Top Reasons Why Small Businesses Must Maintain Bookkeeping Records
Friday, July 6, 2018, 6:00 PM | Leave Comment
Like all small business owners, you probably know the critical role bookkeeping plays in the success of your company.
However, in the course of conducting your market activities, you often neglect this essential financial process. It can hurt performance in the long-run.
Research shows that many small businesses go bankrupt because their owners lack the necessary skills in this area.
Importance of bookkeeping for your business
Experts point out the following four crucial reasons why you need to focus your attention on maintaining proper accounting records:
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Gives a clear indication of the financial health of your business
Cash flow is the lifeline on which your company conducts its activities in the market. You want to know how much money is coming into and flowing out of your business. For this, you need to maintain a proper a record of all your revenues and expenses. Only then can you can carry out necessary follow-ups on your customer’s payments for the sales you make.
You are also in a position to pay your suppliers and other expenses on time. It can help you determine how much profit or loss your organization is making at any point time.
However, all this is not possible unless your organization maintains accurate books of accounts. It can even enable you to take steps to prevent your organization from going into liquidation in the worst-case scenario.
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Tax management
As a responsible citizen and entrepreneur, you need to pay your taxes on time. Proper bookkeeping can help you determine how much income you earn in a particular financial year. From this information, you get to know how much pay tax you have to pay to the regulatory authorities.
Even in cases of disputes you can produce the necessary financial records to prove your point. That can save you from paying penalties and fines for any discrepancies in your income.
It also allows you to avail various deductions and refunds. You can even browse credible websites like Bookkeeping.com to know more about this aspect.
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Proper recording to your investors
From time to time, you may need monetary assistance to operate your business. However, your investors will want to know the financial status of your organization for at least three consecutive fiscal years. Only then will they be willing to give you the funds you need.
Proper and accurate bookkeeping allows you to provide them with all the necessary records they need. It also allows you to show them how you are using their money in your business if the need arises.
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Legal requirement
In many countries, it is essential for entrepreneurs to maintain an accurate record of their financial dealings. Bookkeeping helps them in achieving this objective.
Owners who fail to comply can face audits from the regulatory authorities like Internal Revenue Services (IRS). In the worst-case scenario, they can also face seizure of their assets.
The above four essential reasons prove beyond any doubt that bookkeeping is vital for your business. This financial process helps you to keep track of your incomes and expenses. However, you may find that this task is a bit too much for you. In such a case, you can outsource the activity to proficient experts.
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