Bookkeeping can help keep your business organized and able to yield a profit. Bookkeepers can play a pivotal role in this dynamic. Knowing what bookkeeping consists of and how to get the help you need can have a significant impact on your business. Many small businesses fail due to poor financial management. By applying sound financial principles, you may be able to prevent this fate from befalling your business.
Basic Bookkeeping Principles
Basic bookkeeping helps you to determine basic concepts about your business, such as:
- Whether the business is making money or losing it
- How much money the business is making or losing
- Whether the business is on stable financial ground
- Whether the business experiences cash flow problems
- Whether financial obstacles are projected in the future
While some small business owners may retain the services of an accountant to handle certain tasks like payroll or tax returns, accounting software can help keep accurate financial records.
Importance of Accurate Records
Accurate records are necessary for the success of a business. Some reasons why you need accurate and updated financial records include:
- Getting the information that you need – Being able to evaluate the financial consequences of a decision is almost always necessary when making important decisions about your business. Some decisions that you may need additional evidence to assist you with is whether you should hire another employee or if a particular product or service is likely to turn a profit.
- Obtaining financing – Bankers and other potential investors will likely want to view financial statements, including balance sheets, cash flow budgets and income statements. These types of records are based on daily recordkeeping.
- Maintaining budgets – Successful businesses utilize budgets to help them plan. Such a tool allows businesses to forecast their cash needs and control expenses. Banks and other lenders may also want to see budgets to ensure that you are managing your business in a sound manner.
- Monitoring the success of your business – Bookkeeping helps show whether a business is performing well or is failing. It can show whether the business is making money, increasing sales and increasing expenses.
- Income tax preparation – You must file an income tax return and pay income taxes regardless of the type of business that you have. Having accurate records helps you or an accountant prepare an income tax return more easily. Inaccurate records can make you wind up in tax trouble, having to pay penalties and interest.
- Complying with payroll and sales tax rules – If you hire workers, you must pay payroll taxes and comply with a variety of state and federal payroll tax rules. Tax deposits must comply with strict deadlines. Not keeping accurate records can wind up paying penalties.
Hiring an Accountant
If you decide that you need help meeting your accounting needs, you may determine to hire an accountant. You will likely need the services to help you close books annually and to file your income tax return. You may need accountants more often, based on your needs and the nature of your business. Some of the questions that you may want to ask potential accountants include:
- Do you specialize in small businesses?
- Do you recommend a particular type of accounting program?
- Can you assist me with establishing a bookkeeping system or operating my existing system?
- Do you have references?
- What credentials do you have?
- What is the fee structure?
- How do you communicate information?
- What types of services do you provide?
If you would like more information about whether or not to hire a bookkeeper or whether an accounting program like QuickBooks can handle tasks for you, contact our local QuickBooks ProAdvisor in your area.
