“Bookkeeping for Dummies” states that without bookkeeping, it’s impossible to measure the true success or failure of your business dealings. You won’t know that your $2,000 per-month magazine ad campaign isn’t worth the investment. You’ll have no idea why you barely have enough money to operate your business, and you won’t know where the money went. A smart business owner realizes bookkeeping has several undeniable benefits.
Cash Management Benefits
Certain benefits of cash management include the ability to manage supplier and customer accounts by seeing them on paper, create a business budget, and track deposits and payments. With cash management, you’re able to account for every dollar and cent your business spends. In “Bookkeeping for Dummies,” the author stresses the importance of creating a financial paper trail for your business. Bookkeeping provides the cash management you need to create a financial paper trail.
Business Decision Benefits
Bookkeeping records offer benefits that help you make smart business decisions. With bookkeeping, you can identify money-making opportunities, avoid cash-flow problems, and find ways to increase income or decrease spending. For example, your bookkeeping records might show that eliminating the non-productive late-shift would save your business $5,000 per-month. Your bookkeeping records also might show that business income would increase 50 percent by stocking more red socks instead of blue socks. Good bookkeeping records also are beneficial when you’re applying for a business loan. By keeping good and accurate records, you make it easier for lenders to make decisions about your business.
No matter what type of business you have, compliance with business tax laws is a must. Certain benefits of bookkeeping, depending upon your situation, includes the ability to pay income taxes, payroll taxes, workers’ compensation and sales taxes. You’ll be less anxious about your bookkeeping records if you find yourself facing an Internal Revenue Service audit. According to the American Institute of Professional Bookkeepers, bookkeeping records are valuable to have during an audit. You’ll have items such as canceled checks, receipts, tax returns, and other papers related to the audit.
Two risk-reducing benefits associated with bookkeeping are the ability to detect fraud and embezzlement. You might not want to think about, but there’s always a chance that your business will experience fraud or embezzlement if you have employees or business partners. If your bookkeeper is honest and good at the job, she’ll be able to spot suspicious business transactions. For example, if your business partner uses business funds to pay $1,000 per-month to a mysterious consultant you’ve never heard of, then the bookkeeping records will show the evidence. If you’ve hired a bookkeeper instead of doing it yourself, keep tabs on the bookkeeper to make sure he’s doing an honest job.