Starting a business can be a stressful time for business owners and there are usually many different tasks to sort out; from operations to marketing to accounting. How you prioritize these tasks can heavily influence the outcome of your business.
Bookkeeping often falls to the bottom of the priority list, resulting in receipts and invoices piling up in a shoebox overtime and quickly becoming an overwhelming task that weighs on your business.
There are a number of benefits that come from a simplified and systematic bookkeeping system. Creating a strong bookkeeping process earlier on can make the difference between a successful long-term business and a startup failure.
Managing Cash Flow
Based on research conducted by CB Insights, 29% of startups fail because they run out of cash.
Working capital is important to small business owners as it represents the business’ ability to manage upcoming expenses. Having a lack of working capital can be difficult for businesses as liquid assets are necessary to pay for their day-to-day operational expenses.
A strong bookkeeping process in collaboration with an online bookkeeping application, (such as Xero or Quickbooks Online) can make it easier for you to manage your books and working capital. With money and time both being finite resources, it is pertinent for you to track your cash flow and create budgets right from the start to ensure future success.
Data-Driven Decision Making
Maintaining your books from the start can provide you with valuable information about your business. When it comes to money-making opportunities or managing your working capital, having a clear picture of the company's financial health can aid business owners in making decisions based on facts rather than feelings.
Online accounting software such as QuickBooks Online and Xero offer the ability to run real-time financial reports showcasing the status of your business. The more information you track through your accounting software, the more meaningful these reports can be.
Many small business owners require external funding from banks, investors, or online lending platforms. Having an up-to-date and accurate bookkeeping system can help you understand your financial situation - how much working capital you have and how much you need. Additionally, if you do require external funding, you will need to provide a series of financial statements and additional information.
If you leave your bookkeeping until you actually need these financial reports, it becomes a game of catch up, and you’re left with inaccurate financial information. When you get your books right from the start, you can easily generate accurate financial statements with the click of a button.
Through online lenders such as Lendified or Fundera, you can gain access to short-term business loans in as fast as 48 hours simply by sharing information about your business and its financial performance with them online. Therefore, having an accurate and reliable accounting system could also help speed up your funding process and help you achieve your business goals quicker.
Filing for Taxes & Compliance
Every business has to be in compliance with their local business tax laws. From sales tax to income tax, to payroll tax, each of these has a different deadline and payment amount. Having a clean and accurate set of books can help you figure out when and how much tax you need to pay, reducing the risk of late payments or penalties. Having a clear paper trail also reduces the risk of business fraud and embezzlement.
Bookkeeping is an integral part of any business and when done right, offers a wide range of benefits - from managing cash flow to compliance. It is a task that should be conducted on a daily basis to ensure information is up to date and reliable for decisions making purposes.
If time is a constraint limiting you from performing your bookkeeping tasks, you might want to look at outsourcing your bookkeeping to a professional bookkeeping firm or using apps to simplify your bookkeeping process.
At Enkel, we have a team of dedicated experienced bookkeepers who can help you lift the burden of number crunching and data entry while providing you with accurate financial reports at the end of every month. Contact us today to learn more about how we can help!
How We Select and Evaluate Our Recommended Software
We thoroughly research and test the apps we include in our regular workflow for Client bookkeeping services. After deciding on criteria for evaluating the software and then researching the app itself, we tested the app, noting its strengths and weaknesses. We then work with the app for at least a few weeks before deciding whether to recommend it to our readers. We use the software as it was designed for its intended tasks. For a detailed walk-through of how we select and evaluate software, please see the details of our process.