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Bookkeeping For Your Small Business – Part 1

Published on May 15, 2013 by

Today is the first post in a series about bookkeeping for your small business.  This post will describe a few different reasons why bookkeeping is important for your business.  Additional posts will follow in the series having to do with what kind of records to keep and tips for you to be more successful in your bookkeeping.   I hope that you find this information beneficial to you and your business.

 

One of the first questions you may have is “Do I have a small business?”  The definition of a “small business” is vague and most people have their own ideas on what it includes.  For this article, we are going to include many businesses types and sizes.  For example: restaurants, photographers, hairdressers, convenience stores, auto sales & repair, small shops (such as a bakery, delicatessen, bookstore, etc.), rental property, construction company, multi-level marketing, a business run from your home, small-scale manufacturing, online businesses (such as web design, programming, online sales, consultation, Ebay or Etsy type selling, etc.), and many more.

 

Bookkeeping is keeping and maintaining financial records.  When running a small business, it is important to keep up with your bookkeeping for multiple reasons.

  1. Knowing what money is coming in and where it is going helps you figure out where you could work on trimming expenses to make your business more profitable or what areas you need to invest in your business to increase profitability.
  2. Keeping an updated record of finances for your business will show you if your business is growing, depreciating, or staying in the same place.  You will then be able to assess where you stand and make a detailed plan for the growth of your business.
  3. You will be able to make management decisions better based on your financial information.  You will be able to see if you are in need of extra employees and can afford to hire someone.  You will also be able to see if you have employee expenses that are not needed.
  4. If you will be applying for a loan, financial statements will be easily prepared and make the loan process smoother.
  5. When it comes time to have your taxes prepared you have organized yearly information to give to your CPA which makes it easier and faster.