There are plenty of successful business owners out there, but the truth is that there are many obstacles and challenges in the small business world. You might have a business in an extremely competitive market that’s subject to trends and fickle customers. Maybe you have a business in a city or state that isn’t prospering economically, affecting your revenue. Other companies might face issues regarding public relations, customer service, and/or management problems.
Some business owners might do their own books, but others may have a CPA that they consult to ensure that you are getting the most out of your taxes. Many companies have a bookkeeper on staff to ensure that expenses never get out of control, while other businesses might be a bit less professional with their books. It can also help small business owners avoid audits, which can be lengthy and costly.
Either way, there’s only one answer to the question, “When is it time to clean up my books?” The answer is as soon as possible. Here are some reasons why you should consider making clean accounting records a priority for your business. No matter what, you should make sure to “clean up your books” as a business before year’s end.
DETERMINE ANY PROBLEMS
The sad truth is that many business owners don’t feel like getting into bookkeeping because they find it mundane. However, a business owner who refuses to check their records is often simply in denial about a very real problem. A small business can run into all sorts of issues. For example, you might find money is going missing at the hands of an employee. Other small business owners might uncover accounting mistakes or find a duplicate vendor payment that they overlooked before.
These problems can add up, and it can end up causing even more headaches down the line. If you are serious about accounting, you can spot these issues as soon as possible and tackle them head-on. While accounting might not sound “fun”, there’s a possibility that you can spot huge issues in bookkeeping that must be addressed as soon as possible.
Many entrepreneurs might think that their accounting records are immaculate, but there might be any host of altering your books. You might be an entrepreneur that owns several businesses and loaned money between the businesses. This is the kind of accounting situation that you want to stay on top of, for example. Some business owners even mix personal and business expenses. These kinds of problems can lead to tax issues down the line.
IMPROVING FOR THE NEXT YEAR
Entrepreneurs understand that taxes are necessary, but many hate the idea of sitting down and focusing on books for a while. However, bookkeeping’s beauty is that you can actually get some insights as to what is working in your business and what isn’t. You might find that the information and insight can help you improve operations in some way, and that’s a great way to get an edge over the competition.
In other situations, a CPA might find that not all of your smaller transactions were recorded, and that this changed the books over time. Another example of why you should think about accounting is that you may realize that your company is actually losing money on specific products, or in a specific division of your company. You can then make the appropriate moves towards profitability.
You might get a better idea of your cash flow or figure out where you can reduce expenses. There are many reasons why accounting can help you adjust for the future, and this kind of information can help you understand your business on a deeper level.let’s finish with learning why startup valuation is important.
Some organizations generate so much revenue that they are eligible for millions of dollars in tax deductions. Even if your company isn’t that profitable, tax deductions might be crucial to making sure that your business is getting more profitable year over year. If you don’t have your books organized, there’s a good chance that you will be missing out on a variety of tax deductions and tax credits. It doesn’t matter whether you own a small business or a large corporation; this could be a crucial mistake.
There are many tax deductions that only a CPA might know about, so examining your accounting records can help you identify any potential new deductions. It should be noted that tax deductions take a decent amount of time and work, considering that many deductions have to be itemized ahead of time.
One of the reasons that many small businesses fail is because they run out of money. One of the most important aspects of owning a small business is making sure that your business remains “liquid”. If you have access to a certain amount of cash, it usually means that your company can deal with challenges that come your way.
If you end up consulting with a CPA or using an accounting professional, it means that you have a much better gauge of how well your business is performing. Millions of businesses worldwide go bankrupt every year, so understanding that you are liquid and having access to enough cash to survive, no matter what, is important.
There are so many reasons why business owners should take accounting seriously. First and foremost, your business has to pay taxes if it wants to remain in business. If you are always thinking about accounting, you can get a peace of mind regarding your business's legality. Also, accounting can help you identify customer theft or employee theft. If you want to scale a business, you should be thinking about its accounting records each step of the way.
If a business owner wants to get to the next level, they should consistently be reviewing their business records and accounting statements. If you know more about your business, it could make a meeting with a CPA or an accounting professional that much more productive, as well. Either way, business owners should make sure that they are keeping tabs on their financial and accounting records as much as possible. If you would like the team at Hall Accounting Company to take a look at your books, and do a cleanup, let them know and we will schedule a free consultation. Please reach out to Josh Hall at Josh.Hall@HallAcctCo.com or Jeremy Hall at Jeremy.Hall@HallAcctCo.Com for more information. From tax filing strategies to tips on bookkeeping and accounting, we’ve got you covered.
FUTURE IMPORTANT DEADLINES
Estimated Quarterly Tax Payment for 2020 Tax Year Due
IRS Deadline for Quarterly Estimated Payments for 2020 (Form 1040-ES)