When Let’s not underestimate the importance of small business bookkeeping. We know keeping track of your financial records can seem like a daunting task. Whether you take care of it yourself or hire professionals to help, it’s a crucial part of running a business.

Bookkeeping shouldn’t be something you address at year’s end or when tax time rolls around. You should be managing your books regularly throughout the year. Falling behind brings about challenges when applying for loans. It results in taking a loss at the end of the year. And, even more dramatically, it means the difference between success and failure in a business.

Small business bookkeeping is more than just recording your finances. It helps with budgeting, organization, preparing for tax season, and strategic long-term planning.

Improve budgeting and profit growth.

Without accurate and up-to-date books, budgeting is primarily guesswork. When you have a crystal-clear view of your income and expenses and how they’ve worked (or not worked) together, you can more easily plan for future expenses and find areas to help the business grow.

To go along with managing a good budget, small business bookkeeping also records your resulting profitability. The income statement demonstrates whether you are profitable, both in the present as well as over time. The more you record, the easier it is to track profitability and make decisions to profitability grow in the future.

Maintain more organized records and financial management.

When records, files, or any business information is disorganized, it can cause missed deadlines, unnecessary errors, and other slip-ups in your workflow. Even the smallest mistakes can make a big impact. Doing your books often helps arrange all your most important information in one easily accessible place so you can grab it whenever you need it — even at the last second.

And with greater organization comes improved financial management. Small business bookkeeping is critical for staying in control of your finances and knowing exactly where your money is coming from and going to. It helps you keep track of credits and debits, income and expenses, cash flow, profitability, assets and liabilities, and more.

Effectively prepare for tax time.

You should be well-equipped and well-prepared because it’s the same time every year. You can’t avoid filing taxes at the end of the tax year, so why not stay ahead of the game and make the process easier for you (and your accountant)?

In order to file your taxes, you need to know your net profit, which requires keeping up-to-date books tracking your total income and expenses. When all of your information is consolidated in one place, you avoid last-minute scrambling for receipts, invoices, or other paperwork.

Bookkeeping is not only important for your business at tax time, but if you are a business owner, you also need to know how much income you earned from your business for your personal tax return.

Make better informed, strategic management decisions.

Ultimately, bookkeeping is a tool to assess your business performance and identify your advantages as well as your pitfalls. Small business bookkeeping results in the generation of financial statements, and these statements should be regularly generated.

You can use this valuable information to analyze your successes and failures, adjust and improve your decision making, and craft strategic management plans to continue to help your business grow.

Give yourself peace of mind.

Running a small business is stressful enough as it is without having to worry about disorganized books. When your books are complete — and kept up with regularly — you take one thing off your plate and can focus on more front-end tasks.

Whether you complete bookkeeping in house or outsource to a professional, small business bookkeeping is a must. If you need more help understanding the process or simply want to enhance your books, call us at 800-526-9127. And read more about our other financial tips and tricks today.

Copyright © 2021 Republic Bank of Chicago. All rights reserved.

logo-footer
fdic-logo-footer