6 Benefits of Up to Date Bookkeeping
Up to date bookkeeping helps your business run smoothly. If you’re not maintaining your books, you’re always at risk of falling behind. Lapses in your books can cause you to:
- Go over budget
- Miss out on key deductions
- Stress out before you’re taxes are due
If you’re one of the 64% of business owners who do their own bookkeeping, it’s always better to be up to date than to have to worry about catch up bookkeeping.
Why should you spend time keeping your books up to date?
1. Better Expense Management
How do you account for your business’s expenses? You’re spending money on everything from paperclips to software subscriptions and even gas. All of these expenses need to be entered into your books.
Why?
You don’t want to pay a cent more to the IRS than is necessary, which is why you need to record expenses in your general ledger.
Apps and software can help you scan receipts and track expenses. But why is it a big deal anyway? Imagine spending $500 on a purchase and forgetting to add it to your ledger. The next time you need to resupply your business’s inventory, you suddenly don’t have enough money.
What happened? An oversight in your expense management led to potential budget issues. If you’re accurately logging all of your expenses and income, you’ll also have great control over the business’s financial health.
2. Accurate Revenue Forecasts
Revenue forecasting is extremely useful. You need to forecast revenue for:
- Quarterly tax estimates
- Budgeting for the year
Month to month, business volume changes. You may be entering a slow season or a boom, and if you have forecasts that come from reviewing your books, it will clearly show these trends.
Why do they matter?
If you know a busy time of year is coming up, you can bring on new staff or buy more inventory to keep sales flowing smoothly. Your forecasts won’t be 100% accurate – they rarely are – but they can give your team a general idea of what to expect in the weeks or months ahead.
Up to date bookkeeping helps you maintain accurate forecasts and will also help you do something very important: stay on budget.
3. Stay on Budget
Staying on budget can be tricky if your books are outdated. Why? Because you need to have a realistic idea of what your business is spending if you want to set a budget for the coming months.
When your books are up to date, you can review your budget every month with real numbers. You can see where you’re at and make changes as needed to ensure you stay on track.
4. Less Stressful Tax Season
It’s estimated that it takes businesses 175 hours to comply with tax regulations. Tax season is chaotic and stressful enough as-is. If your books are out of date, then it will likely take even longer to prepare tax returns and ensure you’re in compliance.
When your books are up to date, you can head into tax season with peace of mind that all transactions up to December 31 are recorded and ready to go. It also means that your accountant can step right in and prepare your return for you with minimal hiccups.
5. Prepare for Emergencies
Just like in your personal life, an emergency can strike at any time and take your business for a loop. Having an emergency fund can help soften the blow and allow you to weather the storm.
Socking away just a small percentage of your business income every month can help you build up your emergency fund quickly.
But it will be challenging or even impossible to save for emergencies if your bookkeeping isn’t up to date.
When your books are up to date, you can easily track how much you’ve saved and determine how much you can comfortably put toward your savings. You’ll also know when it’s time to dip into that fund to cover immediate costs.
6. Get a Loan with Greater Ease
At some point, most businesses will need a little financial help to grow and invest in their future. A loan could do the trick to get you the funds you need when you need it most.
But if your books aren’t up to date, you may struggle to get your application approved.
Why? The bank will want to see that your business is making money. Old and outdated financial statements may show that your business was generating revenue at some point, but what about now?
If you keep your books up to date, your business will always be prepared to apply for a loan and will be better positioned to obtain one.
Conclusion
To ensure your business succeeds over the long term, it is crucial to keep your books up to date. Updated financials allow you to make smarter, data-backed decisions, whether that’s investing in new equipment, hiring more staff or cutting back on expenses.
If you’re struggling to keep up with your bookkeeping tasks, we’re here to help.
To learn more about our bookkeeping services or how we can help you with your accounting needs, schedule a consultation now!
