Entrepreneurs starting a new business usually know they need to keep good books. But many are overwhelmed by the sheer volume of other work they need to do to get their business off the ground. As a result, they delay getting their bookkeeping ducks in a row.
Bookkeeping can involve everything from recording day-to-day income and expenses to processing payroll, from paying vendors and contractors to reconciling monthly accounts. It’s a lot to think about, but not something that should be pushed off into the future. Here are four reasons why bookkeeping is important for business start-up.
- Bookkeeping gets your finances in order from Day 1
Instituting good processes are important for any business. When you focus on bookkeeping right from the beginning, you’re more likely to fall into positive habits that keep your business headed in the right direction. Good bookkeeping also gives you a real-time snapshot of your business finances. It helps you to manage cash flow at a time when it’s exceedingly important to do so.
- Bookkeeping helps you prepare for tax time
If you’ve ever arrived at tax time and realized you’re missing receipts or your books aren’t otherwise in order, you know the feeling of true panic. It seems like everything comes down on you at once. Starting a good bookkeeping practice from the outset ensures that all your payables and receivables are accurately categorized and recorded, making it possible for you to get every deduction allowable to you. More importantly, keeping good books helps you to avoid a potentially costly IRS audit.
- Bookkeeping makes it easier to get a loan
Investors like to know that you’re in control of your business finances. Making sure your books are in fine order is one way for them to know this. The difference between getting that small business loan you need or going home empty handed might evolve around how clean your books look. Similarly, investors with money in your business like to see regular and comprehensive financial reports. Without reliable bookkeeping, you won’t be able to make good on that deliverable.
- Bookkeeping facilitates your strategic planning
Business start-ups generally need to be agile and flexible. That means having the ability to look at financial reports and make strategic decisions that influence the direction and focus of your business. With bookkeeping, the “garbage in, garbage out” rule generally applies. If you don’t keep good books, you’ll never know where you stand today and you won’t be able to plan for tomorrow. You need sound bookkeeping practices in order to keep your business headed on the road to success.
Many owners of start-up small businesses make the decision to hire an outside bookkeeper to do the work for them. By doing so, owners free up much-needed time to concentrate on their customers and clients. They also benefit from the business knowledge and wisdom an experienced bookkeeper possesses.