Any financial advisor worth their salt will stress the importance of organized and accurate financial record keeping when it comes to business operations. While it seems like a no-brainer, you might be surprised to know that many businesses are making things harder for themselves by cutting corners when it comes to their financial record keeping. Simply put, if you’ve struggled with your own personal financial record keeping, chances are, those same issues will appear in your business model. And furthermore, while many assume that accurate record-keeping is important, they might not understand why it’s important. In this post, we’ll discuss some of the main reasons why you need to be constantly on top of your record-keeping.
Failure to Maintain Accurate Records Will Threaten Your Business
The Internal Revenue Service (IRS) and other financial agencies require accurate record-keeping from all legitimate businesses making a certain amount of income, registered in the United States. While the IRS does offer small leniencies here and there, it’s best to always be one step ahead when dealing with government agencies. At best, errors flagged by the IRS can result in more paperwork and lost time and revenue. At worst, continuous penalties and failure to provide accurate documentation can actually threaten your business’s ability to stay open and operational. Many new business owners, especially those running small businesses make the oft-fatal mistake of assuming that because they’ve filed personal taxes in the past, they will easily be able to do the same with their business taxes. There are definitely a lot of similarities when filing personal and business taxes, but business tax work is still an entirely different animal and should be treated as such.
As a business owner, the best thing you can do to avoid being hounded by the IRS is to make sure that your records are ironclad. Do what you need to do, whether that’s finding a person in-company to manage your records, investing in deluxe software, or hiring a consultant from a tax and bookkeeping services agency. Furthermore, get and stay organized from the very beginning. It might require you to invest some time upfront, but it will be much easier to start strong at the beginning, rather than frantically try and backtrack through unorganized records when you realize you’re missing crucial information.
Financial Records Can Help You Effectively Budget
A lot of businesses, especially those that are small or brand-new, will experience growing pains. Moreover, events like the COVID-19 pandemic showed us just how fragile a business can become, even a very successful one, in the event of an emergency. By keeping strong financial records, you can easily map the trajectory of your business’s revenue and expenses. This data is important regardless of how well your business is doing, however, it can be lifesaving if you find yourself needing to make budget cuts or adjustments to your financial plan of attack. For certain businesses, strong financial record-keeping can also help you determine weak spots in your inventory, including what’s selling and what’s not. Those numbers can help you determine where to make cuts.
Additionally, many businesses needlessly run themselves into the ground because the people running them never learned how to keep records properly or correctly. If needed, budgeting can help you find the extra funds needed to hire an expert from a financial firm or consulting company. A lot of times, businesses just need outside guidance from experts to help them determine the best way to move forward.
Organized Records Allow You to Easily Access Important Documentation
Modern-day technology has revolutionized bookkeeping, and yet, many people still find themselves struggling to keep up with the demands of record keeping. In a perfect world, we’d never need to look up past information, however, you never know when you might need quick access to documentation, like in the event of a customer or vendor dispute. Organized bookkeeping Charlotte NC will help you settle disputes quickly and easily, in addition to saving you valuable time that could be better utilized elsewhere. In essence, financial record-keeping goes hand in hand with productivity. The more time that you spend having to comb through records and fill in the blanks, the less time you have to oversee important day-to-day operations and affairs.
Moreover, knowing what documents to keep is vital to increasing productivity and improving time management. A lot of business owners will make the rookie mistake of keeping every last document or piece of paper they believe might come in handy at some juncture. However, excess paperwork does nothing to help you and does everything to add another roadblock. Instead of hoarding, you can save precious time by eliminating unnecessary records. The key is knowing what is and isn’t crucial. If you’re unsure, definitely consider getting an expert’s opinion. A bookkeeping and tax expert can tell you exactly what to keep and what to discard based on their experience. And frankly, a lot of times what might be necessary for one business isn’t needed for another. All in all, you’ll never regret taking the time to get your financial records in order, especially when it comes to knowing what to keep and what to throw out.
Disposing of Expired Documentation Helps Promote Organization
Another aspect of knowing what to keep and what to discard involves understanding when an important document is no longer necessary. While some documents are worth keeping for an extended period of time, if not indefinitely, you will find that certain once-important records are okay to discard at a certain time. Again, this keeps your records from becoming overstuffed with excess documentation that is no longer relevant or necessary. Data retention schedules can help you determine important timelines, although, it is important to be very mindful when reviewing this information because schedules are determined based on data type and ownership. Essentially, these schedules exist to help you stay organized and keep documentation from piling up when it is no longer useful.
As previously discussed, regulatory compliance is vital to ensuring the success of your business. By knowing what you need and when you need it, you can make room for other important documentation, and stay in the good graces of government agencies.
At McGrant Tax And Bookkeeping, we are here to help answer all your questions as your primary bookkeeper in Charlotte NC. Visit our other business location for trustworthy Bookkeeping and Taxes in Albemarle NC services. Please feel free to contact us today at any of our two locations or visit our website https://mcgranttax.com and book an online or physical appointment.
This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. McGrant Tax and Bookkeeping assumes no liability for actions taken in reliance upon the information contained herein.
