Bookkeeping tells stories about a business using numbers in categories. Knowing why this business function is essential and what stories the numbers are saying about your business can be beneficial. Financial data offers invaluable insight into any business. This makes bookkeeping beneficial for both business decisions and compliance.
Data on Business Performance
Reports from bookkeeping can show which products, or services are over and under-performing. From this information, businesses can make informed decisions on price setting, and identify opportunities for cost saving, product growth, or potential threats to the bottom line.
Bookkeeping allows business owners, finance staff or other designates to categorize and track revenues and expenses. Organizing into categories can provide insight into the profitability of the business and show how cash moves in and out of the business every month.
When it comes to cash flow, precise bookkeeping shows where money is going and coming from and when. Paying debts and expenses promptly avoids penalties and interest. Knowing where money is coming from and collecting on credits owed is important for business profitability. Anticipating issues keeps the business focused on maintaining a healthy cash flow.
Bookkeeping supports business forecasting by pulling data and reports. This is especially helpful for annual or quarterly cumulative expenses, such as income tax and payroll expenses. These types of expenses can require future cash flow projections.
Identifying Deductions
When transactions are routinely reviewed, expense reports at year-end are less time-consuming and costly. From these reports, your accountant can make informed recommendations using bookkeeping data. For tax reporting, record-keeping during the fiscal year makes it easier to identify and maximize business deductions. Have all records and receipts ready.
Compliance
As mentioned earlier, current and accurate bookkeeping can identify who is owed money. This is imperative for business compliance with the Canada Revenue Agency. Calculating and submitting remittances saves on late penalties and interest while reducing the risk of an audit. If an audit should occur, having well-organized records makes it a little easier.
Financing Opportunities
When a business needs external funding to expand or invest, lenders rely on financial reports to assess its performance. Information pulled from bookkeeping reports is used to evaluate risk, a measure of the business’s ability to repay the loan. Clear and legitimate bookkeeping can make the business more favourable for funding, resulting in better terms and rates.
If you’re struggling with bookkeeping or have been procrastinating to seek help, we encourage you to reach out to us here at McNabb Lucuk LLP or another Grande Prairie professional to get on track with your business numbers.
Stay tuned for our next blog where we explore different categories for bookkeeping and types of financial accounts for business.