Let’s talk about an exhausting list. The kind that makes you sleepy just thinking about it. It’s called “The list of things I should or need to do as a small business owner.” This “To Do” list can be never ending, but there are some action items that can make a huge impact on your day-to-day life. Today, we are going to chat about one of those action items: keeping your business books clean and organized.
Keeping the books is defined as: to keep a written record of the finances of a business.
This record can be kept manually or digitally, however, using an accounting software is usually the most helpful and beneficial.
We have many clients that will tell you their books are in order, but what they leave out is that they stayed up all night to enter the previous 8 months’ worth of financials. This does not actually count as having your books in order. You should be managing your books regularly, whether that be daily, weekly, or biweekly to receive the full benefit of the information your books hold.
8 reasons why you should keep your books organized and up to date:
Provides you with a Roadmap
There are several financial reports you can run, but as a new business owner the Profit & Loss Statement (P&L) and the Balance Sheet will be the most common you review. These 2 reports tell you where you have been and can help you to determine where you want to go. It is incredibly important to understand how you arrived where you are in order to form a plan to get where you want. By doing a deep dive into these financials, you can create a clear roadmap for your business.
Allows you to learn and pivot quickly
Staying on top of your finances regularly, allows you to be more in tune with how the business is performing and allows you the opportunity to pivot quickly and easily. If you put off doing your books because you are “too busy” you could miss seeing evidence that something is going awry and take longer to respond.
Monitors your progress towards your goals
We are a huge proponent of creating goals for yourself and your business. We are an even larger proponent of measuring your results as you go. Research has shown that you are more likely to achieve your goals if you measure your progress regularly. Check out our Setting Goals blog post for a deep dive into what this looks like.
We never want to talk about a possible lawsuit or audit, but they do occur, so it is better to be prepared. Keeping your books, will give you a clean audit trail of where the money is going to and from. If you are an LLC or S-Corp, keeping clean business financials maintains your layer of protection. If an attorney can show that the business is not being ran like it should the layer of protection is often popped.
Easier to find funding if needed
If you are searching for capital, clean records make it significantly easier to obtain. Financial statements are always required for consideration, but more important are the questions that come during the process. Your books should provide you with the answers to those questions.
Allows you to sleep better at night
Owning your own business is incredibly stressful, so everything you can do to lighten the stress load is good. Knowing where you stand financially and having a strong plan in place will help you sleep better at night – we promise.
Take Advantage of all eligible business deductions
Having good records, guarantees you that you will take every deduction you are eligible for. It also allows for an accountant to give you better advice on tax strategies because the financial picture is very clear.
Reduce your tax preparation fees
We can tell you from experience, you will always be charged less if your books are in order. An accountant will most likely work harder for you as well because they know you value the information.