Keeping your books is not just about preparing for tax filing or tax savings; there is a lot more to it. A lot of critical decisions about the business are made based on the information offered in financial statements. Some might consider bookkeeping to be something that can be done by anyone. However, maintaining accurate records of business financials is not an ordinary task and requires skills and expertise. Businesses outsource professional accounting and bookkeeping services for this job because they consider it important and understand the significance of doing it right. Here are some of the reasons why business accounting tasks should be taken seriously.
Corporate Veil and Bookkeeping
The corporate veil is a legal concept that separates a corporation from its shareholders and protects them from being personally liable to company debts and obligations. When you maintain separate books for each subsidiary of the business, it demonstrates that you have recognized it as a separate entity and, therefore, everything related to the entity is a business of its own. Also, when you keep your personal and business finances separate, it makes it easier for you and the auditors to accurately measure the business performance.
Unfortunately, this is an approach that many new business owners opt for and it inexorably comes back to bite them. Accurate bookkeeping is indispensable for tracing the growth of your business and legal/tax purposes. Legal business demands you to maintain an accurate measure of cash flows, expenses, labor costs, and revenues. Cutting corners to save time and money must not be an option and should be avoided at all costs.
Audit and Tax Protection
Every business, whether big or small, has to go through IRS auditing. This can be really bad for you if your books are not well maintained. Discrepancies in financial records will be noted by the audit team and you can face potential charges from the IRS. These charges can result in you paying heavy penalties or fines and, in some cases, even lead to the closure of your business. This is certainly a situation that must be avoided. Appropriate bookkeeping is the only way to avoid such scenarios.
The amount of taxes that you have to pay depends on the revenues generated by your business. Professional accounting procedures ensure that you pay payroll taxes as well as prepare the documentation for filing your taxes on time. If you have maintained your books properly, you can search for legal ways to reduce the tax burden, which is quite possible given you understand accounting practices. If you are not adept at accounting, it is recommended to hire a professional to assist you with this task.
Bookkeeping Leads to Improved Decision Making
The success of any business depends on its ability to interpret the given information accurately and make informed decisions based on the provided knowledge. The best source of information for any business is its financial records which include expense tracking, budgeting, income statements and sale reports. Any inaccuracy in these records will mean that your decisions are based on imprecise information and that can have disastrous consequences. Whether you are handling the bookkeeping needs internally or have outsourced the job, you must ensure that the highest standards are followed in their compilation. As a business owner or manager, it is your duty to find someone who is capable enough to perform this important task for you.
Automating the Process
The evolution of technology has simplified most tasks that were thought to be complicated just a few short years ago. Using automated bookkeeping services, such as QuickBooks, automates most of the tasks that were previously handled manually. This means that the tasks are completed efficiently with less resources than previously required. You will notice a significant fall in costs related to bookkeeping. You won’t have to spend surplus payroll money on a full-time staff bookkeeper to handle the job, as the automated software will:
- Keep essential information at your fingertips
- Efficient use of online banking
- Better collection of receivables
- Track real-time receipts and invoices
- Give you access to financial information on the go
In conclusion, don’t be naïve and laid back about managing your books. Take charge of your business with the help of these vital tips.
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