As a business owner or manager, knowing what’s going on with your company is essential in running it successfully, which is why monthly bookkeeping is so important. Rather than only looking at your number once a quarter or a couple times a year, monthly bookkeeping will help you in a myriad of ways.
Here are a few:
1. You can watch your business budget
The first step of creating your budget is having complete accurate numbers. Without this beginning guideline, it will be nearly impossible to plot out your next year or next month.
However, even if you create your budget, if you don’t track your budget, how will you know if you’re reaching your goals?
Running your books monthly enables you to watch your numbers in real time. You will be able to see each month if you are over or under budget.
For example, if you budget a $1,000 bonus to each employee in May based off your profits, watching your budget can show if you are able to proceed with this bonus. If you are $4,000 short of your budgeted income, you know you will not be able to do your $1,000 bonuses in May.
2. Managing Expenses
Being able to see your expenses monthly can help your budget in the aforementioned example. Capturing the expenses each month ensures that nothing gets missed. It’s a lot easier to verify your expenses for one prior month than it is to verify your expenses for an entire year.
For example, what if you had a fraudulent charge on your account in August, but you did not notice until you reconcile in December? This makes it much more difficult to prove it was fraudulent and report that it was fraudulent.
Knowing when your expenses come out is very helpful as well.
Another example: Say you budgeted $300 in February for insurance to come out of your checking account, but when the insurance came due to pay it was actually $500. By not doing your monthly record keeping, you could potentially miss this larger expense and potentially overspend money you thought you had in that given month.
3. Revenue Tracking
Revenue tracking is one of the most important items for almost all business owners.
If you are a company that is required to pay monthly or quarterly taxes, you need accurate numbers, so you are not overpaying or under paying on your tax bill.
You might be wondering why you can’t just pull your deposits.
There are two reasons that just pulling deposits may not benefit you.
- If you deposit an owner’s investment or money that does not pertain to the business, you are overpaying on money that was not necessary.
- What if you have sales that need to be taxes and sales that don’t? If you just take the deposits, you are once again overpaying for your taxes.
Without watching your monthly numbers, how you can you verify that you are on track for your income goals?
Knowing if you are reaching those income goals helps you know which of the expenses you planned for can be paid.
4. Loans and Investors
If you are trying to grow your business but need a loan to do so, all lenders will need financials to decide if you are able to get a loan or not. By having the financials up to date monthly you have a better idea if you are able to support a loan, as well as being able to quickly provide the financials to a lender.
Having to create those numbers from scratch will take a bit more time and hold you up from getting the funding you need.
If you are working to get investors or even potentially planning to sell your business, you will need accurate up -to-date financials. Not only are accurate up-to-date financials important; many investors or buyers will want to see your past financials as well as your budget.
5. Being Prepared
Doing monthly bookkeeping also helps you be prepared for year’s end. If your financials are done and up to date, you will be able to pass these directly to a tax preparer to file the taxes quickly. The financials should also make it easier for you to answer the tax questions your tax preparer has for you.
Keeping up with your income, expenses, and budget also can help in the case of emergencies. It is easier to have a rainy-day fund when you are watching your financials closely.
Knowing your numbers helps your business grow and succeed. The more you know about how your business is operating, the better.
Silver Star Bookkeeping can help you understand your numbers and help the growth and success, so you can keep operating your business.