What Can Your Books Tell You?
Your bookkeeping can uncover essential information about your business, but you need to know where to look and how to find it. If you choose not to utilize your books as a tool for your business, you’ll likely notice the negative effect over time. Think of your bookkeeping as the eyes for your business - without it, you’ll be moving forward blindly.
First and foremost, your bookkeeping is a journal for your business’ transactions. All the in’s and out’s of money should be recorded on a daily basis. Being able to see exactly where your money is going and where it’s coming from are incredibly helpful when it comes to having conversations about cutting costs or investing even more into something. There are multiple reports you can run that will breakdown specific areas of your finances that you want to hone in on - like a Profit & Loss Statement, a Balance Sheet, or a Cash Flow Statement. If your books are neglected, these reports will not be useful.
Whether your business is experiencing an upward or downward trend, if your books are up-to-date and accurate, it will be tracking this for you the entire way. Is your business over or underperforming for the month, quarter, year? Knowing where your business stands will help guide you as you make decisions moving forward. Plus, how is your business performing compared to previous months, quarters, and years? Your bookkeeping will be able to answer all of these questions and more if you keep up with them over the long-term.
Aside from the day-to-day basic operations of running your business, your bookkeeping is essential when tax season rolls around - not only for accurate records, but to know which tax deductions you qualify for. To claim a deduction, you need to have the proper documentation and proof. Without keeping up with your books, this isn’t possible and claiming a deduction will be much more of a challenge and harder to prove.
Your bookkeeping can be your greatest and most valuable tool when it comes to making decisions for your business. To create this tool, you need to make sure your books are set up correctly, they’re organized, and kept up with on a regular basis.