Are you consistent with maintaining accurate financial records for your business? Many business owners are so caught up in the challenges of keeping the company running that they overlook the essential steps of financial management and tracking. It is easy to get distracted by employee management, cash flow concerns, and product development. If your attention is turned to other business priorities, then your financial records might fall to the backburner.
The truth is that we can’t place enough emphasis on the importance of business financial records. These numbers show the story of your business success and weak points. Having the right financial information available will implement the strategies that are important for your company, as well as the decisions that are made going forward. Your financial records can literally show whether your company will be increasing or decreasing in value.
Here are a few ways that your financial tracking and reporting can have a positive influence on the value of your company:
Transparency for Better Decisions
When you are making decisions about how money will be reinvested in the company, it can be a challenge to make the correct decision if you don’t have accurate information. It is essential that you maintain transparency in your financials so that your decisions will align with the reality of what is happening in your company.
You can look at reports to see the revenue that was earned over a period of time. Keep in mind that this information is only a piece of the puzzle. You should also evaluate the actual cash on hand, as well as expenses or anticipated costs that will affect your cash flow.
If anything is reported inaccurately, then it can have a domino effect on the success of your company. At the same time, these problems are easy to avoid if you implement the right system for tracking and auditing. A good accounting and bookkeeping team can help you understand the performance of your business so you can implement the strategies that will change your trajectory for the future.
How Much are You Paying in Taxes?
Tax liabilities are directly tied to the accuracy in your financial situations. As a corporation or small business owner, your tax liabilities can be high, which has a negative impact on your cash flow and profitability. How much money will you have left after paying the government? Accurate financial records will give you a clear picture so you know the funds that will be available for future business costs.
Strategies can be used to reduce your tax burden. An experienced accountant will be able to offer advice regarding the write-offs and deductions that fall within the acceptable lines for the IRS. Not only do you need to create a clear, accurate picture for the IRS. But you also need to be consistent about your financial tracking so you can back up the numbers if there are ever questions about the transactions that are moving through your company.
Reducing your tax burden comes down to the way you are managing your expenses and claiming these write-offs. Even the smallest details might seem trivial, but they can add up over time. Make sure you are recording every dollar that is spent on business expenses so this information can be used when calculating your tax burden for the year.
Good Financial Records Reduce Errors
How often have financial errors slipped through your business, causing you to lose money? If you don’t have a good system in place, then it is hard to determine where you have lost out on money that should have been collected. Your financial systems should be designed with checks-and-balances in place so you can identify any potential transactions or invoices that were overlooked.
For example, many accounting services offer monthly reconciliations. Not only does the accounting team keep up with the daily and weekly transactions, but an internal auditing system is used each month to make sure all of the accounts line up.
If a discrepancy is identified in the services that were rendered and the money that was collected, then it is a good indication that you need to turn your attention to collections on the outstanding invoices. Bringing in more money will ensure you are protecting the overall value of your company by protecting your profit margins.
Plus, the right financial system is essential to identify any potential risks for fraud. Even though you want to trust your employees and management, there is never a guarantee that illegal activity won’t happen in your office. Keeping accurate, detailed financial records will help you catch mistakes in the early stages before they turn into something that brings down your company. It is essential that you have the right system in place to identify internal wrongdoings so you can avoid major issues in the future.
Optimize Payment Trends for AP/AR
Pay attention to the cash flow trends to see if you find a cycle of cash flow issues that pop up throughout the year. If you find there is a trend or theme in the times that you are facing challenges with managing your cash flow, then it might be time to make some tweaks with your Accounts Receivable and Accounts Payable systems.
But you need to take a step back to ensure that you have accuracy in your financial statements. Inaccurate invoices can make it difficult to understand the clear picture regarding money that is flowing in and out of your business. You need to be sure you have correct information about the anticipated money that will be flowing into your company. At the same time, these financial records can help you be prepared for expenses that are coming up: wages, dividends, taxes, business development, rent, utilities, credit payments, and more.
Poorly kept financial records will make it almost impossible to keep up with these obligations because you don’t know when the payments are due. As a result, you might face late fees and interest charges, which can have a domino effect to make it even harder to keep up with your cash flow. Running proper calculations and implementing a good cash flow system is essential to help you avoid the credit issues that could be the downfall of your business in the future.
Financial Information Ensures Quality Decisions
What it all comes down to is one simple concept: you need to be sure you are making the right decisions to support the needs of your company. These decisions can influence the possibilities for your company in the future. When a business owner is always making decisions reactively, it means they are scraping enough money together to pay the immediate bills. It is a struggle to look to the future and plan for possibilities if you can’t keep up with the current requirements.
On the other hand, the right strategy for your financial records can help you evaluate the reality of the numbers for your company. You can find the areas where the business needs a little more attention. This process is a great way to fill in the gaps where you are losing money or missing out on profit potential.
Don’t underestimate how much your financials will affect all other aspects of your company. When the finances are unorganized, then it creates a huge mess that can be hard to turn around in the future. Instead of waiting for the problems to surface, you need to be proactive with implementing the right systems right now to be sure you are prepared for the future.
Choosing the Right Services to Improve Your Finances
Now that you can see the importance of improving your financial records so you can protect the value of your company, you might be wondering where you need to start to turn things around. If you don’t have accounting or bookkeeping experience, then it means you need to look to someone who understands this aspect of your business.
You have the option to hire an employee, but you will need to bear the burden of their salary and overhead costs. Instead, the smart solution is to find an outsourced accounting service that can help you build the right foundation. Our team is here to assist with the implementation of good accounting software, giving you a strong financial base that will support the future growth of your company.
Not only can we assist with the process of setting up the right system for your company, but we are also here to offer the ongoing support that you need. These services encompass everything from tax strategy to payroll management. When you let our team take care of the financial tracking and strategy, then you can turn your attention to other responsibilities that will help with the growth of your company.