeping for small businesses.

The recording of every financial transaction that takes place within a business throughout an accounting period is known as bookkeeping.

One of the crucial reasons why small businesses fail despite doing everything right is because of not realizing the importance of bookkeeping.

Bookkeeping is the backbone of your business’s finances. Lack of proper bookkeeping could lead your business to misery. 

If you’re not sure why bookkeeping is so significant for your business, then we have the top 10 reasons to help you realize and consider bookkeeping right away.

Top 10 Reasons Your Business can Benefit from Bookkeeping

 

1. You will be Able to Track Your Business’s Growth

Every business exists to make a profit. Without having a constant and reliable method of tracking your small business’s profit in exact figures, it’s hard to determine your actual profit and loss.

Through the method of keeping financial records, you will be able to prepare financial statements at the end of the year that will allow you to reflect on the profits and losses that your business has incurred. 

Over the years when you will want to look back on your business cycles, you will have a clear picture of how your business operates financially. 

2. Bookkeeping Increases Business’s Cash Flow

Through up-to-date bookkeeping records, you can monitor business transactions regularly, have a track of each and every expense and conduct monthly data checkups of finances.

The lack of this crucial information will make it difficult for you to plan expenses for your business or have sufficient liquid assets to invest in important projects.

Thus, you can cut down expenses and implement required changes that will allow you to manage your business on a day-to-day basis.

3. Bookkeeping as a Tool for Decision Making in Business

Bookkeeping plays a crucial role in business decisions. If you run a startup then there will be plenty of new decisions that you have to make to meet your business goals.

For example, you want to invest X amount of money on a project that you believe will yield a great profit but you’re unsure if you have sufficient finance to start working on the project right away. 

In this case, you would need the bookkeeping data of your business to make a decision of investing.

4. Prepare Your Business for Tax and the Law

One of the main reasons why you should consider bookkeeping for your business is for the taxes. 

The tax season may feel overwhelming if your business’s financial records are all over the place and there’s nothing that you’re doing to maintain it now. 

Bookkeeping keeps your business ready for tax seasons and legal deductions. You won’t have to pull off your hair looking for the receipts or invoices at the last moment. 

That’s just a headache that you can altogether avoid if you begin bookkeeping earlier. The sooner the better.

Not only for tax preparations, every business, small or big, is required to have precise bookkeeping data according to law. 

The consequences not abiding with the law could lead to serious losses or even shutting down your business. 

So keep yourself prepared before things go wrong.

5. Business Investors Require Bookkeeping Records

As a business, you might rely on investors who will provide you with funds to run your business smoothly. 

However, your investors need an accurate report of how the business is doing in terms of finance and regular operations.

Along with that, accurate bookkeeping data will be a strong feature to your potential investors who can confidently fund your projects in the future. 

6. Save Your Sanity and Do What You Enjoy

As a business owner, there are plenty of things that require your attention, time and energy. 

Keeping track of every financial record of your business is not an easy task to do. 

You need professional help, be it an experienced bookkeeper or bookkeeping software. 

There’s only so much that you can handle all by yourself. 

So take the wise decision and focus on improving other aspects of your business while an expert takes care of your bookkeeping.

7. Bookkeeping Helps You Detect Business Errors and Stay Organized

Financial or recording errors can cost your business a lot. Every business has to manage customer and clients invoices, pay bills on time, keep track of revenues, expenses, liabilities, and receivables. 

Errors such as paying twice, wrong invoice, extra fees for late payment, banking errors etc can happen anytime.

Your bookkeeping records will reveal where things have gone wrong or prevent you from making any mistakes in financial terms. 

As a result, you will stay organized and save money from unwanted expenses.

8. Planning a Budget for Your Small Business 

Unplanned expenses can keep you from reaching your business goals. Instead of making more money, you could end up paying a large sum of debt every year – all because you did not create and stick to a budget at the right time.

If you want to avoid that scenario then make a business budget. A proper bookkeeping record will come handy in this case.

Your bookkeeping data will help you plan for anticipated expenses, meet costs and recurring bills effectively without running out of cash. 

You will be able to make the necessary changes in your present expenses and have money when you need it.

9. Bookkeeping can Help You Grow Your Small Business

Your business might be small now but it will expand over time and you’ll need to hire a team of employees, manage payroll, handle your clients and get the business running when there is a lot of work to be done. 

Managing your bookkeeping by yourself can be possible for you now but the case won’t remain the same always. 

As a business owner, you must prepare for future changes. Without a proper bookkeeping method in your business, you will be overworked, stressed and paying for losses in the long run. 

10. Get Bank Loans with Proper Bookkeeping

You will need to borrow money from the bank for various purposes such as renovating your office, expanding your business or buying more resources. 

Whatever the reason could be, you will need more money as a small business operator. 

To get a loan from the bank, it’s a requirement to have a clear bookkeeping record. The bank will then make a decision based on the bookkeeping records and your financial ability to pay back. 

In Few Words

These are just a few of the reasons why bookkeeping is important for your business. 

Bookkeeping is an essential tool for businesses of all sizes. 

You should stay focus on achieving your goals instead of trying to do everything yourself.

If you’re willing to take the right step of getting bookkeeping help for your business, here’s why outsourcing bookkeeping services is a good idea.

It’s time for you to invest in bookkeeping because you will let someone experienced, who understands the accounting matters very well and knows how to organize your business transactions, take care of your business’s finances. 

You will not only feel well-prepared for the tax season but also get peace of mind. 

 

At Centrosome, we provide a wide range of accounting and bookkeeping services that are catered to all industries in both Canada and the US. Helping entrepreneurs just like you to figure out the importance of bookkeeping for small businesses. And what the business needs most in order to maintain its financial health and grow is our mission.

Contact us for a free one-hour consultation and we will customize a plan specifically for your business needs!