Accounting is a Key Piece of Your Business
An entrepreneurs guide to the importance of bookkeeping
If you’re an entrepreneur, you probably didn’t start your business because you love paperwork and bookkeeping. Most entrepreneurs want to spend their time selling their product or service and working with their customers. Not balancing their checkbook, tracking their expenses, and chasing customers for payment. However, if you have a business, the bookkeeping is a necessary evil for many reasons.
Taxes. The #1 reason is because, as much as we may hate it, we have to pay taxes on our business profits. Regardless of the type of entity your business is, sole proprietor, LLC, C Corp, or S Corp, the income and expenses of your business need to be reported for tax purposes. And nobody wants to pay more than their fair share, so you don’t want any business deductions to fall through the cracks.
Am I Making Money? Many people determine whether or not their business is making money by checking their bank account balance. If there is money in the account I must be doing OK, right? But does that really give you a clear picture of how your business is doing. If you don’t have reliable and timely information you can’t make informed decisions to grow your business. If you’re only looking at the books once a year at tax time, it may be too late to make necessary adjustments. How can you make strategic decisions about your business if you don’t know how much money is coming in and going out and for what. How can you answer questions like:
Am I charging enough?
What products/services are most profitable?
How much does it really cost me to provide the services I offer?
What are my overhead costs?
Am I spending money on things I don’t need to?
What expenses can I cut to make more profit?
Can I afford to hire someone to help me?
Are my marketing costs paying off?
Get Paid. If you invoice customers for your services (i.e. they don’t pay on the spot) then you need to make sure you are getting paid. Keeping track of who owes you money and collecting payment is critical to your business. If you don’t have a system in place to do this, you could be losing money without even knowing it.
Reduce Fraud Risk/Save Money. If you’re reviewing the activity in your bank and credit card accounts in a timely manner, you are more likely to catch fraudulent activity, which has become increasingly prevalent. Also, you may notice that you’re paying recurring fees for services you’re no longer using. It’s easy in today’s subscription based economy to sign up for services and forget to stop them if you are no longer using them.
Get A Loan. If you need financing for your business, or possibly even for yourself (i.e. home mortgage), a bank will want to see current financial information for your business so they can decide if they want to loan you money.
There are lots of reasons why the accounting for your business is important, but unfortunately that doesn’t make it more fun to do. However, there are tools available to help make it less time-consuming so you can get it done and get back to doing what you love – serving your customers! QuickBooks Online can help automate the tracking of your income and expenses. It can also help make the process of customer invoicing and collection of payments fast and easy.