July 23rd, 2014 Amanda Han CPA (Taxloopholes.com Tax Strategist)
Did you know that a recent study shows that over 75% of business owners Do Not effectively utilize bookkeeping as a business tool. The majority of businesses use bookkeeping solely as a way to track historical data. This is what we refer to as “Reactive Bookkeeping”.
Bookkeeping, as mundane as it may appear, is actually the #1 Secret Weapon when it comes to Business Management and Growth. This is the concept of “Proactive Bookkeeping”. In other words – What Gets Measured Gets Managed. Proactive bookkeeping allows us to review recent financial data and make informed decisions on cash-flow projections, income acceleration, and expense reduction techniques to help grow our business. It is only with accurate and consistent measurement of these and other key indicators that we as business owners can effectively manage and expand our businesses. Here are the Tips on 5 Ways to Significantly Increase Your Profits with Proactive Bookkeeping:
- Make Effective Business Decisions: If you or someone you have hired does not have the knowledge of formal bookkeeping practices, this can become a problem. Properly categorized income and expenses allow you as the business owner to quickly review the monthly numbers and make informed business decisions immediately. Whether it’s to cut costs in a particular area, or to increase spending on marketing, the numbers tell the story of what brings your Company to profitability.
- Cash Flow Control:For many small businesses, cash flow is one of the most important aspects of daily operations. Accurate bookkeeping will allow you as the business owner to get a grasp on the inflow and outflow of your cash. Frequent cash flow analysis can help to reveal and manage costs and make sure your money is being utilized and invested in the most efficient manner for your business.
- Time to Grow Your Business: Many business owners try to do bookkeeping themselves or do not have the professional help they need. Although we all know that time is money, many business owners do not put enough value on their time. How you value your time is extremely important to your business. Leave the tedious and time consuming task of bookkeeping to the professionals. A bookkeeper will know what to record, how to record it, and most importantly, the accounting changes that affect a business on an ongoing basis. This alone can not only save you time, but it also free up more of your time so you can focus on growth and taking your business to the next level.
- Save Money in a Potential Audit: Improper or poor receipt and record keeping is common for businesses. It is easy to lose receipts or forget about those small expenses that seem insignificant. Maintaining accurate records on a monthly basis and with a proper filing system can save you time and money on your income taxes. It can also provide the necessary documentation in the event that you are audited by the IRS. In case of a potential audit, accurate records of income and expenses could end ups saving you thousands of tax dollars in dealings with an IRS auditor.
- Save Money at Tax Time: Many business owners spend days or even weeks gathering up their financial information at tax filing time. Having monthly bookkeeping systems in place helps to alleviate this tax time headache and anxiety. The only way to reduce taxes is with proper tax planning and documentation. The only way to have proper tax planning is with accurate books and financial information. As such, having accurate books not only allow for tax savings but it can also save many business owners from that tax time rush and anxiety.
Now that you have read through the 5 Ways to Use Bookkeeping to Significantly Increase Your Profits, take a look at your business and determine how each of these can benefit you. Now is the time to make some easy changes to upgrade your bookkeeping system and turn that mundane task of bookkeeping into your #1 Secret Weapon for Business Management and Success!
If you need assistance with bookkeeping, be sure to check out our affordable bookkeeping services for small businesses and real estate investors by clicking HERE.