If you are new to the business scene, it is easy to get caught up in the process of carrying out big business operations, like product development, service training, marketing, and advertising. With so many on your plate and so many shoes to fill, it can be quite easy to overlook the most important aspect of business – finance. This is understandably so as many things may be running through your mind. However, being neglectful of your finances, though at the moment may not seem like a big deal, can creep up on you like a silent disease, ultimately driving the business you have worked hard to build to the ground.
Good financial management is the very basic function that keeps businesses alive the same way the lifebuoy keeps kids who are just learning to swim afloat. Without properly monitoring your accounts, you risk not being able to track gains and losses. This limits your ability to make good and calculated decisions. If you are not one to regularly keep an eye on your books of accounts, here are the reasons why bookkeeping is so important and why you should start taking accountability for it or hire a professional to do it for you.
1. Steering Map-less
All businesses rely heavily on their past and current financial records to guide business decisions. Bookkeeping allows you to see the financial health of your company. Without properly and regularly updated books of accounts, you are essentially a captain trying to steer a ship without a map. You try to take control and turn the boat in a certain direction, unknowingly driving it straight into the eye of a storm.
Bookkeeping provides the necessary paper trail to help you navigate your business. It includes keeping records like balance sheets, ledgers, statements of cash flows, and profit and loss statements so you can see just where your money goes and how it comes back to you. These bookkeeping records allow you to spot and address problems and identify opportunities within your business.
2. Difficulty Seeking Financing
As your company grows, you will need to turn to banks and loan companies or investors to finance future projects and overall business development. These companies will require your papers and records in order to see if you are capable of paying off any loans.
Without proper bookkeeping records, they will not be able to gauge your business’s financial health and performance. As a result, it would limit their ability to grant you loans, curtailing your company’s expansions plans and growth.
3. Payroll Services Nightmare
The payroll might sound fairly straightforward. Employee goes to work and gets paid for a number of hours. Easy, right? Wrong. What about overtime, night differential, paid maternity leave, part-time contractors, or employees who suddenly quit? And then there’s the 13th month pay which is entirely different from the Christmas bonus.
Without a proper bookkeeping system in place, you can expect to have a migraine come salary season. Moreover, improper documentation can result in you paying your employee too little or paying them more because of faulty calculations. A poor recording system will also leave you with a tax nightmare as you’ll be scrambling to juxtapose actual cash in the bank with what is written on the payroll. Who knows, this may even be the reason for an employment case with the Labor Commission.
4. The BIR will Make an Enemy Out of You
Tax computations are based on income and other financial statements. With poor bookkeeping systems, or without bookkeeping systems in place at all, you can expect BIR officials to give you a furrowed brow. Not only are miscalculations a reflection of your business and company values, but they can also cause you to pay penalties.
Moreover, if you are a consistent offender, you may find yourself facing a BIR audit and investigation. Worse, if you have no taxes to file because you have no records at all, prepare yourself to face the dreaded tax evasion case.
Stay Proactive and Seek Professional Guidance
Bookkeeping is undoubtedly not an easy task. It requires careful attention to detail and constant monitoring and updating. However, despite its difficulty, and no matter how much you hate it, it is the lifebuoy of every business. It is through financial records that you are able to identify areas for business growth and, conversely, areas that need improvement.
As your business begins to grow, it is understandable that this may be the last thing on your mind in comparison to landing big projects. But, as essential as it is, it should never be forgotten or neglected. If you need extra hands but still can’t rack up the funds to afford an in-house accountant or bookkeeper, as a new and growing business, there exist today numerous online outsource accounting and bookkeeping services that can handle your records.
Count on our team to do the complex number crunching for you. We can also help with Payroll Services. With our decades of experience, we will straighten your books of accounts and help you stay tax compliant. Stay ahead with sound business advice coming from certified professionals. Take advantage of our free 30-minute consultation.