A business operates on capital and to keep a check on the income and expenses made in the business, regular and correct bookkeeping is crucial. Bookkeeping is the method of maintaining records of financial transactions taking place within a business. There are various ways in which bookkeeping can contribute towards a better functioning of your business. Here are some of the reasons why regular and timely bookkeeping is important for your business.
Easy Cash Flow Management
When running a business, keeping a check on your cash flow is essential. Issuing proper invoices to your customers and maintaining records on a daily basis is crucial. If the same is not followed, it leads to delays in receivables and payables, which could affect your cash flow adversely. Having a bookkeeping system ensures that proper entries are maintained thereby making it easy to know and manage your cash flow.
Helps in Tax Breaks
When your books of account are not maintained, you may miss out on transaction entries. Doing so will affect your tax planning. You may not realize this, but there are various expenses which are allowed as deductions according to the Income Tax Act and expenditures which are not fully deductible for income tax purposes.Accurate recording of transactions will ensure that expenditures are recorded in order to be able to give them the proper tax treatment at your company’s fiscal year-end.
Aids Future Planning
Often business owners assume they are making a profit without proper bookkeeping and just by taking the incoming money to be profit. This is a mistake and can be avoided by correct bookkeeping. When you have a detailed record of your expenses and incomes, it becomes easier to make informed decisions about your business’s future. The main bookkeeping statements you need to check are the balance sheet and the profit and loss statements to get a complete insight into your current standing and financial health.
Easy Presentation to Investors
The first thing that an investor may ask for before investing money in your business is to have a look at not only your company’s prior Year End Financial Statements and Corporate Income Tax Returns, but also your bookkeeping for the current year. Having a disheveled bookkeeping will give an impression to the investor that you are not a focused business owner. When your bookkeeping is accurate and well kept, it becomes easier to provide reports of financial growth and profitability to the investor.
Do not hesitate to take professional help to maintain accuracy. Reach out to one of the finest chartered accounting firms for comprehensive consultation on your bookkeeping.