7 Reasons Why Bookkeeping is Important
Bookkeeping can be such a drag. So why bother with it?
1. Easier Audit
Ideally your business would never be audited, but you need to be prepared for the worst-case scenario. Having organized records that are up to date reduces the duration of an audit, while making the entire process smoother.
2. Maximize Tax Deductions
Unless you are keeping up with the books, it can be easy to miss some tax deductions. It’s in your best interest to claim as many deductions as you legally can, so maintain the books in order to spot every opportunity.
3. Proof of Tax Deductions
Storing the documents associated with your tax deductions proves your right to claim them.
4.Minimize Tax Season Stress
Picture two opposite scenarios. In the first, you are stressed to the max after realizing you are quickly approaching the deadline to file your tax returns and you haven’t DONE A THING ABOUT IT. You will be running around like crazy, trying to compile all necessary paperwork and recording all expenses.
In the second scenario, you are much more relaxed. Thanks to regular bookkeeping, your records are up to date and you know where your paperwork is. Which situation do you prefer?
5. Saves Time
Having everything organized makes it quick and easy to find the records you need when you need them. No more wasting time searching through a mess of paperwork.
6. Keep Cash Flowing In
Bookkeeping allows you to see where your money is going and where it’s coming from. This knowledge gives you the ability to make better business decisions that will lead to an increase in cash coming in, while decreasing expenses.
7. Performance Analysis
Although it’s important to monitor your cash flow, analyzing the business as a whole is equally valuable. The bookkeeping records provide the information needed to create financial statements and financial ratios. These enable you to compare your company’s performance from period to period.
You will know which expenses are the biggest drain on your resources, enabling you to adjust your budget to cover mandatory expenses and cut expenses that aren’t necessary
You will also know where your greatest revenue sources are. By focusing on those specific sources you can increase the profitability of your business.
As you can see, bookkeeping is more than a tedious chore. It is an necessary tool for business owners who are looking to maximize profits, minimize headaches, and grow their businesses.