03.14.20163 min read

Bookkeeping for Small Business: Why it’s Important

Accurate bookkeeping is an essential component of small business success. While it may be a nuisance and feel like a chore, it’s vitally important you track your revenue and expenditures. Many businesses that could have earned great success have been bogged down by their failure to properly maintain their financial records. The IRS tells us 40 percent of small businesses incur an average penalty of $845 each year for late or inaccurate filings and payments. Whether you go at it alone or outsource it, bookkeeping is crucial to your small business. Here are some big reasons:

Taxes

Your business must provide information on a regular basis about its profits or losses in order to access the amount of tax dollars you owe.  The information must be correct and presented in a manner that is professional and concise. Failure to stay current with your taxes can lead to severe repercussions—the government can impose penalties and fines that could negatively impact your business.

Expenses

Business owners can claim expenses that have been incurred as a business expense. These expenses need to be paid from the business bank account, and ideally submitted on a consistent basis such as one time each month. This ensures the person responsible for bookkeeping can better see and monitor outgoing cash for tax purposes.

Cash flow

Oftentimes businesses work hard at building a brand with a passion—yet they fail to track cash flow. It is critical for a business to track its spending no matter its size—and it is only possible with accurate financial records. Several growing and seemingly profitable businesses have failed because they were suddenly hit by a cash-flow crisis that was unexpected—and they weren’t prepared.

Profitability and growth

To determine the amount of profit your business is making, accurate bookkeeping is essential. A number of business owners neglect to track this, but it is vitally important. Bookkeeping allows a business owner to have a better grasp of how much progress they make from year to year. Bookkeeping gives business owners the ability to look back at years past to identify patterns and make comparisons. This helps provide a greater understanding of areas where the business profits and where costs can be cut. Through financial analysis, small business owners can learn how to avoid future problems and pitfalls.

Take time to determine how you want to keep track of your business’ bookkeeping. There are many reasons why small businesses opt to outsource bookkeeping tasks, while others would rather purchase the software available that makes bookkeeping for small business simpler and even provides the needed data required to file taxes. You may also decide it’s better to hire an individual to join your team and manage the financial affairs of your company long term.

While bookkeeping may feel like a burden when you are trying to grow your business, it is worth the time and effort. Diligent bookkeeping is one piece of the puzzle of success and may help you survive today’s harsh economic climate. How has accurate bookkeeping helped your business prosper?

2017 Strategic Planning Kit - Download Now

Megan Totka is the Chief Editor for ChamberofCommerce.com. She specializes on the topic of small business tips and resources. ChamberofCommerce.com helps small businesses grow their business on the web and facilitates connectivity between local businesses and more than 7,000 Chambers of Commerce worldwide.

Was this post helpful?
Created with Sketch.
Infusionsoft cornerstone spinner
close button
Subscribe to our weekly newsletter!

5 Reasons to Subscribe:

1. Weekly tips to dominate sales and marketing

At our core, we're focused on helping you become a sales and marketing machine. We tap into the genius of the best salesfolks and marketers out there to give you daily tips to grow your leads, make more sales, and keep more customers.

2. Expert small business resources that cost you zero dollars

Want to go deep? We have you covered with free guides, webinars, and tools on a range of topics from marketing automation, CRM, and digital marketing to building sales and marketing strategies from the ground up. All for free. All for you.

3. We're focused 100 percent on small business success

We exist for one reason: helping small businesses succeed. We give you the ideas and insights you need to blow the competition out of the water. We serve business owners who are hungry to put in the hard work to grow their business and own the market.

4. We do the work for you

Running a small business is a 110 percent endeavor. You don't have time to surf Internet for the best small business insights and ideas out there. We'll do that for you with the best original content from our team and from industry experts and small business owners.

5. But wait, there's more!

Small business success means more than just sales and marketing, so we also hit on a range of topics to help your small business thrive, including personal and business growth, customer service, and business management.

6. Righteous GIFs

OK, we said five reasons, but we like to overdeliver...and GIFs. We really like GIFs. You're bound to see some righteous ones.

GIF of Ferris Bueler principal's assistant

P.S. We'll never give out your information. We'll only use it to send you awesome content and resources, if you're cool with that.