What is Bookkeeping, and Why Should You Care?
It’s a common question! Bookkeeping is the umbrella that all of your business’s financial transactions fall under. Keeping track of who pays you? That’s bookkeeping. Keeping track of who you pay? That’s bookkeeping, too.
In essence, bookkeeping is how you keep a record of money going into and coming out of your company. And, how well you do it can make a huge difference in your bottom line, especially at tax time.
The success of your business and your ability to make a profit depends on a few different factors – though nothing is more important than organized and accurate bookkeeping.
So, why is bookkeeping so critical to your business success? Here are the most important reasons:
- Calculating Your Income: You’re responsible for your own income. That’s a great feeling, but it’s also a little scary. Whether you can pay your bills or not is up to the success of your business. It depends directly on how well you manage your money.
- Growing Your Business: Hiring employees is a great sign of growth. It also means more work, because now you have to track payroll and manage benefits.
- Paying Taxes and Avoiding Audits: Part of small business accounting includes making estimated quarterly tax payments. Some accounting software programs offer assistance with deductions and tax filing, but working with a tax professional or certified public accountant helps you maximize deductions and access credits you may not have otherwise known about.
There are lots of DIY software options, like QuickBooks or Xero, available to small business owners. They’re great for starting out, but if you’re not familiar with certain tax filing practices, you’ll probably end up leaving money on the table. If you think you might need to bring in an expert for bookkeeping support, learn about the three key option available to you here.