Why is bookkeeping so important to your business?


blog photo - profit or loss direction


Maybe you have asked yourself the same question – why is bookkeeping so important to my business? You are  in business to make money.Your business is probably not just a hobby and you probably rely on your income to provide you and your family with necessities, it is vital that you manage your business properly. This does not just start with  making sure you have reliable employees; it also depends on your bookkeeping. 

Firstly, accurate bookkeeping will help you to ensure you are meeting your goals. It is basically impossible for you to know if your company is as successful as you want it to be without keeping documented tabs on finances.

Bookkeeping can also help you to keep track of who you owe money to and who owes money to you. With so many transactions taking place in a small time span, you need to be able to keep track of it all. You do not want to lose out on money, nor do you want to forget to pay someone. One mistake with overlooking money you owe can compromise your business's reputation. 

Obviously, you want your business to be as profitable as possible. Through record keeping, you can establish whether your company is earning money. Additionally, you have the ability to use your records to determine how you can increase your earning potential. 

Another vital reason for keeping records that are precise is for tax purposes. At the end of the year, you will be required to submit your profit and/or loss to the Internal Revenue Service (IRS), so you can pay taxes on your earnings or in a small number of cases, you may get money back. When you are filing your taxes, you have the ability to claim your business expenses, which helps to decrease the amount you owe. Do you really want to wait last minute to try and figure out what you can claim and what you cannot? With the IRS, there is no room for error. One mistake due to bookkeeping just might cost your business a significant amount of cash. 

Numerous reasons exist for keeping accurate records. Without knowing where every last penny is going, how can you know how to enhance your profit? Not to mention, legally you are obligated to report your earnings, and they must be correct. 

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