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6 Reasons Why You Need to Keep Your Bookkeeping Up-to-date

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Just like you need to take care of your car regularly for it to work well, you need to keep up with your bookkeeping regularly for your business to run smoothly. You must always be prepared for a breakdown when you fall behind on your bookkeeping.

Here are 6 things you can do with up-to-date books, whether you do your own bookkeeping or have Countick do it for you.

you can easily manage your expenses.

Every time a business expense occurs, it must be recorded. Perhaps the cost is paper clips for your office. Perhaps it’s a tank of diesel for your organic farm’s tractor. It must be recorded, no matter how minor.

Expenses are typically recorded in the general ledger. You can get into trouble when they aren’t—due to sluggish bookkeeping.

Consider the cement truck. Assume you spent $80 on petrol on Friday. On Saturday, you sell $300 worth of cement at the market.

The $300 is deposited into your bank account, and you calculate that you are now up $300 for the week. That’s great—until you go to withdraw $300 for a truck payment and discover you only have $220.

Bookkeeping services for startups or any other business that is up to date means knowing how much you’ve spent and how much you’ve earned. That is critical information for your company’s day-to-day operations.

you are capable of adhering to a business budget.

It’s a good idea to keep track of your expenses. Even better, make a plan for every dollar you earn in the coming year.

But you can’t create a budget unless you know what you spent last year. That is your starting point. Then you plan out how much money you *hope* to spend this year.

Most budgets fail because they are not updated monthly with actual spending figures. When you do regular bookkeeping, you can see how you’re doing in relation to your budget and make changes as needed.

Assume you planned to reduce your Instagram advertising to $300 per month to save $150 per month for an expensive industrial screen printer. But you realize you have some inventory that needs to be sold quickly, so you invest $450 in your next Instagram promotion.

You can see that with updated books (and an updated budget), the printer will have to wait another month. But, at the very least, you know where every dollar is going and how it affects your business.

more reading: how to choose the right bookkeeping software for your business

you can predict revenue. (this is helpful, we promise)

One of the things that feel like an academic exercise is revenue forecasting. However, there are times when you must have an accurate forecast, and the best way to get an accurate forecast is to review your previous financial statements.

For example, if you make quarterly estimated tax payments, you must forecast revenue for the year in order to estimate how much tax to pay.

Monthly forecasting is also essential. Maybe it’s tourist season, and your pancake stand is doing well. It’s so busy that you need to hire another high school student to bake.

How will you know you can afford another wage unless you can forecast how much money will come into your business over the rest of the summer? Looking back over your books for the past few summers, you’ll be able to do the math and add another spatula to your fleet.

you can avoid the stress of tax season.

When your books are up to date, you can relax and enjoy tax season—and the new year.

If you’ve recorded all of your business transactions up to December 31, you’ll have everything you need for an accountant to prepare your tax return. You can focus on popping champagne on New Year’s Eve rather than preparing your Tax.

However, if you reach the end of the year with out-of-date books, you may find yourself scrambling. Paying a bookkeeper or accountant to do catch-up Bookkeeping for you, or even doing it yourself, costs money and time. On New Year’s Eve, you might find yourself counting pennies rather than counting down to midnight.

Even if paying for an outsourced bookkeeping solution costs you money over the course of the year, that cost is offset at least partially by the money you save in catch-up costs.

further read: the importance of accurate bookkeeping for tax filing

you can obtain a loan.

Assume your cocktail stand does exceptionally well during the summer tourist season, but you want to keep things going during the rainy season. A covered patio area could do the trick, enticing people to come in and enjoy the rain.

You will require funds to hire a builder. However, before the bank extends your line of credit, they will require proof that your business is profitable. (After all, they’d prefer you to pay back the money they’re lending you.)

You’ll need to present up-to-date financial statements for this.

The three most important financial statements are the income statement, balance sheet, and cash flow statement. These three statements tell you how much money you’re making, how your expenses affect your revenue, and how money moves throughout your business.

read more: essentials to know when bookkeeping for ecommerce

An accountant can create trustworthy financial records for you if you provide them with up-to-date books. A lender can then use your financial statements to determine whether or not your company is healthy and whether or not they should lend you money.

helpful resources: achieving financial success-the most effective accounting solutions for your business

you can plan ahead of time for emergencies.

It’s prudent to plan for the unexpected when running your own business. However, Murphy’s Law sometimes triumphs.

A swarm of aphids decimates your kale crop, or your burger grill decides to give up the ghost. When faced with a sudden increase in expenses—or a decrease in revenue—you must be able to make up the difference. This may necessitate the use of reserve funds.

Unexpected costs can be mitigated with the help of an emergency fund. You may be surprised at how quickly your savings add up if you set aside a portion of your monthly business income. When your bookkeeping needs to be updated, saving for emergencies is nearly impossible.

Current books show how much money you’ve saved. They’ll also let you know when you can start withholding more from your paychecks or when you need to divert some of your emergency fund savings to cover more pressing expenses.
Take advantage of up-to-date books without wasting hours on spreadsheets or accounting software. When you delegate your bookkeeping to Countick, your records are always up to date and ready for tax season.

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