Why Your Business Needs Bookkeeping.
When you run a business, it’s important that you keep a good set of books. Ensuring that your books are accurate and up-to-date are critical components for any successful business. Most businesses believe the key reason to maintain accurate and detailed books is for tax preparation. Although tax preparation is a very important reason to maintain your books, there are many others as well.
Accurate and up-to-date bookkeeping records help you better understand the financial health of your business. Monthly reports allow you to understand how much money your business is bringing in, how much you spend on expenses, whether your numbers match up and most importantly, whether you need to improve your business model. Below are four key reasons why you should maintain accurate and detailed books throughout the year.
#1 Tax Preparation
When it’s time to prepare your taxes, your tax professional needs detailed and accurate records. Some of the most important components of preparing a business tax return are:
- Gross receipts and sales or services (sales records, returns and allowances, other income, etc.)
- Cost of goods sold (if applicable – inventory, materials & supplies, beginning and ending inventory, etc.)
- Expenses (advertising, rent, utilities, hotels, meals, business trips, interest expenses, office supplies, commission to subcontractors, wages paid to employees, asset depreciation, etc.)
Maintaining accurate and detailed books allows your tax professional to properly and accurately prepare your business tax return. Maintaining a system of accounting with accurate records and back-up will ensure proper and accurate tax preparation with maximum deductions.
#2 Understanding the Financial Health of Your Business
Another important reason for maintaining accurate and detailed bookkeeping records are for your own benefit. Maintaining your books allows you to keep track of income and expenses and allows you to better understand the health of your business. Without proper bookkeeping, it is impossible to measure the true success or failure of your business. Proper and accurate bookkeeping has many benefits including tracking sales and expenses, the ability to make proper business decisions, maintaining accurate records for compliance with tax laws and other regulations, and much more.
#3 Financial Statements
Financial statements are a result of detailed and accurate books. By maintaining your books, you are able to view accurate and reliable financial statements that provide you with a detailed report or a simple snapshot of the health of your business. With financial statements, you are able to analyze and compare sales, expenses, assets, liabilities and more. These reports help you understand the current state of your business health, where your business is headed and most importantly, whether or not you are meeting your goals.
#4 The Result
The result is awesome and accurate books and detailed financial statements to help you better understand the financial health of your business and make better, more informed business decisions. The numbers revealed through accurate and proper bookkeeping result in detailed and informative financial statements that play a very important role in helping you plan strategies, determine success, estimate failures and file accurate tax returns for your business. Contact Accountlet today to schedule an appointment and learn more about professional cloud bookkeeping and accounting.