Accounting is a task that many business owners may fear, but it is a vital part of running a business. It’s more than just a way to stay organized. It can help you save money, grow your business, and run a successful business. Here are some of the benefits of accounting:
Simplify your life at tax time
When filing your taxes, you will need up-to-date financial records detailing your income and expenses. If you are not at the top of your accounting, you will struggle to find all your receipts and invoices at tax time. Keeping your books up to date will relieve some of your stress this time of year. Plus, your CPA will be very happy with you!
Prepare for a potential audit
In the event of an audit, you will need to have financial documents available for review. An efficient and accurate system of record keeping will make it easier for you to find what you are looking for to pass the audit. If substantial documentation cannot be provided for the audit, additional fees and penalties may be required.
Keep track of your cash flow
As a business owner, it is important to keep track of money in and out of your account. Implementing good accounting practices will help you visualize your cash flow and find areas where you can save money. This is why you would also need bookkeeping services near me.
Create financial statements
Financial statements such as income statements, balance sheets, and cash flow statements are essential for understanding your business from a financial perspective. Reviewing these documents on a monthly or quarterly basis will help you get an overview of how your business is doing, check the accuracy of your bookkeeping and accounting services, and make future spending and tax planning decisions.
Capture errors and scams
Reconciling your books each month will help you catch errors or fraud in their tracks. Each transaction will be posted to see if there are any discrepancies between your statements and what was recorded in the books.
There are not only benefits but also certain costs associated with bookkeeping and accounting services. Not many, but worth considering a bit.
One of the drawbacks associated with accounting is time. Collecting financial records, examining discrepancies between accounting records, and searching for errors can take hours, even with automated computer software. Maintaining accounting books by adding new information takes time, and it also takes time to effectively analyze accounting records to make financial decisions.
Cost is another drawback associated with accounting. Hiring an external accounting service can be expensive for smaller companies, although it can be cheaper than hiring a full-time dedicated accountant. Buying accounting software for your business can also be expensive, especially since it needs to be updated and replaced as newer versions become available.
Another drawback of accounting is inaccuracy. Accidental inaccuracies can still lead to a waste of time and money as they must be identified and corrected. Intentional inaccuracies by untrusted employees or business partners can lead to “cookbooks” that can be considered commercial fraud or government tax evasion. Hiring an auditor to review your accounting records can help identify these problems.
Frequently asked questions
Is it a legal obligation to maintain bookkeeping records?
One of the benefits of accounting is that you meet the legal obligation to keep the financial records of your company. Companies are not legally allowed to operate “under the table,” so to speak. You need to track and document your income and expenses to pay the appropriate taxes each year. Failure to keep corporate books can result in state sanctions if you are audited and asked to provide evidence of your company’s business transactions.
Is it important to hire a bookkeeper who is well-equipped with industry acumen and has worked with similar clients?
It is extremely important to have a bookkeeping and accounting services provider with prior industry experience to be able to utilize their expertise in the best possible manner. Someone having a great deal of industry experience might not be the best fit for you because they might not know the nitty-gritty of the industry your business operates in.
What is the purpose of the bookkeeping work?
Some accountants act as chief accountants and can analyze financial statements, and the skills of other accountants are limited to data entry.
- Consider who will do the following:
- Bank reconciliation (and how often? Daily / weekly / monthly)
- Entry of accounts payable, classification of business expenses, and payment of suppliers
- Increase of sales invoices and monitoring of debtors
- Verify the encoding of the transactions to make sure they have been encoded on the correct account and with the correct tax regime
- US sales tax, GST, or VAT filing / declaration
- Prepare financial documents such as profit and loss and balance sheet
- Help interpret the stats and tell the story behind the numbers
What does an accountant or a bookkeeper near me do?
Instead of focusing on basic accounting tasks, hiring an accountant allows you to focus more on the fundamentals and strategies of the company so that you can pursue long-term business goals.
Should a bookkeeper also provide financial insights?
Dependent on the scope of work and the tasks you hire your bookkeeper for, if you search for a bookkeeper near me, they might also be able to provide you with financial consultancy and many more services rather than the traditional bookkeeping services near me. This has to be in line with what you hire and pay them for.
It is a trend in the industry to hire bookkeepers on fixed rates; thus, it is important to have your rates decided with your bookkeeper beforehand and form an understanding of the services you are going to have them complete for you.
Find a bookkeeper near me or bookkeeping services near me for your bookkeeping problems.