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Accurate bookkeeping is so important

Do You Know How Much Money You Are Making?

I am always amazed at how many small business owners do not really have a handle on their finances or have a good grasp of what their business is or isn’t making.

Apparently around half of businesses fail within 5 years. Yes that right half! And they fail because of lack of profits and or lack of funding.

Entrepreneurs by their very nature are optimistic souls and many underestimate the time to market, the lead time of converting sales and the amount of capital required, even though they may have a great product or service

There are many reasons for having accurate books. Here are some of them.

  • Helps in making informed decisions

Accurate accounts provide business owners with real-time financial data that helps them make informed decisions. With accurate accounts, business owners can easily track revenue, expenses, and profits, which allows them to identify areas that require improvement and make strategic decisions to grow their business.

  • Comply with tax regulations

Keeping accurate accounts is essential for businesses to comply with tax regulations. By accurately recording financial transactions, businesses can easily prepare and file tax returns and avoid costly penalties and fines that result from inaccurate reporting.

  • Provides insights into financial performance

Accurate accounts provide insights into a business’s financial performance, such as profitability, cash flow, and liquidity. This information is critical for business owners and investors to assess the health of a business, identify potential areas of growth, and make informed investment decisions.

  • Facilitates access to funding

Accurate accounts can help businesses secure funding from investors, lenders, and other financial institutions. Lenders and investors require accurate financial statements to assess the risk of lending or investing in a business. Without accurate accounts, businesses may not be able to access funding or secure favorable terms.

  • Improves business operations

Accurate accounts can help businesses improve their operations and reduce costs. By tracking expenses and identifying areas of waste or inefficiencies, businesses can optimize their operations and increase profits. Accurate accounts can also help businesses monitor inventory levels, manage cash flow, and make informed purchasing decisions.

The Things You Must Do

You absolutely must have a PLAN and it must be costed and well thought out with a budget.

You absolutely must have up to date information on which you can base your decisions upon.

You absolutely must compare your actual results with your budget and evaluate why your forecasts weren’t met. It maybe that you need to re-evaluate your business model. If what you are trying does not work it is far better to see it early so you can take corrective action or even to cut your losses.

You absolutely must get your record keeping and tax affairs in order from day one. If you are a small sole trader you could probably do this all yourself. There is some great very cheap online bookkeeping software out there and most start at around £10 per month. Alternatively get an accountant to do it all for you. Most accountants fees for small businesses are not very expensive.

Disclaimer:

Paul Stankiewicz is the owner and principal at Paul Marks & Co Chartered Accountants which is the trading name of Paul Marks Ltd a Limited Company registered in England and Wales (registered number 4487645). This article is designed for the information of readers only and is the opinion of the author only. Readers should not act on any of the information contained in this article without seeking professional advice. Nothing in this article constitutes advice, nor does the transmission, downloading or sending of any information or the Material create any contractual relationship. Links to third party websites are provided as a convenience to the reader, Paul Marks Ltd does not control and is not responsible for any of those websites or their content.Paul Stankiewicz and Paul Marks Ltd accepts no liability or responsibility whatsoever for any loss or damage suffered by any user of the information contained on or accessed through this article or the Material downloaded.