Keeping your bookkeeping up to date is a must for any successful business. Keeping close tabs on your accounts and monitoring payments in and out is crucial. If your books aren’t up-to-date or your finances are a mess, the risk of financial failure goes up dramatically.
Here are five reasons to keep your bookkeeping up to date
1. Monitoring and Controlling Your Expenses
Every business has expenses, whether you run an office, store, salon, or agricultural business. Keeping your books updated lets you monitor expenses, preventing cash flow issues, and helps you prepare your tax returns. Claiming essential business expenses can reduce your tax bill. Always keep receipts and invoices and document every transaction. This helps with tax returns and identifying areas to cut costs if expenses are too high.
2. Budgeting is essential.
With an accurate view of your books, you can plan, prepare for income fluctuations, and decide the best ways to spend and invest. Use your books to create a budget based on real sales and expenses, and update it regularly. Business conditions change quickly, so keeping both your bookkeeping and budget up to date is key.
3. Stress-Free Tax
Filing a tax return is a dreaded task for many small business owners. It’s much simpler and less stressful with good bookkeeping. Your books should clearly show your income and expenses, making tax returns easier. If you have an accountant, they’ll also appreciate your organised books. Planning for tax payments by setting aside monthly amounts can spread out the cost and prevent a big lump sum payment at the end of the tax year.
4. Creating Forecasts
Forecasts are invaluable for small businesses. The best way to create accurate forecasts is using past data. If your books are in order, you can forecast for upcoming months or years. Forecasts help with future planning, money management, and reducing cash flow risks. Seasonal businesses can use forecasts to decide on hiring extra staff or buying more stock during peak periods.
5. Borrowing Money
Many business owners borrow money to expand. If you’re considering a new outlet, growing your product range, or hiring more staff, you might need a cash injection. Lenders want to see your books and accounts. Good bookkeeping improves your chances of getting a loan. If your books are messy, and it’s unclear how much profit you’re making or where you’re spending, lenders are likely to reject your application.
Keeping an eye on your books is vital for your business. You might have new customers and soaring sales, but you must also track expenses.
Being organised, documenting every transaction, and keeping your books up-to-date helps you plan, reduce cash flow problems, ease tax return stress, and improve your chances of borrowing money.
