By Bert Seither
Bert Seither is the Vice President at 1800Accountant, the nation’s leading accounting and consulting firm for small businesses and entrepreneurs. For over a decade, Seither has assisted thousands of small business owners by helping them achieve financial freedom.
Solid recordkeeping within a small business is one of the least desirable tasks of any small business owner out there. It can be overly time-consuming and won’t make you a dime. However, it is also one of the most important tasks for so many reasons.
In terms of operating a small business, bookkeeping is an integral aspect of recordkeeping to ensure a company is on firm financial ground for both the present, the near future, and over the long haul. Bookkeeping involves maintaining all of the financial records of a business. It’s essential to keep close tabs on the profits your small business brings in, its regular expenses, and the tax payments it owes to Uncle Sam. When you have a broad perspective of your company, the financial implications of it will become a top priority for you right away.
On another front, it is important to know if your profits are on the rise, trending downward, or are remaining fairly steady. These financial figures can give you a nice gauge on the past, present, and future status of your business. If you notice increasing profits, you are probably making smart decisions. If you are not seeing an upward trend, or you are instead noticing a significant decline, there could be something up with how you’re handling things. Being able to compare your finances from one timeframe to another through top-notch recordkeeping can help you stay on top of every penny you earn and spend.
Most small businesses are on the hook for some expenses on a regular basis. Purchases from something as cheap as a package of number-two pencils to a more pricey desktop computer must be recorded. Take a close look at all of the expenses you incur. Doing so will help you determine whether you can reduce certain expenses for tangible items or intangible services that are simply unnecessary to drive the profitability of a company. Since most expenses in a business can be written off as tax deductible business costs, this is simply an additional reason why accounting for bookkeeping is a must. Not only can you find ways to save money by doing this, but also you can determine strategies to reduce your overall tax liability.
Speaking of Uncle Sam and taxes, recordkeeping in a business is an absolute must. This means saving any receipts you get from business purchases, copies of special tax returns you must file, and any other relevant documentation the IRS may need to verify that your business activities are legitimate. The last thing you want is to not be able to take advantage of a tax-saving opportunity because you did not maintain proper records.
On the whole, it’s easy to see how good recordkeeping can positively impact your small business. Financially-strapped entrepreneurs are constantly on the lookout for ways to hold on to more of their money. Maintaining records is one big step in the right direction toward this goal.