Are you paying close attention to your bookkeeping? The following 5 Bookkeeping tips for Petaluma businesses should be used by all business owners.
Keeping track of financial transactions is one of the most important parts of running a business. Businesses that don’t make bookkeeping a priority risk running cash shortages, falling behind on accounts payable or forgetting to invoice clients. It is always a good idea to hire a professional bookkeeper to manage your financial transactions.
There are a variety of reasons that bookkeeping needs to be one of your top priorities. Make sure that you understand the following risks if you aren’t keeping track of your financial transactions.
1. Protect Against IRS Audit
Undergoing an audit can be very frightening for most businesses. However, it will be much scarier if your records haven’t been updated. You need to be particularly diligent about recording expenses and cash collections. You need to also cross-reference your journal entries with your banking statements.
The IRS collects over $700 in unpaid taxes for every hour it spends auditing a small business. Fortunately, the cost of an audit is much lower to businesses that maintain accurate records. Maintaining accurate records also reduces the risk of filing errors, which lessens the likelihood of an audit. It is always a good idea to hire a professional bookkeeper before filing taxes to minimize the risk.
2. Avoid Overpaying Taxes
Audits can be very stressful and expensive, but overpaying in taxes can be a serious problem as well. Make sure that you are aware of any tax deductions that you may be eligible for. You need to keep accurate financial records to make sure that you catch them. Make sure that you know which expenses are tax deductible before writing them off.
3. Keep Bills from Falling Through the Cracks
A survey from the National Federation of Independent Business shows that nearly 40% of small businesses have had problems with clients paying them late. It is important to avoid being one of those delinquent clients to protect relationships with creditors, avoid unnecessary late fees and potential litigation.
Delinquent bills are a frequent problem with poor bookkeeping. Petaluma businesses need to keep detailed financial records to stay on top of them. You need to keep careful track of your accounts payable and make sure that bills are paid by the deadline.
4. Streamline Filings
Filing taxes is a tedious and time-consuming process. The process is even more involved for businesses than individuals, because you need to file with the IRS every three months.
However, it can be a lot more time intensive if you haven’t maintained accurate financial records. You will want to track every transaction in a ledger and add it to a financial accounting program every month. This makes it easier to report your income and any deductions that you may have earned.
5. Keep Track of Receivables
On the flipside, it is important to keep careful track of your accounts receivable. You may forget to invoice clients or follow-up on late payments if you didn’t keep detailed records. Always create a journal entry whenever a shipment is made or a service is delivered.
Many businesses have difficulty tracking their cash flow, following up with suppliers and remembering to bill customers. These problems often stem from poor bookkeeping. Petaluma business owners must recognize the need to keep up-to-date financial records to avoid the problems that would arise. By following the above Top 5 bookkeeping tips for Petaluma business owners, many a business owners can lower their financial stressors.