The Benefits of Having a Bookkeeper Through the Year
Bookkeepers record all income and expenses for the business. Some businesses do not keep track of the income it receives – odd, but true. The owner may deposit the income in the bank account and never think twice about it until it is time for tax preparation. In my experience, new businesses are prone to this because the owner is concentrating more on running the business rather than calculating income and losses. With consistent monitoring and recording of the income and expenses, the owner can see which direction the company is heading, and create strategies on how it can be successful.
Tracking your income and expenses will paint a picture of how your business is doing. You will be able to see how much money is being spent in different areas. Once you compare the current month to the previous, you should be able to tell a story. For example, if you hired a new employee, your payroll wages and expenses should be higher; or if you canceled an ad on the internet, your advertising expense should have decreased. You will be able to see where you can cut costs or where you can spend more. If you have income from different revenue sources, separating these sources can show you where most of your income is coming in.
Monthly recording can also help in detecting fraud. Accountants reconcile bank and credit card statements. Expenses that are not common are easily detected and questioned. As stated before, each change should have a logical explanation behind it. If there is no explanation for a large fluctuation, it should be investigated.
A majority of clients hire an accountant for tax planning purposes. I have had new business owners hit the floor when they get their income taxes completed because of the first point we discussed; keeping track of income and expenses. They are unaware of how much income they have earned and their tax bill is high. This situation could have been avoided by tax planning. Once it is known that you are making a significant amount of money, action can be taken to plan for the self-employment tax and the federal income tax due on April 15th.
With every expense, income, capital asset, etc. recorded throughout the year, the tax return is completed quickly and easily- with no stress to the client or accountant. Depending on the size of the company and how many transactions occurred throughout the year, organizing the information in time to file a tax return can be overwhelming.
Why not make everyone’s life easier and just hire a bookkeeper/accountant to deal with this.
Contact us for bookkeeping and accounting needs! 256.705.3585