Wednesday, October 21, 2009

Why do you need to do your bookkeeping?

Written by Holly from Accounting SPOT

{Intro: Welcome to the Accounting Simplified series for small business!}

Welcome! I am Holly, owner of Accounting SPOT. My focus is on helping small business owners get their accounting and bookkeeping organized and maintained. I am putting together this series to help simplify this task which many business owners tend to avoid.

Maintaining your books can be daunting and is often a procrastination point. It does NOT have to be this way! I am going to try to lay out the process as simply as possible, so as to help you WANT to do this fun (ok, so maybe I am the only one who considers bookkeeping FUN!) task.

This series will cover:
  • Why: Why do you need to do your bookkeeping?
  • What: What program should you use to track your bookkeeping?
  • Taxes: What do you need to know about taxes (or where should you look)?
  • Profit Equation: How do you determine profit?
  • Income: How do you track income?
  • Expenses: How do you track expenses?
  • Left Overs: What else do you need to know?
My hope is that this series will alleviate some of the anxiety often associated with accounting/bookkeeping. I am a numbers girl, so writing is not necessarily my forte. I hope my thoughts come across clear and helpful!

If you have any thoughts, tips or questions, please post a comment to this post. I will include relevant info (with a link back to the commentator's shop) in the series finale 'Left Overs'.

{This series is directed at sole proprietor businesses who use the cash method of accounting.}

{Please be sure to contact your tax professional if you have any questions/concerns regarding taxes.}

{WHY: Why do you need to do your bookkeeping?}

Bookkeeping is such an important task for a business to maintain. To fully know and understand your income and expenses (and the difference between the two!), allows you as a business owner to make better business decisions. Plus, when maintained properly, tax time is a breeze because you already have the information in a usable format.

You know it is good practice to keep your bookkeeping updated. But do you know why you should be doing that? There are both internal and external reasons for doing so.


Internal - When your accounting is up to date, you know your profit, you can view where your income is coming from and where you are spending your money. These are all things that help you make solid business decisions. Pricing, product changes, spending reviews are just a few of the decisions that updated financials can help with.

I want to really drive home the point the keeping your financial information accurate and up-to-date is first and foremost done for you as a business owner. Many owners do their bookkeeping 'for' the tax man. This is backwards. You do your bookkeeping for YOU and as a result, can easily share the required info with the tax man.
So, that brings me to:

External - Taxes and banking. Keeping proper bookkeeping records allows you to easily transfer your data to your tax forms. No need to sweat it during tax time, just plug in the info you already have or send your completed reports to your CPA.

Also, if you are ever in need of business financing, your bank will need financial reports. By keeping your bookkeeping up to date, these reports will be readily available.

I am sure there are many more reasons that I haven't touched on here. If you want to share the benefits you have encountered from properly maintained financial records, please post a comment to share!

We are just warming up, I promise the series gets more beefy as I get in to it :)
Stay tuned for a detailed review of small business accounting programs!


Aprons and More said...

Thanks so much for this series! How do you know I needed it? I usually do my books every months...but this time I am 3 months behind! It has been on my list of things to do every day! I could use some tips to make it easier!
Katy :)

Julie - Fine Tooth Comb said...

Hi, Holly. Great post and very needed for small business owners. I particularly liked your comment that we should keep accurate records for ourselves, not for the tax man. Great advice! I look forward to future posts!

Moon Katty Studios said...

Thank you so much for this article! I have been researching this subject in-depth lately. The books side of business just boggles the mind sometimes and it's great to have some suggestions from other, experienced artists.

TheNikiProject said...

Just in time! I've been telling myself that I need to get my stuff together. I'm looking forward to the rest of this series!