Accurate bookkeeping is an essential component of small business success. While it may be a nuisance and feel like a chore, it’s vitally important you track your revenue and expenditures. Many businesses that could have earned great success have been bogged down by their failure to properly maintain their financial records. The IRS tells us 40 percent of small businesses incur an average penalty of $845 each year for late or inaccurate filings and payments.
Your business must provide information on a regular basis about its profits or losses to access the amount of tax dollars you owe. The information must be correct and presented in a manner that is professional and concise. Failure to stay current with your taxes can lead to severe repercussionsthe government can impose penalties and fines that could negatively impact your business.
Business owners can claim expenses that have been incurred as a business expense. These expenses need to be paid from the business bank account, and ideally submitted on a consistent basis such as one time each month. This ensures the person responsible for bookkeeping can better see and monitor outgoing cash for tax purposes.
Oftentimes businesses work hard at building a brand with a passion yet they fail to track cash flow. It is critical for a business to track its spending no matter its size and it is only possible with accurate financial records. Several growing and seemingly profitable businesses have failed because they were suddenly hit by a cash-flow crisis that was unexpected and they weren’t prepared.
Profitability and growth
To determine the amount of profit your business is making, accurate bookkeeping is essential. A few business owners neglect to track this, but it is vitally important. Bookkeeping allows a business owner to have a better grasp of how much progress they make from year to year.