For business whether it is small or large, bookkeeping is such an important activity which decides that how far the graph of success will move. A few reasons listed below on having an organized and updated financial accounts for a business.
Monitor the Financial Success or Failure of Business
You need accurate information to manage the financial health of your company. You must know if there are customers in arrears, or if you have outstanding balances on your lines of credit. Without accurate records it would be difficult to manage the cash flow of your business.
Provides the Information You Need to Make Decisions
An accurate book of accounts will help you see where your business is and where it is going in the next several years. The financial report aids in keeping in line with the budget, analyzing the gross income, determining the health of the business and anticipating cash flow issues.
A detailed and correct books of accounts are important when your resort to outside financing. This is the instrument for business to determine how much risk they are dealing with. They need this data before releasing the amount and asking for funding/loans from a bank requires financial statements. Eventually, if you want to sell out and exit – you need financial statements for at least a few years.
No matter what your business entity, you must file an income tax return and pay income taxes. With good records, preparing an accurate tax return will be easier and filing will more likely be done on time. Poor recordkeeping may result in underpayment or overpayment of your taxes. If your CPA prepares your tax return, poor records could result in higher accounting costs.
Many small businesses due to high overheads or other important business functions such as sales and marketing often tend to ignore the significance of preparing and managing financial accounts. Making this mistake can cause blunders later on and it would be difficult and more costly to arrange the accounts in order, therefore bookkeeping is believed to be a high profile task. It not only includes a clear picture of the organization but help in the overall performance of the company.
For small businesses it is often a headache to hire, train, and manage accounting/bookkeeping staff as it is very expensive and time consuming. Since accounting is not one of the core competencies, it may make sense, operationally and economically, to outsource bookkeeping functions. Outsourcing bookkeeping concept is one which allows the firm to save up to 50% on the cost and at the same time hire the services of specialized and qualified accounting personnel’s. Outsource bookkeeping service providers also save space since they generally work remotely and will not take up valuable office space, as an in-house bookkeeper would. More and more businesses are now relying on bookkeeping outsourcing providers to conduct bookkeeping and reconciliation services. By hiring outsourced bookkeepers, a business does not only save in time and money but also eliminate the expenditures necessary for payroll, benefits, insurance, and training.