There are so many things for small business owners to pay attention to, from supply chain relationships and product research to advertising and customer service. However, at the top of the list is quality accounting, and here are four reasons why we think it’s so important.
Security and Control
As we’ve already mentioned, there are plenty of things for business owners to worry about, but without a clear picture of where your money is going, you cannot ensure that employees, partners, vendors and scammers don’t steal from you. This could be as simple as discovering that your merchant provider double-charged or mis-charged you, or it could be a trusted employee embezzling money from your business.
With a clear understanding of your cash flow, you can put any worries about the security of your finances to rest. Good bookkeeping equals lower stress!
Valuation and Capital Raising
Going into a valuation, you will need financial statements from at least the previous three years, copies of your business’s tax filings and returns, and an up to date balance sheet. Investors will expect that these items are prepared to a professional standard, and high quality accounting makes for a more trusting investor-owner relationship.
In addition, if you foresee a need for raising capital, now is the time to begin recording accurate and professional accounting. Anyone who gives you money for your business wants to know it’s being used in a productive and responsible way, and investor-grade accounting will clearly reflect your knowledgeable business decisions.
The IRS puts the burden on business owners to prove that any expense made through a business account was legitimate. This isn’t hard to do if you have a good bookkeeping system, but it is impossible to do if you don’t. Without high-quality accounting, you are left with two less-than-desirable outcomes: paying extra taxes (which most business owners do) or risking an audit where you would have to pay back taxes and penalties.
Clear and accurate accounting allows your tax prep partners to find the most deductions and keeps you from overpaying on taxes, saving you money and increasing profitability in the long run.
“What Gets Measured Gets Managed”
World-famous management consultant Peter Drucker once said, “what gets measured gets managed,” and nowhere is this more true than in business accounting. As important as the other three points in this post are, this one is the key to whether or not you’ll meet the goals you’ve set for your business.
You cannot grow your business unless you can learn to improve your processes and manage toward profitability, and you cannot do those things without an accurate scorecard. Accurate bookkeeping is the foundation of this scorecard and allows you to benchmark your progress in every aspect of your business.
Work With Us
If you’re ready to outsource your accounting to a firm like Seller Accountant, book a free 15-minute discovery call today. If you’ve got a question or are looking for a consultation with a member of our leadership team, book a paid coaching call here.