Why it's important to keep accurate and detailed records of your business?
As a business owner, it is easy to get caught up in the excitement of running and growing your business. However, it is crucial to pay attention to the accounting and bookkeeping aspect of your business as well. In fact, nine out of ten businesses fail due to financial mismanagement, often because they don't properly plan for growth or keep accurate records of their transactions.
Accurate and detailed records are essential for a number of reasons. First and foremost, they help you make informed decisions about your business. If you don't have a clear picture of your financial situation, you won't be able to know if you can afford to hire new employees, invest in assets, or make other important decisions. Accurate records also help you comply with requirements and regulations, such as those set by the Canada Revenue Agency (CRA).
Waiting until tax season to record your transactions and fix any errors in your books can be costly and time-consuming. It is much easier to keep your records up to date on a daily, weekly, or monthly basis, either by hiring a bookkeeper or engaging an outside accounting or bookkeeping firm. By keeping accurate records, you'll have a better understanding of your business's financial performance and be able to make informed decisions about its future.
Accurate and detailed records also help you understand key financial metrics, such as your revenue, direct costs, payroll expenses, and general and administrative expenses. They also allow you to analyze your cash flow, debt-to-asset ratio, and other important ratios. All of this information is essential for making smart decisions about your business and planning for its growth.
In short, keeping accurate and detailed records of your business is crucial for its success. It helps you make informed decisions, comply with regulations, and understand key financial metrics. Don't neglect this important aspect of your business – invest the time and resources to keep your records up to date, and you'll be well on your way to success.
