Bookkeeping is an important part of running your business. If you do not keep accurate records of your business expenses, you will not be able to prove them and therefore claim deductions. An auditor may disallow the deductions, burdening you with back taxes and penalties. If you do not keeping accurate records, you cannot be sure exactly what your business expenses were for any given year and you can end up paying excessive taxes on your return.
If you implement your bookkeeping system accurately, it will help you track your sales, expenses, and purchases. A good record-keeping system allows you to track your day-to-day business operations, helping you identify high and low cycles. It will also help you identify changes in your customers’ preferences and behavior, in turn enabling you to change your marketing strategy.
Do I Need a Bookkeeper or an Accountant?
It is common for a business to have both a bookkeeper and an accountant. Bookkeepers are junior-level accounting professionals who might visit your place of business once or twice a week to update your books. The bookkeeper will take your receipts and records and enter them into a bookkeeping system. Since accountants usually charge a high hourly rate, they are often too costly to hire as bookkeepers. If you are having a hard time finding a bookkeeper, ask your accountant to recommend one
If you are a new business owner, you might want to do your own bookkeeping. Ask your accountant to set up a bookkeeping system and give you a crash course on how to use it. If you are doing your own bookkeeping, you can update your records every day and have better control over you business expenses.
Some small home-based businesses do not use a computerized bookkeeping system. Instead, they are able to manage with traditional pen-and-paper based record keeping. You would then give these records to your accountant when they prepare your taxes.