Reasons Your Small Business Needs Bookkeeping 

Accounting and bookkeeping services are not the fun things or taken-for-granted aspects of running a small business. Instead, they are the most important. A study found that 20% of small businesses fail within their first year, 30% within their second year, and 50% within their fifth year. However, 70% of small businesses fail within their first ten years.

Why are these businesses failing?

There are numerous reasons behind the failure of the majority of small businesses. Some of them include running out of cash, not having the right resources, and not having the right team. But one of the essential facts that led to its failure is not having a bookkeeper on the right.

Here are the top reasons why your small business needs a bookkeeper.

  • Budget

Having income and expenses organized correctly is key to achieving a proper budget that can be accomplished smoothly by a Bookkeeping service provider. A budget helps you prepare for future business expenses and helps you better anticipate and allocate your costs.

  • Tax preparation

Many business owners find themselves scrambling to gather all the necessary paperwork to file their tax returns at the end of the year. In addition to being more efficient, bookkeeping can also be more cost-effective.

When you pay a bookkeeper to keep your books up to date over the months, your tax firm has less back work to do to prepare your documents for submission.

  • Organization

The AASB, employees, customers, investors, and lenders are generally the five main parties who are likely to have an interest in your company's financial records. Successful operations require the ability to provide these parties with the information they require. A bookkeeper organizes financial information. The easier you keep your financial records, the easier they will find and provide to the right people.

Besides this, an outsourced CFO can also maintain the organization's financial position.

  • Analysis

With the help of financial statements, you can understand the financial standing of your business. By analyzing your business' strengths and vulnerabilities, you will know where to focus your efforts or where to improve. A bookkeeper does it all for you.

  • Decision making

Making decisions comes after analysis. It is imperative to receive the most accurate and up-to-date information on your business to make the best decisions possible.

  • Track profit and growth

A professional bookkeeper shows the profitability of your business. A bookkeeper provides you with financial statements that include the income statement. A bookkeeper and outsourced CFO contribute equally to your business's financial growth and profit.

With this information, you can track your company's profitability and how it compares with previous years. This data will allow you to see trends and better understand your business cycles with these months and years of income data.

In conclusion

Maintaining accurate financial records for your business is probably the essential aspect of keeping your company afloat. Small businesses fail for four reasons: running out of cash, not having a bookkeeper and dedicated team, price and cost issues, and a lack of a business model.

With a bookkeeper, you have a better understanding of how money comes in and goes out, so you can make informed decisions regarding cash flow. When you have a bookkeeper working for you, you can talk about the financial aspects of your business and see how to re-evaluate your staff based on the money you're spending on those areas. 

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Wednesday, 27 September 2023

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