While sometimes it can seem that keeping the books is an arduous and bothersome task, it is no less important. The following are the four top benefits of good bookkeeping practices.
#1 Cash is Better Managed
When you do a good job of keeping the books you can stay on top of your money at all times. You know exactly how much money you have flowing into the company (or your personal account) and how much is being drained out. This helps you stay on top of bills, making profit projections, and managing the accounts of your customers and vendors. It also helps you to better budget should you be performing better (or worse) than you expected. You need to know where you are to have a good idea of where you will be and how you should prepare for it.
#2 It Helps with Business Analysis
Financial statements help a lot with analysing the business and seeing how you are performing. This kind of business analysis allows you to identify key areas where you can make more money. Is an area performing better than others? Invest in it and make it even more profitable. Or steer money away from the money sinks you didn’t see before. Financial statements allow you to make better financial decisions. It also helps a lot with applying for a business loan. It means you know how much you should be borrowing and shows the lender that you have the ability to pay them back. Finally financial statements can help you plan for the upcoming tax season. You can estimate how much tax you should be paying and set aside the money ready.
#3 Comply With any Regulations
There are regulations in place for businesses that mean you have to keep good financial records. For a start you need accurate financial information in order to pay off income taxes. If you don’t have a record of your income then you won’t know how much tax you need to pay. There are also other returns such as the employer’s returns which rely on good bookkeeping of staff remuneration. You could get in trouble if you don’t keep good enough records. Speaking of trouble…
#4 Risk Management
When you keep accurate records you can really reduce the risks of getting in trouble with the IRD or worse. Good bookkeeping allows you to prepare for an audit and have everything where you need it when the auditor shows up. It also protects you against fraud and embezzlement. People can only embezzle your money if you aren’t keeping a close eye on it. It also reduces the risk that you yourself will be accused of fraud or embezzlement. Finally it minimises any penalties or interest associated with your finances.
There are plenty of good reasons to keep accurate bookkeeping information and stay on top of your finances. If you think it’s too much hard work then outsource the finances of your company to a third party bookkeeper. They can handle everything for you and let you focus on what really matters; running your business.