Good Records Keep Things Going Smoothly
Good bookkeeping and record keeping are essential to operating a successful business. When you start your own business, you need to know why these daily chores are important, so you'll be motivated to keep up with them. (And if you're like most people, you'll need all the motivation you can get.)
To Monitor or Track the performance of Your Business
Monitoring will tell you whether you're making money. It will allow you to gauge which items or services are selling and which ones aren't. You'll also get a firm understanding of which expenses are necessary and which ones may be higher than you'd like them to be.
Sound business decisions should be based on where you stand financially. Before you take on new employees, buy more inventory, move to a larger office, or do anything that requires a solid business decision, you'll need to know how it will impact your business financially. Good bookkeeping and record keeping will provide you with such information when you need it most.
To pay Your Taxes
It's much easier to calculate tax return figures and pay taxes when you're working from a set of accurate financial records. Besides paying quarterly taxes, you'll be filing tax returns or other returns if you've incorporated. In addition, the many rules and regulations governing sales taxes and payroll taxes will be much easier to comply with if you know where to look for the correct numbers.
To pay Yourself and Others
Salaries are an important consideration. Many say you should pay yourself first. But how much? You can't pay yourself or distribute profits to other partners or investors if you don't know what those profits are.
If you're looking for a second, third, or fourth round of investors, or you want to secure a loan from the bank, you'll need to show accurate financial statements. Besides the bank and investors, the IRS and other regulatory agencies will need financial statements from you, too. You can only furnish accurate statements with reliable bookkeeping.
To Sell the Business
If you want to sell your business someday, the buyer will want to know how the business has been doing while you were in charge. The best way for them to measure its success is by reviewing the financial statements. The same holds true for merging with another business, when you will need accurate financial statements.