By Greg Lindberg, 1800Accountant Writer
In the eyes of most small business owners, bookkeeping is likely one of their least favorite things to do. When you sit down and think about it, who truly enjoys pouring over lengthy spreadsheets and calculating financial figures that will often make your head spin? Even though bookkeeping is not a highly popular task it is still one of the most important priorities on any business owner’s to-do list.
Bookkeeping is a practice that involves maintaining all of the financial records of a business. It is vital to keep a keen eye on the profits a small business generates, the money it pays in the form of expenses, and the taxes it incurs on a regular basis. When you can see a clear snapshot of this information in front of you, the financial side of your small business will immediately become very important to you.
Keeping tabs on your cash flow is equally as important as making sales for business owners. Individuals who are financially conscious keep a close eye on their personal finances, and these financial figures are generally much easier to manage. When running a business, you should have a clear understanding of how much income you’re bringing in at all times. It’s important to know whether your profits are trending upward, trending downward, or are holding steady as this is often a good indication of the pulse of your business. Increasing profits suggests you’re making wise decisions. If you aren’t seeing an increase or are actually spending more than you make, there may be something wrong with your business that needs attention. Having the ability to compare your finances from one timeframe to another can help you with this process.
Every small business incurs some expenses on a regular basis. Purchases from as basic as a package of printer paper to a new laptop must be documented. Take a close look at all of the expenses you have. Doing so will help you determine whether you can reduce certain expenses for items or services that are simply not essential to the overall profitability of your company. As many business expenses are tax deductible, this is another reason why understanding bookkeeping is imperative. You may be able to write off these costs on your business tax return and keep more of the money you make. On the other hand, if you fall behind with maintaining your books, you could wind up missing important IRS tax deductions and tax credits for businesses, which could ultimately increase your tax liability.
Bookkeeping can obviously be quite time-consuming – and the time you spend on it won’t bring in a single penny to your small business. It’s been shown that if you spend one hour each day managing your books, you could be losing out on nearly six weeks a year that could instead be used for other tasks, such as making sales. Because of the time involved, outsourcing your bookkeeping needs is highly recommended. By letting experienced financial professionals who enjoy calculations handle your books, you can use this newly found time to focus more of your attention on the day-to-day duties of managing your company. These professionals can also offer valuable suggestions to save you money and increase your bottom line. Isn’t that what all business owners want?
1800Accountant is a national full-service accounting firm that assists startup companies, established small businesses, and individuals with tax planning and preparation, bookkeeping, payroll, and business development.