According to the US Small Business Administration: half of all new small businesses fail within the first five years, and the number one cause of failure is financial mismanagement. Tough to hear, however, you need to be aware of the critical role bookkeeping plays in successful businesses.
- When you own a small business, it is imperative that you keep a good set of consistently updated books. The IRS will not be satisfied with records that were thrown together at the end of a year.
- It’s important to know how much money your business is bringing in. How and where is your money being spent? Compare your results to industry standards to determine where you need to improve your business model.
- Compare this year’s sales/expenses and balance sheet accounts (cash, receivables, liabilities, etc.) to the prior year(s) to note your progress in the business world and help establish profit and sales goals.
- Tax preparation is another key reason to maintain a detailed set of books. A bookkeeping plan will create and maintain accurate, end of year, totals.
- Current financial statements will satisfy a lender who will certainly require them, in order to evaluate your qualification for a loan.
- Your business needs to employ a bookkeeping plan that is more sophisticated than a simple spreadsheet format in order to obtain current, as well as comparative data. Bookkeeping is key to growth. Growth is key to success. Success is key to happiness.
- For most businesses (startups and established alike), those things that you excel at are your product or service, usually what you do has nothing to do with bookkeeping. So, unless your business is bookkeeping, you and your team should concentrate on those things that you do best.