Often low on a business person's "to do" list is bookkeeping.
Understandably, that task is neither the easiest nor the most enjoyable part of operating a business.
So why be bothered with keeping a set of books?
- Doing bookkeeping on a regular basis reduces stress, anxiety and creates "peace of mind" around your business venture.
- Helps you know when you have the necessary financial resources available to achieve your goals, i.e. whether you can afford that new equipment or advertising opportunity.
- It's the law. Anyone who operates a business in Canada must keep books and records at their place of business and in such a format or order to enable the assessment and payment of taxes.
- Tracking sales will help you identify high and low periods of your business cycle thereby allowing you to set aside financial resources to cover the slower periods.
- Knowing when those peaks and valleys occur can help you avoid unnecessary spending during the slow periods.
- A well-kept set of books will provide you with the information you must have i.e. a Profit and Loss Statement. That document will tell you what your sales and expenses are and whether you made or lost money.
- You will avoid penalties and fines on late remittance of taxes i.e. GST, PST and income taxes by keeping your paperwork up-to-date.
- Makes tax time easier. When you know that your books are up-to-date all you need to do is provide financial statements and/or a disk to your accountant. You don't have to spend time looking for receipts or finding someone to put it all together for you, then paying more for unorganization.
- When bookkeeping (record keeping) is a regular practice it occupies only a small chunk of time. When it has been put off the time frame required is much larger.
- Good bookkeeping will support your request for credit from vendors or a loan from the bank. Vendors and financial institutions always request financial statements and/or income tax returns to verify creditworthiness.
- Good financial records will support your claims about the business should you wish to sell it. Buyers will want to see past financial records to assess the feasibility of the business.
The importance of keeping adequate records cannot be stressed enough.
Without records you cannot see how well your business is doing and where it is going.
But most of all, you need them to run your business.
