5 Ways Up-To-Date Bookkeeping Helps Your Business
Are you wondering how the new tax law will affect your business?
Do you wonder how your business is doing this year, but you are behind in your bookkeeping?
Does the end of the year scare you because you are overwhelmed with organizing your business finances?
I was working with one of my clients for end-of-year tax planning. Since the bookkeeping was up-to-date, we could forecast a projected taxable income. We then came up with a plan to reduce the Corporation taxes in 2017. This tax savings plan would only be possible with current bookkeeping.
Here are 5 reasons why investing in good bookkeeping can provide you more peace and guidance this holiday season.
1. Tax Planning
The new tax law most likely will lower the tax for regular corporations, partnerships, and S-Corporations. This makes it a better time than normal to reduce your tax liability in 2017. No matter the timing and details of the law, there are steps you can take before the end of the year that can lower your liability if you are a cash basis tax entity.
So what does this mean? You really need to know your taxable income now so you can know how to plan. Maybe you purchase equipment, inventory, or pay out a bonus. How would you know if you are months behind on your bookkeeping?
2. Celebrating Your Wins
It is important to celebrate when you hit your goals. If you set revenue and profit goals earlier this year, how do you know if you are hitting these goals without current bookkeeping? How can you calculate accurate commission or bonus calculations without good bookkeeping? I had a client once who was estimating their profit and paying out commission based on this estimate. This is a dangerous thing to do because you could overpay the commission and bonus, and you aren’t getting that money back.
If you had a good year, celebrate hitting these goals with your team. I know some businesses that will not know how they did in 2017 until September or October 2018 due to filing a tax return extension. At that time, nobody will want to celebrate. They will have long moved on.
3. Recognizing Your Challenges
What if your expenses and margins are lower than you think? You could be headed for a cash crunch, but you don’t even know it. It can be quite motivating to know if you are behind the plan. A few years ago, I was Controller for a company that was $500,000 behind the plan. We communicated this to our team and we all did our part to catch up. In fact, we came up with innovative ways to upsell and improve services. We ended up shattering the goal. We also were in position for excellent growth the following year.
How could we do this if we didn’t know where we stood financially? Current bookkeeping gives you more flexibility to assess where you are today and adjust.
4. Setting Updated Goals for 2018
How can you set goals for 2018 without knowing where you stand today? The best financial goals are based on historical results or some kind of actionable plan for success. For example, if you want to double your revenue, what are you doubling? Is this even possible? What do you need to do differently to reach this destination? What people, processes, or profits are needed to meet the 2018 goal?
Last week in my post “Focus in a Distracted World“, I discussed how assessing where you are today is the first step in getting to your destination.
5. More Peaceful End 0f Year
If you are disorganized and months behind on your finances, you might be dreading the end of the year and January. Could you be doing better or worse than you are thinking? You might owe a large tax bill or get a credit, but you don’t know. The suspense of not knowing can be stressful. You don’t know how to make decisions on hiring or investing in your business.
What if you had your bookkeeping up-to-date? You could have your tax liability estimated. The knowledge of your profit and cash flow can help you make better decisions. Would this give you more peace? Wouldn’t it be nice to be hanging out with your family having coffee and pie on the Christmas and New Years with that peaceful feeling?
If you desire clean, current, accurate books, reach out to us at Bender CFO Services. I have a team of bookkeepers who can straighten this out. Contact me at firstname.lastname@example.org or 682.593.9101.