Small businesses are often bereft of low cash, skilled human resources, grant approval and on constant pressure from stakeholders and investors. While tackling all these problems alone, record keeping the entire business transaction quarterly or yearly becomes another arduous job. But this is mostly to do with accountancy, which requires a solid understanding of the finance of the business, without which the business outcome and its financial health are hard to predict.
That’s why you need bookkeeping for financial-related business planning. Let’s delve into why you need a bookkeeper for a small business.
The Importance of Bookkeeping or Bookkeeper for a Small Business
Bookkeeping is a process of recording and organizing your business’s financial transactions in a centralized system from its launching to its operating period. We call it a system because the entire bookkeeping is shifted to the digital format, which is a tool or bookkeeping software.
All the transactional and financial reporting are stored here so that you can harness them to predict your business’s overall cash flow management, such as sales, profit, loss, and revenue.
This system takes receipts, sales, purchase orders, and invoices into account for the financial forecasting of your business performance so that you know how your business is doing, if it’s coping with a financial crisis, bringing any profit, or leaving with enough cash to pay the debt.
As such, you can keep track of your tax filing reports, report them to the governance body, stay compliant with the regulatory system, keep your papers up to date and become decisive in making the best strategy for your small business’s best interest.
Failing to do so will result in delays in getting a time-to-time business update, losing the stakeholders’ interest in approving your grant, organizing your tax filing documents, not submitting the tax filing on time, and getting penalized with lump sum fines.
Unlocking Financial Success: Why Bookkeeping Is the Key to Small Business Prosperity?
Maintaining Accurate Financial Records
When you have so many things to control and maintain, losing important financial documents and invoices is obvious. Small businesses are no exception; the lack of a proper system to keep track of them may lead to no trace of their whereabouts, and you will end up with shambolic documents flying here and there.
When you need to onboard your investors anytime, you will be disconcerted by not finding them. Your accountants will also struggle to give you a consolidated update of your financial report, leaving you with no idea about your company’s financial status.
Thus, the growth of your small business will stagnate and inflict a portent on your overall revenue. Therefore, a bookkeeper with sufficient experience and skillsets can supply you with any financial record in an instant.
Creating and Monitoring a Budget
Budgeting allows you to find the area where you need to cut the cost and use your resources carefully. Small businesses often rely on budget, as any extra cost incurred may impact the company’s overall resources. It enables you to determine how you want to deal with your regular expenses or overall business assets head-on, such as hiring new employees, issuing subscriptions with new software, buying furniture for the businesses, etc.
With knowing your expenses, sales, cost of good sales, and income, you can breeze through your financial management smoothly. And all these can be feasible with the help of a bookkeeper who organizes your budget-related files and folders in a one-sized-fit-for-all system to educate you on your overall cost control, invoice management, and payroll management.
Complying with Tax Obligations
Taxation compliance is the biggest issue for any form of business, and small businesses can be affected by this if not being careful. Most small businesses, with their lack of awareness and improper bookkeeping system in place, lose their crucial paperwork in limbo and get tense when the tax season arrives.
Things get even worse when the bookkeeper is not assigned these tasks throughout the year, and out of nowhere, an accountant with no bookkeeping experience is suddenly assigned to track all the documents upfront just days before tax filing. This is ridiculous, albeit made by a lot of business owners, if not most.
Therefore, organized and accurate bookkeeping of the important documents executed by consummate bookkeepers ensures that you get to file your tax on time without messing around with your time and get your fair and justified tax return or pay whatever amount you owe to the government.
Attracting Business Investors for Loan Sanction
Often, small businesses rely on external investors and stakeholders to hold their sail for further business expansion. From increasing supply chains to enforcing marketing budget, a great deal of loan or grant approval becomes a necessity for which they need to seek funding. But remember, investors are not gullible to invest in your company right off the bat unless they are satisfied with your up-to-date financial information.
To understand your business’s current condition and diagnose its potential and viability through financial analysis, they need a clear picture of your business. That can only happen when all your financial documents are stored in a unified system and readily accessible at any investor’s behest. This allows them to have business decision-making ability and, thus, get apt for considering whether or not sanctioning a loan to your company will bring them the ROI and payback on time.
That’s why the need for a bookkeeper for a small business is a must for financial statement preparation and organization so that they can be immediately generated at the time of their urgent need to attract potential investors to give a leg-up to those small businesses.
Audit Support and Internal Controls
Running a business in Canada means you are always under the surveillance of the CRA (Canada Revenue Agency). Your inaccurate and organized bookkeeping can jeopardize your financial accountability to the CRA if they suspect you have violated your tax filing or submission deadline. CRA empowers audit support and internal control to monitor your right-timing of tax filing.
For any unforeseen reason, if you fail to submit your tax on time, CRA, through its notional or arbitrary assessments, assumes that you owe tax to the government, and that amount can be higher than you actually owe.
In fact, your late-filing penalty is fixed as 5% for your 2022 balance, with an additional 1% charge will be imposed upon your every month after paying late tax for a maximum of 12 months, according to CRA.
But don’t worry; if you can hire an accountant who possesses sufficient knowledge and practical skills in bookkeeping like the ones in Oshawa Bookkeeping, you can go to sleep with peace of mind. Your tax file submission to any of its associated issues will be taken care of by them, relieving you of any stress and extra hassles.
Final Thoughts
Why you need a bookkeeper for a small business must have become clear to you from the above discussion. From keeping a record of the bank reconciliation to all types of financial transactions to creating business growth planning are executed by experienced bookkeepers. They ensure that your bookkeeping method complies with the recent digitalized form of bookkeeping and is organized and accurate to remind you of any discrepancies in the statement.
It enables you to be pre-alert to any extra amount that you are yet to pay tax for, and that too unknowingly and can prevent it before submission. One mistake in not identifying this error will lead to the CRA not allowing you to claim the deductions. Hence, accurate bookkeeping led by a skilled bookkeeper leads to maximizing deductions and minimizing tax liability.
FAQs
Why Would You Need a Bookkeeper?
Bookkeepers are usually accountants with vast experience in sorting, organizing, and centralizing your all-year financial transactions, such as receipts, sales, invoices, etc., in a digital book so it can be accessed and leveraged. In this way, they can, in turn, provide up-to-date financial information to that company so the owners and investors know what their financial status is and how they can approach strategically that will make their company profitable without undergoing any tax-filing-related issues.
Why Is Bookkeeping Important for Startups?
Any business needs a bookkeeper regardless of their size. However, startups need a bookkeeper because they need help keeping track of their initial financial disbursement, payroll management, and budget management.
Sometimes some startups don’t hire any individual accountant or bookkeeper to keep their documents in a unified system. As a consequence, most sales-related receipts, transactional documents, and invoices get scattered here and there and lead to disarray.
Hence, a bookkeeper is needed to do their jobs properly to provide relief in dealing with the company’s most important documents in time of need.