If you happen are a business owner, you know how busy and fully occupied your day can be with overlooking your business operations. There is so much to be done and numerous things to be looked after. With the tasks that need to be fulfilled and your clients demanding your attention, the last thing you want to think about is bookkeeping. With the loads of expense receipts, invoices, and other piled up paperwork, you are likely tempted to put your bookkeeping obligations off until tomorrow or next week.
Many small business owners (SBO) try to save their costs by taking the responsibility of their bookkeeping on themselves instead of appointing a professional bookkeeper. There’s no harm in doing it yourself, provided you have the time and knowledge to do so. However, small business owners need to understand that inaccurate bookkeeping will cost them plenty in due course.
Bookkeeping is not necessarily complicated. Experts say that small and mid-sized business owners should make it a point to reconcile their books on a weekly or even daily basis. In the end, this will prove to be much more profitable.
Why is it Important to Reconcile your Books Every Week?
Conceals The Positioning Of Your Business
Your books offer a picture of the financial viability of your company. Without updated and accurate records, the picture will be blurry and fuzzy. Inaccurate bookkeeping will lead to inaccurate cash flow reports.
This is why it is important to maintain your bookkeeping accounts frequently. It could be that your business is struggling financially and you are unable to see the root cause of the problem. What’s worse is that you might not be aware that there is an issue in your business.
Causes Pricey Mistakes
Miscalculating costs or profits because of bad bookkeeping can end up being disastrous for you. If you overestimate your profits, your taxes owed will increase when you file for them. On the other hand, underestimating your profits might result in an audit. Miscategorizing your assets (for example fixed assets) and expenses may end up in you paying excess taxes.
Having exemptions, deductions or expenses that are not adding up and/or filing your taxes late ends up with the IRS conducting an audit of your company. Not only that, any irregularities that turn up in the audit will have its penalties that go along with them.
Tax Deductions Decrease
In order to claim your taxes, you need to document your expenses. Overlooked or misplaced receipts prevent you from claiming all of your expenses. If you do not have your bookkeeping records set straight, your accountant can’t help you in spotting your eligible deductions. Make sure that you get each and every tax advantage that is rightly deserved. This can only be done when you reconcile your books frequently.
With all other financial aspects, your payroll will also be affected because of your inaccurate records. It can be that you are overcompensating or under compensating the paychecks or benefits of your employees without even knowing it.
Invoicing Cycle Increases
If your business books are not reconciled, you will not be able to tell who and how much you owe. You will need to spend much of your valuable time organizing and sending the invoices if left unattended. The longer you delay in sending your outstanding accounts, the longer it will take your debtors to pay back your funds.
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