Knowing your financial situation within your business at all times is a sure way to help ensure financial success in your business.
If you know how your business stands when it comes to how much debt you owe or is owed to you, you are more likely to be in full control of your finances and be able to keep on top of your business growth.
As a business owner, you should make sure that you are keeping a very close eye on your accounts and balancing all payments in and out of your business. This is vital for good bookkeeping because if your books are not up to date you could be looking down the barrel of financial failure. And no one wants that!
Here are some reasons why you should make sure that you keep your bookkeeping up to date in your business.
Every business incurs expenses no matter what type of business you are running. Ensure that your bookkeeping software enables you to monitor expenses as well as sales. We all love the sales coming in and we can watch our bank balance grow as our revenue increases and that makes us all happy. BUT – expenses that a business can incur especially as a start-up business, can be quite large and take a large chunk of that revenue coming into the business.
By monitoring your expenses you can help prevent any future cash flow issues that may arise as the business grows. Spending money on expenses that are 100% business-related is not all bad, you can claim all of these as business expenses in your Annual Tax Return which, in turn, will help to reduce your tax bill. If you do not keep your receipts you will be unable to claim these expenses.
TIP: Scan your receipts with an app on your phone such as adobe scan or PDF scan and save it to the cloud. Set up a G Drive (if you use Gmail) or One Drive (if you use outlook) or Dropbox and save all of your receipts to the one place to ensure that you are not missing any crucial documents. They are then sitting there waiting for you if you need to access them at any time for the Tax Office and you don’t have a pile of paper receipts floating around your office floor or in a shoebox.
So, keeping track of and monitoring your expenses can help you evaluate how your business is travelling in regards to the expenditure. You can track how much money you are spending on certain things and where you could be able to cutback if cashflow issues may arise. Please ensure your bookkeeping software allows this monitoring.
Borrowing money from a lending agency
Many businesses, especially as they grow need to borrow money to help them expand and grow within their industry.
When needing to borrow money for a cash injection into your business any lender will want to look at your books and accounts and analyse them to ensure that you have your finances in order and you can pay back the loan. Your due diligence with your bookkeeping will ensure that you have all the answers for the lender right there in front of them and should make the loan application process very stress free and straight forward.
Your chances of getting the money will be higher if your books are all in order. Your loan application may be rejected if your books are out of date, behind or unclear of any profit that you may be turning over. We ALL LOVE money so if you want some more keep your books up to date.
Now, budgeting is essential for ANY business. Do you have a budget for your business? If not, then you should.
You can easily create a budget for your business by using your expenditure and revenue figures from any given month or year of your accounting software package. By having an accurate view of your financial position you can plan for the future and work out the best ways to spend or invest your money to help your business to grow.
By monitoring all of your revenue and expenditure and keeping it up to date you are dealing with figures that are real-time and based on your current day. Your budget could be updated at any given time as you will always have real-time figures if you are keeping your books up to date.
Keeping your books can help you and your business plan for the future, manage your money and reduce cash flow issues.
Tax time stress-free zone
Don’t let the Taxman stress you out. We all hate Tax Time. We all hate the Taxman. It can be a stressful time but it doesn’t need to be if your books are kept up to date monthly.
The End of the Financial Year can be simple and easy if you have been keeping your bookkeeping up to date. Your bookkeeping file should present a clear picture of your businesses financial situation if you have been keeping it up to date. AND if you have done all this your accountant will LOVE you for it. Accountants love an organised client – so does your bookkeeper!
BUT – don’t forget to also incorporate your tax payment into your budget. By keeping track of your books you should have an idea of how much money you will be owing to the tax office. Keeping a bit of income aside during the year ready for the Taxman can be very handy and take the stress out of tax return lodgements.
TIP: When you get paid from a client or customer, pop 30% of that payment into a separate account. When tax time comes you may find you have some leftover and get to inject that back into your business. The main thing is you have the money sitting there for the tax bill and you don’t need to go and try to find the cash!
So, keep on top of your Bookkeeping! It will be beneficial in the big picture of your business. If you are running low on time or not interested in doing your bookkeeping engage a bookkeeper and you will always be up to date.
Bookkeepers LOVE keeping books! We love to help businesses to keep on top of their financial situation.