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7 Reasons Why #Bookkeeping Is Important For Your Business

You, as a business owner, have a lot on your plate! It can be stressful realizing that bookkeeping is yet another task which must be completed.

Guess what…To understand the financial health of your business, you need to have accurate and up-to-date bookkeeping. This is in addition to the regulatory reporting requirements from the various local, state, and federal agencies.

So…Why is accurate and up-to-date bookkeeping important?

1. Tax Reporting and Obligations

a. Every U.S. Citizen (unless earning less then $12,950 usd) and business must file their federal taxes annually – yes, even if you’re an #expat and living outside the U.S. full-time! U.S. federal taxes are based on citizenship and includes global income.

i. For U.S. citizens living abroad, the FEIE (Foreign Earned Income Exclusion, using IRS form 2555), allows you to exclude a certain amount of your FOREIGN EARNED INCOME from US tax. For 2022, the maximum exclusion amount is $112,000.

b. Accurate bookkeeping will keep you up to date on your tax obligations and make your tax filer (and your) life much easier.

i. Your #bookkeeper should be aware of what your filing date requirement are for your particular situation (country of citizenship, residency, business structure, etc.).

c. Your bookkeeper should have your chart of accounts set up so you are always aware of your payroll tax liabilities, and any other tax liabilities due during the year.

2. Organizing of Records

a. The organization of your financial records is key when it comes time to budget, apply for loans or grants, to determine quickly whether you are operating at a profit (or loss), or gathering information for an audit.

b. If your bookkeeping is inaccurate, and/or unorganized, it creates a situation where you don’t have easily obtainable or accurate information; thus, creating a situation where a lot of time and effort is spent attempting to gather accurate information.

i. Precise bookkeeping gathers all of your financial data to form a clear picture of your business finances.

3. Financial Blueprint

a. When creating a budget, you are creating a financial “road map” for your business.

b. With a budget, you can plan for future and ongoing expenses; and the anticipated resources which would cover those expenses

i. How would you know what your ongoing expenses are – or the revenue you are receiving – without accurate and up to date bookkeeping?

It should be spent building and managing your business, increasing revenue and profits, managing your staff; having the time to review your financials, developing and implementing the best strategy for building your company. any. ny. y. .

4. Business Analysis & Planning

a. Analyzing your financial statements (i.e. Balance Sheet, P & L) will help you in managing your profit and loss.

i. If your bookkeeping is accurate and up-to-date, you can easily assess your business performance and identify your strengths – and weaknesses.

b. Having precise financial records will help make business planning and decision making smoother and more manageable.

c. By checking the Profit & Loss Statement, you will be able to determine whether the business is on the right track financially.

d. By comparing the financials over periods of time, you will be able to establish trends for growth, revenue, profitability, and expenses.

i. This type of accurate information will provide you with the information to develop specific strategies to improve your business in the ways you feel are important and necessary; whether it is increased sales, decreasing specific expenses, or better management of labor.

5. Record Keeping Required by Law

a. Your business policy and procedures must meet the rules or your local, state (provincial) or federal government.

i. Bookkeeping helps you to maintain your business records properly and in accordance with the pertinent regulations.

b. If your business is involved in #cross-border and #multi-currency situations, the regulatory and reporting requirements increase exponentially.

c. If the records are maintained in a well-organized, recoverable manner, the retrieving process becomes much more manageable when an audit occurs.

6. Better Cash Flow

a. Bookkeeping can help contribute to improving cash flow – really!

i. Accurate and up-to-date bookkeeping provides information regarding outstanding invoices, in an organized and easily accessible manner.

ii. You can use this information to implement better cash flow policies, thus improving your cash flow.

7. Getting Business Loans or Investors

a. Applying for a business loan or grant? A sole-proprietor and wishing to apply for a mortgage? Wanting to attract some Investors?

i. The viability for attaining any of the above will be determined by…..you’ve got it right, YOUR BOOKS!

b. If your bookkeeping is a mess, providing inaccurate or missing information, the chances of attaining any of the above is slim.

i. Financial institutions and investors want to see records for several years.

c. If you are a small business owner, or sole-proprietor, wishing to apply for a mortgage, I strongly encourage you to speak with a CPA regarding the income you are claiming and determine the best strategy for attaining a mortgage.

As a business owner, your time is valuable.

iIt should be spent building and managing your business, increasing revenue and profits, managing your staff; having the time to review your financials, developing and implementing the best strategy for building your company.

Spending the time to: a) learn proper accounting practices, b) figuring out which accounting software works best for your situation, c) learning how to use the accounting software, d) setting up the accounting software to meet the specific needs of your business, and e) entering all the data in a timely and accurate manner so you have accurate and up-to-date financial information….is this really the best use of your time and energy?

And...we haven’t even touched on having a “balanced life” or spending time with family and friends!

Something to consider….

If you have any questions regarding bookkeeping, please do not hesitate to contact us and schedule a FREE 30 minute consultation.

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