Book keeping is just
not keep Accounting records but it is a tool to manage
the business. It is not something you have to keep
for paying taxes only but also as an internal
support to decision making and grow the business. There are few
more factors that prove why every business needs to maintain
accounts.
1.
Business plan
If you don’t maintain
business accounts you will not have any business plan &
without a plan there is no way
to see that a business is going in right direction or not.
So not having good bookkeeping work is like driving a car with a
blindfold on.
2.
Losing Money
A sole member of business will do everything
including invoicing.
But it's not possible to remember
all instances in which it was supposed to get
paid on time. Customer will never say "Hey! Do I owe
you any money? ". The bookkeeping records that helps
you to manage you’re pending bills & take it follow ups about it. If
business is not maintaining accounts it will also not be
able to maintain its cash flow. Hence, running
out of cash is one of the quickest ways to go out of business unless you’re
able to schedule its payments to the creditors. Businesses
that don’t keep a proper track of who owes them money and who they owe money
to, are the most likely to fail on this count.
3.
Tax Issues
Without the proper accounts the tax time will
be a nightmare. It will be time consuming for tax professionals to
calculate taxes & refunds without accounting or bookkeeping
systems being in place in business.
4.
Profit elements
If you do not have
any bookkeeping records your business will not understand how profit
works. When working out your business profit margins, it’s very important
to take into account all the fixed costs as well as variable costs
that will affect you’re pricing. If you’ve only looked at the gross profit
margin, you’ll find that your business making a lot less than expected.
5.
Cost cutting when it needed
If business don’t have
proper bookkeeping records it will not get benefit from a
regular cost-cutting review. If your profit margins are tight, wasting precious
financial resources by maintaining an over-sized office or paying high salaries
incommensurate with the work being done could lead your business to collapse.
6.
Growth will be hard
A lack of financial records will make things
difficult to grow the business when your business gets to the stage where it’s
time to expand, open a new location or build out a team. No bank will give you
loan without evidence of responsible financial practices &
without a financial history, growing your small business will be hard.
7.
Market Review
Without records the business will not study the
market or their competitors. Your business may be surviving now but if you’re
not analyzing market trends and keeping an eye on the
competition, the business could get left behind. Good accounting is
not just about knowing your own numbers but seeing how they stack up against
your closest business rivals.
8.
Long Run Support
Professional fees for accountants, business
consultants or tax advisors may seem high, but it can save your
business in the long run and should make the initial outlay
worthwhile. Every company can benefit from professional accountant with their
business accounts, and those that think they’ll save money by doing it
themselves may find it costs them dear. You should seek
an external support from a professional bookkeeper.
9.
Know your Earnings
At the end of the day, you’re in business for
yourself to make a living. If you don’t have an accounting system for you in
place, you simply cannot accurately know what to pay yourself.
Can you guess based on what’s in your bank? Sure. But that’s risky for obvious
reasons.
(Hint: the less you have to guess at
anything in business, the more successful you will be.) Regardless of how you
put money in your own pocket (i.e., owner’s draws, payroll, etc.)
So at the end we can say
that bookkeeping is the engine that powers sound
decision-making through robust accounting practices. Without the
right accounting procedures in place, which are supported by standardized
bookkeeping, your business could head for a financial ruin.
Don’t stick your head in the sand and hope the situation will improve, as it’s
unlikely to achieve good books without a professional
advice.
For any
queries, feel free to write to info@chartercpa.com or call us.
Thanks
& Best regards,
Knowledge Base Team
Pankaj Dethariya
Finance & Accounts Outsourcing Specialists
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