Most small business owners don’t give much thought to their accounting system when they start their business. actually, they probably don’t think about the accounting much at all… they’re thinking about running the business and how to make money. unfortunately, poor financial records are the reason why many small businesses fail. Keeping accurate and timely records for your business is important for many reasons.

Probably the most important reason to keep good business records is so that you’ll know how your business is doing. is the business making money? are you charging enough for your products and/or services? are your expenses out of control? many small business owners have no idea how their business is really doing. They may think their business is doing well because there is cash in the bank, but that may not be a good assumption. if you make bad financial decisions and you don’t realize it until the end of the year, it may be too late to recover from your mistakes.

Another reason to keep good records is that it helps you know if you are pricing your product or service accurately. Determining the correct price to charge may be one of the most important decisions you make in your business. Charge too much and you may lose business to your competitors, charge too little and you may price yourself right out of business. you need to make sure you price your product or service high enough to cover all of your costs, including costs that might not directly go into your product, such as loan costs, insurance, supplies, etc.

If you apply for a business loan, you will be asked to supply financial statements so the bank can determine if you will be able to pay the loan back or not. if you have to take time to update your financial records before you can apply for a loan you could miss out on a business opportunity or on good financing terms.

When preparing your tax return it’s vital that you have good business records. Poor records can result in missed tax deductions and therefore higher taxes. with good records, preparing your taxes will be much faster and easier. also, if you pay a tax preparer to complete your return, poor records could result in higher fees because it will take the tax preparer longer to file your tax return.

Good records can save you time and money in your business. you are most valuable when you are working on profitable activities such as getting the sale or delivering the service. you don’t want to have to take time away from profitable activities to get your books in order. Nor do you want to miss out on business opportunities because your financial records aren’t in order. the best way to avoid that is to have a good accounting system in place and to keep good records on a regular, timely basis.