Routine car maintenance. Weekly house cleaning. Yearly furnace cleaning. Doing these things regularly can save a lot of time — and sometimes a lot of money — in the long run.
Similarly, keeping clean and accurate accounting records is really important. Not only will your tax accountant thank you, maintaining up-to-date accounting records helps:
- Manage cash flow
- Identify any past-due receivables and collect from clients in a timely manner
- Process payables before you are charged interest or late fees
- Prepare timely and accurate reporting of profits or losses
- Alert you to any potential cash flow problems or fraudulent activity
- Prepare financial forecasts
It helps to have the right people and an online or “cloud” accounting system in place. Many small- and medium-sized business owners try to manage the bookkeeping and accounting themselves or with staff who are handy with numbers but don’t have accounting backgrounds.
Keeping your records straight can be a challenge, particularly if other work-related responsibilities take priority. When the ongoing processing of your business records is put on the back burner for too long, it can take a lot of work to straighten things out. It might be a sign that it’s time to outsource to a virtual bookkeeper.
(Pro tip: It’s a lot less expensive to hire a virtual bookkeeper than to pay your tax accountant to clean up your accounting records!).
There are several benefits to having clean and accurate accounting records, including:
- You’ll have the information you need to make informed decisions at any time: When you have clean and accurate accounting records, you have the information required for identifying areas of weakness, strength, and potential growth.
(Pro tip: You can hire a Virtual CFO to streamline accounting processes and for guidance with financial planning, reporting, and forecasting.)
- Being prepared for tax season: When you have good records of all your income and business expenses, your tax accountant can maximize your deductibles. It’s also reassuring to know that you are compliant (without the stress of trying to figure things out and get your business books ready!). Plus, when you’re on time and prepared, you won’t have to pay additional interest or penalties.
- You’re ready in the event you’re audited: When your accounting records are accurate and you have the supporting documentation to provide to the tax auditors, the auditor will have confidence in your processes and controls. This usually reduces the amount of testing conducted, because an auditor who isn’t finding errors and omissions is less likely to keep scrutinizing your records. Accurate accounting makes an audit go more smoothly, which is less stressful for everyone involved!
- You’ll be ready for financial investors: When you are looking for financing, bankers and private investors will want to see accurate and up-to-date accounting records.
If you’re feeling overwhelmed because you know you’re weeks (or months) behind on recording business transactions, don’t despair. Follow our 6 Financial tips for getting caught up and don’t hesitate to reach out to us if you need help.
We help businesses across Canada transition to cloud accounting and keep accurate and up-to-date accounting records. Contact us at Finatics Accounting Solutions for a free consultation.