Does it really matter how perfect my accounting records are if I am only a small business?
When most small business owners think of bookkeeping and accounting, they think of it as a necessary evil and often fail to focus on making sure the records are clear and supported. Many new small businesses often have cash flow needs that are sometimes not met by sales and require inflows from other sources such as loans. Also, those same small businesses often co mingle personal expenses in with business accounts.
Although some do not feel these items are a big issue so long as in the end they can get some sort of information to their accountant to do the taxes, they should. First, proper bookkeeping helps to provide you as the owner with real time data that is often crucial for making business decisions. Did that job make money or loose money? Am I undercharging my customers? Proper bookkeeping also helps to control costs. Proper records help to assure that your suppliers are not overcharging or double billing. It helps to expedite customer payments which can often mean less strain on cash flow and less borrowing. Missed invoices, failed collections, and slow-paying customers all create real costs to small business owners.
Good bookkeeping can sometimes even mean the difference under a tax audit. When the IRS audits a taxpayer and discovers that their records are not organized, they often look to adjusting the income number based on deposits in bank accounts. This means that without proper documentation those monthly loans you as the owner throw into the business could end up being taxable if you cannot prove how the funds were obtained. Add onto that, the disallowed expenses when the IRS discovers this unorganized accounting system and legitimate expenses may not end up being deductible.
Unfortunately, many businesses cannot afford to hire an on-staff QUALITY accounting professional to do what needs to be done; however, the costs of not doing it right can far outweigh the short-term savings. Thankfully many more services are now available to these small businesses then were just a few years ago. From help “cleaning up” the records to complete off-site bookkeeping services, RPB can help fulfill any needs your business may have. Let us see how we can help make your job easier so you can focus on what you do really well….run your business.