7 Ways Bookkeeping Impacts a Small Business
Bookkeeping can make several impacts to a small business, including the customer experience and profitability if only business owners would manage it.
Richmond runs on the success of the many small businesses that provide services and products to the local community. As a small business owner, it’s essential that you manage all financial aspects of your operation to go to the next level.
Even the best business plan and product offering can result in business failure if you don’t keep track of finances to truly understand your revenue and expenses. That’s where bookkeeping becomes essential to your business.
What Bookkeeping Items Should You Manage in Your Business ?
To make effective business decisions, you need to know where your cash is coming from, and where it’s going. Details of sales and expenses are critical, as well as an understanding of accounting principles that apply to your business, including any tax implications.
This knowledge – or lack of – can impact your business in many ways:
1. Tracking Expenses
It’s easy to lose track of where your capital goes, with business meetings, purchasing supplies, labor expenses, and so many other day-to-day activities. Bookkeeping processes accumulate all such expenses not only to get an accurate audit of where the money goes, but to keep a record for tax purposes, as well.
2. Missed Opportunities
There are times when it may be advantageous for your business to purchase larger volumes of supplies or invest in new product development. Without an accurate picture of your cash flow and account balances, you may not know whether you can leverage your funds to benefit from such opportunities.
Recording and filing invoices from your suppliers is essential to ensure payments are made accurately, and only once. Duplicate payments cost you money. Getting reimbursed for overpayments negatively impacts cash flow, and results in lost time for you or your employees.
4. Late Fees and Missed Discounts
When you don’t pay invoices on time, late fees can offset your profits and damage vendor relationships. Paying promptly in many cases can be rewarded with discounts from your suppliers. Accurate bookkeeping ensures on-time payments and the ability to capitalize on available discounts.
5. Bank Account Reconciliation
As a small business owner, you certainly have bank accounts both for depositing receipts and making payments to vendors or generating payroll for your employees. Bookkeeping activities include reconciling bank account balances to your financial ledger, to make sure all financial activities are accounted for accurately, with any discrepancies being resolved in a timely manner.
6. Financial Strategy
As your small business grows, you may need a more complex financial strategy to make business decisions such as approaching new business markets, investing in equipment or larger facilities, and long-term goals.
Business-critical decisions will benefit from an experienced financial expert such as a CFO. When you cannot justify a full-time employee with such credentials, an alternative is to seek the expertise outside, engaging a fractional CFO for assistance.
7. Tax Preparation and Reporting
Like it or not, you will need to pay taxes as part of owning your small business. Without accurate records, tax preparation will be difficult, time-consuming, and expensive. Good bookkeeping practices will ensure you get all the tax benefits you’re entitled to, and file accurate tax returns.
Performing bookkeeping tasks requires an understanding of what needs to be accounted for and how to categorize financial activities such as accounts payable, accounts receivable, and business expenses.
You may start out with a do-it-yourself approach, incorporating the use of a general-use software package such as QuickBooks, to facilitate your accounting and reporting needs. Even taking that route should include some level of training, to get the most from the use of the software.
Another alternative is to outsource or hire an accountant or bookkeeper, who can manage the books for you. Many small business owners feel they need to hire an employee, but consider outsourcing before you truly realize the amount of time it takes to do your bookkeeping. Outsourcing has many benefits and is typically a good “bridge” before hiring staff.
Getting the Right Help with your Bookkeeping
As a small business owner, you may have great confidence in your products or services, and certainly your entrepreneurship, but you may not have the background and expertise in bookkeeping needed to establish a good accounting system or financial foundation.
You may simply determine as a small business owner that bookkeeping is not the most effective use of your time and existing personnel resources. When that’s the case, you have an alternative solution.
Outsourcing your bookkeeping needs to competent, professional bookkeeping services can actually save your business money in several ways:
- Improved cash flow
- Avoiding duplicate or late payments
- Taking advantage of any potential tax benefits
- Making informed, strategic financial decisions
- Reduced labor expenses and missed time off
- Minimal, if any, training
Steiner Business Solutions is your complete small business bookkeeping partner, providing expert services without the overhead or investment in full-time personnel.