Running a successful business takes a lot of work. So much so that a significant percentage of new companies do not remain open to see their fifth year.
One of the critical things to running a profitable business is your business finances.
If you are looking for a bigger and better 2022, here is a quick look into bookkeeping and four reasons why good bookkeeping services in Montreal are fundamental to this goal.
What Is Bookkeeping?
Bookkeeping is a systematic method used to record and organize all transactions in a business over a period of time.
As such, bookkeeping records day-to-day financial events and is, therefore, an integral part of accounting.
Some of these records include sales revenue, tax return preparation, overheads, payroll, and so on. If your bookkeeping is excellent, so will your general accounting and financial management.
Importance of Good Bookkeeping
Here are four reasons why every business needs good bookkeeping services:
1. Helps With Budgeting
Bookkeeping compiles your income and expense sheets. This makes it much easier to review your resources and costs.
Knowing what you spend and what you have at hand makes it possible for you to budget and plan your business finances. Without good bookkeeping, any future planning and budgeting you do will not be accurate as you will be doing it without a clear picture of what your business looks like.
2. Gets You Ready For Tax Season
Businesses are required to comply with several stipulations from the federal government and local authorities. One of these is taxes.
With good bookkeeping, you have all your financial records for the entire year. These are instrumental in preparing your taxes.
You also derive information from your books to help in preparing other financial statements. If there was ever a query or a tax audit, these documents would come in handy in helping you defend your position.
3. Helps Keep Things Organized
When you are well-organized, you are able to find key information about your business quickly.
Aside from this information being required for internal processes and decision-making, other external parties might need it. These include the IRS, customers, employees, lenders, and investors.
Not having this information for the IRS could mean fines and penalties. Not having it for lenders and investors could mean a rejection of your credit application.
By doing your books and keeping them updated, it becomes much easier to find the information quickly whenever it’s required.
4. Tracking Profit and Growth
Being a profit-making entity, it’s wise to have the necessary checks and balances in place to analyze a business’ well-being.
Bookkeeping helps you prepare other financial reports that allow you to gauge how well or poorly your business is doing. This helps you learn what you are doing right as a business and tells you when to take mitigative measures when things are not going too well.
Without bookkeeping, you are literally shooting in the dark. On the other hand, good bookkeeping gives you more control and gives you the tools to help steer your business towards profitability.