Why do some small businesses fail in the first five years of business? While the slow economy can be to blame for some of the failed businesses, mismanaged finances is the largest culprit. Keeping an accurate record of your company’s finances is crucial to not only understanding your company’s financial demands, but also to staying in business for years to come. Accurately recorded books also provide small businesses with current, up-to-date financial information, giving them insight into the company’s current situation and enabling them to make informed financial decisions for the company’s future.
Why is Bookkeeping So Important to My Business?
First of all, if a company wishes to seek out potential buyers or funders in the future, it is important to maintain and uphold accurate financial records. When investors and lenders express interest in a company, they will want to examine clear and well-kept books in order to gain an accurate assessment of the business.
Proper bookkeeping, in addition to preventing costly audits, builds the business’ framework by outlining its strengths and weaknesses. Without proper bookkeeping, a company’s quarterly reviews would be useless. These reviews help business leaders make accurate, informed decisions for the future of the company based on the information gleaned from their important financial documents. Without accurate financial records, business leaders would not be able to make decisions on the company’s growth or identify any problem-areas needing immediate attention. Basically, if a company wishes to grow and succeed, it needs to have immediate access to important financial information.
Identity theft and other threats have also increased the importance of accurate bookkeeping. If a company has a well-maintained set of books, identity theft or a simple error will stick out like a sore thumb. If a company’s books are not properly maintained, it will be easier for identity theft and errors to slip under the cracks and cause extensive amounts of damage.
Maintaining good bookkeeping practices is not hard; it just requires a little time and attention. Find out how to clean up your records with these bookkeeping basics designed for small businesses.