According to the US Small Business Association, half of all new small businesses fail within the first five years! That’s the harsh truth of being an entrepreneur in today’s competitive market. But did you know, the number one reason for failure is actually financial mismanagement? As a new business owner or solopreneur, it’s incredibly important for you to be aware of the critical role that proper bookkeeping plays in a successful business! That’s why when we’re asked, “Does my small business need bookkeeping?”, the answer is always “YES!”
Still wondering why bookkeeping matters so much? Here are a few of the top reasons:
You’ll keep the taxman happy
Whether you’re a business or an individual, we all know that filing and paying your taxes is a must! It’d be a lot more difficult to file and meet your tax obligation as a business owner without accurate and up-to-date bookkeeping! Handwritten notes on coffee-stained receipts kept in a shoebox just won’t cut it after a while. So why make your life harder than it already is? You need reporting that clearly breaks down your company’s cash flow and bookkeeping is the tool that makes all that possible!
You’ll get paid!
Without bookkeeping, it’s a lot hard to keep track of who owes you what and when especially when your business starts to grow! Basic bookkeeping means invoices sent and payments received. In the early days of a small business, this can seem unnecessary because you can juggle that information in your head. However, as your business grows, you’ll need to put systems to track things like payables and receivables. And ultimately, how your business manages its cash flow directly impacts what you personally take home!
You won’t screw up your bank account
When you have accurate and up-to-date books and information, it makes it a lot simpler to reconcile with your bank. All this means is you’ll have far fewer headaches when trying to compare your monthly bank statements and make sure everything matches up. When you use TrulySmall Accounting, all of the reconciliation is done for you in the background! Beyond that, we even bring in all of your transactions for you so you never have to worry about missing an income or expense.
You can easily tell if you’re making a profit
Aside from passion, profit is probably one of the top reasons you’re an entrepreneur in the first place. But without proper bookkeeping, it’s going to be really tough to gauge whether or not your business is actually profitable! With good bookkeeping processes in place, you’re able to see the inflow vs outflow of your business easily. That’s how you know whether your business is profitable!
You’ll pay less in taxes
It’s common for small business owners to miss deductions during their first few years of business. Any expenses that you miss throughout the year (all those lost receipts add up!) are going to cause your tax bill to be higher. Why? Because your expenses reduce your net revenue! Like we mentioned above, TrulySmall Accounting helps to make sure every expense is accounted for. Meaning more money in your pockets at the end of your fiscal year!
You’ll be able to get financing
When your business starts to grow, you’ll start to consider factors like financing or loans to help with the expansion. In order to prove to the bank or other financial institutions that your business is actually running successfully, you’ll need to have (surprise surprise) accurate and up-to-date bookkeeping! When your bookkeeping is done right, you can easily generate reports such as balance sheets and profit and loss statements. These documents are critical to helping you make your case for financing.
As you can see, there’s so much more to learning the ins and outs of bookkeeping and how it affects your business! Getting ready for tax season, getting paid as your business grows, paying less taxes, and receiving help through loans are only the tip of the iceberg. That’s why selecting the right accounting software for you is key as a small business owner.