Keeping track of sales, earnings, expenses and purchases is fundamental to the overall health and sustainability of your business. Effective bookkeeping produces the data you need to evaluate your current practices and plan for the future.
But despite its proven effectiveness, many business owners dread and avoid doing their bookkeeping tasks. Here are four reasons why bookkeeping is crucial to your success.
Keeping track of expenses
A reliable system for tracking expenses ensures you reap all the benefits you’re entitled to when doing your tax returns. Expenses such as “food”, “travel” and “office supplies” can be easily categorised when recorded in a bookkeeping software program.
Using a dedicated credit card for business expenses and reconciling your bank statements on a monthly basis ensures that nothing is missed come tax time.
Measuring profitability and planning for the future
In order to grow your business, you must be able to track and compare its finances from one year to the next.
In addition to reconciling your bank statements every month, effective bookkeeping generates data you can use to gain a comprehensive overview of your business. This data can help you:
- measure year to year profits;
- identify opportunities to cut costs;
- plan for major expenses such as new office space, equipment or staff; and
- develop data-based strategies for expansion.
Preparing for tax time
Few things are more stressful for business owners than scrambling to get poorly maintained financial records ready for tax time. In addition to the panic of last minute preparation, inaccurate or incomplete documentation can lead to the ATO imposing penalties and interest charges or conducting an audit.
Sound bookkeeping will not only save you money, it will enable you to meet lodgement deadlines in a timely manner and give you peace of mind.
Final tip: ask for help
Most business owners are passionate about the overall business, not just crunching the numbers. Employing a bookkeeper, even on a part-time or as-needed basis, to help manage tasks like processing payroll, reconciling the books each month and managing accounts receivable will keep everything running smoothly and optimize your overall efficiency and profitability.
Invest in effective bookkeeping and you’ll build a solid foundation for business success.
Here at BSN & Co we have experienced bookkeepers who can help you manage your business. Visit our bookkeeping page to find out more.