The significance of accountants is undeniable to all companies, including SMEs. However, when these procedures are not very frequent or complex, entrepreneurs often have fundamental questions about how this involvement takes place and the contribution of these professionals. Do you have these questions? Then this article is for you!
Want to learn more about accountants, understand why accountants are great partners for businesses of all sizes and industries, or have the opportunity to discover how good bookkeeping can help you? Please read on to learn more.
The Benefits of Good Bookkeeping
An accountant’s job is to organize and systematize a company’s accounts. However, in many cases, it is difficult for business owners to understand that good bookkeeping is essential for a business to remain active and profitable in the marketplace. The financial health of your business is your responsibility, and it also allows managers to make decisions based on information specific to their business.
- Accounting organizes and categorizes this information, allowing management to understand the status of liabilities and assets.
- Accountants use methods to record, calculate and analyze the financial position of an organization.
- Therefore, good bookkeeping is essential for businesses of all sizes. In fact, all companies must have accounting records, and only multinational companies are exempt from this requirement.
1. Help with budgeting
Good bookkeeping is an essential part of budgeting. Reliable financial information allows small business owners to estimate revenues and expenses and prepare accurate, manageable budgets. Regular comparison of budgeted and actual financial data is best to identify potential cash flow problems and cost-cutting opportunities. Without good bookkeeping practices, budgeting can be a difficult and stressful task.
2. Fulfilling tax reporting obligations
Most businesses must file tax returns and pay sales and payroll taxes throughout the year. Often, business owners procrastinate on accounting and try to get things done so they can submit their tax returns before the deadline. Entrusting this work to accountants at the end of the year can result in specific bills being paid at tax time. Keeping accurate and organized records throughout the year can therefore make it easier to calculate your tax bill and reduce the risk of late payments and penalties.
3. Maximize deductions for your business
Confused or sloppy records can lead to accountants missing legitimate deductions or, in the worst case, the IRS disallows deductions because they are inaccurate. Good record keeping minimizes errors and allows you to pay the least amount of taxes possible.
4. Financial viability
So, micro and small business accounting are also directly related to financial management. Using these two business interfaces together allows you to develop all revenues and expenses and measure profit potential.
- This financial performance measurement exercise is also crucial for planning the next steps.
- For example, in the case of an expansion plan, you need to ensure that you have the cash flow to invest in growing the business, such as establishing a new headquarters or hiring additional staff.
- However, the flip side of the coin is that these are the times when you need to put the brakes on.
- A good analysis of accounting and financial ratios can also help identify unfavorable situations that usually require a quick response in the form of cost-cutting.
5. Profitability and growth potential
Accurate records are also crucial in determining a business’s profitability, which allows entrepreneurs to understand better how their business is growing from year to year. Small business good bookkeeping will enable entrepreneurs to look back over the past few years to see trends and compare them. Through financial analysis, entrepreneurs can learn how to avoid future problems and pitfalls and ultimately improve the management of their small businesses.
6. Contribution to strategic planning
Entrepreneurs engage in a comprehensive business analysis that goes beyond financial reporting each year. What goals have been met? What is the state of the balance sheet? Is a review of the tax base necessary? All of these questions are part of financial management and, therefore, part of accounting.
- In this case, the entire strategic plan has reviewed to ensure that the company has headed in the right direction.
- And who better than an accountant to evaluate all the accounting and financial information and help management set potential goals and correct any errors?
- Sales goals, a market analysis, the position to generate the best financial return, and an action plan to achieve results.
- With all of these factors in mind, and with the help of an accountant, business people can create something that fits the financial and accounting reality of their business.
Good bookkeeping is essential for maintaining accurate financial records. However, many startups and small businesses fail to implement this necessary procedure. Keeping books of account helps protect against future mistakes, disappointments, and legal obligations.
Inadequate bookkeeping is one of the most common causes of business failure. Without them, your business will operate blindly. In other areas as well, small business good bookkeeping can be helpful in many ways, so pay attention to it.
Villie Walters Ramirez is a 32-year-old sales assistant at a tax king who enjoys tax preparation services nyc and bookkeeping. She has a post-graduate degree in accounting, and she has a severe phobia of cats. She enjoys travelling A lot.