Bookkeeping, or maintaining a business’ financial records, can be an interesting challenge for growth-focused small businesses. It isn’t typically one of the first things a startup or small business will hire for, so there can be several years where a “DIY” approach is taken. This’ll usually suffice – up to a point. As you begin to grow more, though, it’s important to bring on a professional bookkeeper. What can a bookkeeper do to help steer your small business to the path of success?
Some consider bookkeeping to be primarily a tax-saving strategy, but it’s a lot more than that. Having a professional bookkeeper helps keep you sane, especially when it comes to tracking expenses. It’s impossible for a small business to know where they stand unless they know what’s going out, i.e. expenses. When your books are disorganized around expenses, you’re stressed trying to take care of it, and this ultimately can cause you to come undone. When you use a DIY approach to bookkeeping, chances are: whoever is managing your books is also wearing a couple of other hats -- such is the nature of small business. In that context, it’s possible for things like business expenses to fall through the cracks.
Maintain cash flow.
Bookkeeping services essentially put you in control of your own cash flow. Because you’ll have a clearer picture of how much cash your business has on hand, you’ll be better prepared to pay for urgent expenses. If you uncover that your seemingly profitable business is actually running low on cash flow, your bookkeeper can provide strategic guidance on how to overcome this obstacle. A bookkeeper will understand what needs to be done and when in regards to the reporting and tracking of the financials.
Stay on top of taxes.
Not correctly keeping your books can cause issues: overestimating your profits when filing taxes needlessly increases your taxes owed, while underestimating them can lead to an audit and fines. Miscategorizing assets (i.e. long-term assets that depreciate over time) and expenses could mean that you’re paying more in taxes than you need to. Additionally, filing taxes late or having exemptions, expenses, or deductions that don't add up raise red flags with the IRS which can leave you vulnerable to an audit. And misplaced or overlooked receipts prevent you from being able to claim expenses as write-offs. Without accurate books, your bookkeeper won't be able to spot every deduction you are eligible for. Small businesses have numerous tax advantages available to them. Your bookkeeper can help you find the ones that could help your business out.
Forecast profitability and growth.
For many small businesses, being able to compile accurate forecasts is extremely important because it helps show potential investors, purchasers, or partners where the business is headed. Having accurate books is crucial to this process, largely because it means you’ll be equipped with accurate data. Shoddy, inconsistent bookkeeping likely means that business decisions are being made based off of incorrect data. Not good. But with efficient bookkeeping, all the ducks are in their proverbial rows. It makes the actual decision-making process much less painful and more productive.
As your business gets to the point where managing DIY-style bookkeeping is too much to handle, it’s crucial to find a solution. Hiring a bookkeeper can help your small business track expenses, maintain cash flow, stay on top of taxes and forecast for profitability and growth. With a qualified financial professional on your small business’ side, you’ll be poised for success.