Operating a small business is a lot of work. Owners tend to have many responsibilities including sales, marketing, vendor relationships, shipping and distribution, accounting, and tech support. With so many business activities happening at the same time, it’s easy to forget or neglect important things like bookkeeping. It’s critical to maintain your books properly to avoid major financial setbacks.
Tracking Cash Flow
Monitoring your cash flow is probably the most important task for small business owners. As money flows in and out of your business, you must maintain a comfortable cushion of money to pay bills, order new supplies, and process payroll. Mistakes such as accidentally double-booking payment from a customer could leave you thinking you have more money on hand than you actually do.
These mistakes can be costly. If you run out of money, you could incur additional expenses for your business such as tax penalties, late payment fees, and loan interest. For a small business, even small unexpected expenses can be detrimental to your bottom line.
Building Strong Business Relationships
Owners of small businesses who work to build strong, strategic relationships with clients, vendors, financial institutes, and investors will have a significantly greater chance of success. For example, a small business owner in Vancouver will likely get cheaper production prices from a manufacturing partner that frequently gets paid on time. Having well-organized bookkeeping will help keep track of invoices that are coming due and ensure that the business has the cash available to pay their suppliers.
For businesses that need to review their financials with partners, their bank, or other investors, having clean books will show that you are not only financially secure but also run your business properly. This can build trust and help secure better loan terms or additional capital to invest back into the company.
Taxes are a drag for any company. For small business owners, this can be terrifying. Good bookkeeping can help set you up for success and your tax professional will thank you when it comes time to help file your tax returns. By properly recording all your journal entries, you will be more likely to capture the largest number of tax deductions. This can also help avoid overpayment, or even worse, underpayment that leads to tax penalties. The last thing a small business owner needs is to be hit with a huge tax bill after a successful year.
Why Small Businesses Shouldn’t Do Their Own Bookkeeping
There are many risks and rewards tied to proper bookkeeping. When the time comes, a small business owner should know when it’s time to turn to a professional for help.
Just because a business owner loves what they do doesn’t mean that they enjoy every aspect of running the business. The burden of administrative duties can lead to burnout. According to one survey, half of all small business owners found bookkeeping to be their least favorite activity.
Twenty percent of small business owners work seven days a week. This may seem easy when your business is brand new, but it is not sustainable. Eliminating business tasks like accounting and bookkeeping can free up time to unplug and recharge.
Focus on Growth
It can be difficult to grow a small business when the owner is focused on working in the business rather than on the business. Every hour that you spend on administrative tasks such as bookkeeping is another hour that you didn’t spend interacting with clients and making sales.
Lack of Skill
Just because you can learn to do your own bookkeeping does not mean that you should. It can take a considerable about of time to learn a new skill. Your time is valuable. Spend it on tasks that only you can do. Having an expert in accounting and bookkeeping can help you avoid simple mistakes. You can also leverage them to answer your financial questions without having to do hours and hours of research.
Know When to Bring in an Expert
If your business is expanding rapidly or becoming more complex, it may be time to bring in a professional bookkeeper or accountant. For over 30 years, the team at Valley Business Centre has been providing comprehensive accounting, bookkeeping, and tax services to our clients in Whistler, Squamish, the Sea to Sky Corridor, and metro Vancouver BC areas. Contact us today to learn how we can help support your growing business.