Too often, small businesses and sole traders see bookkeeping as a boring obligation. It’s something to get done (eventually) and use for the necessary evil that is the tax return then file away in a dark cabinet. In other words, it’s important as record keeping but has no use outside of working out your obligations to the taxman.
In fact, your business’ books can be a powerful and valuable tool to help your business operate at full efficiency. Maintaining your books carefully and regularly looking over them, preferably with the help of your accountant’s expert opinion, can help you better run your business in a number of ways.
Predicting the Future
Your books are the closest thing you have to a crystal ball when it comes to making forecasts about your several important aspects of your business. In some areas, the best way to work out what will happen is to look at the past. True, past performance is certainly no guarantee of future performance, but in some areas it can be a very useful tool to predict what is likely to happen.
In particular, if your business is at least a few years old, your books from previous years can help you get a good idea of seasonal trends. This means you can be prepared for “famine” periods and better prepare for them in “feast” periods. It also means you can be prepared to take steps to mitigate periods of slow trading and capitalise on seasons or events which boost your business.
Tax Compliance and Efficiency
Another benefit of paying close attention to your accounts is that you are simply more likely to keep them in thoroughly good shape. Small expenses, especially the kind that represent crumpled and half-forgotten receipts, can easily slip through the net if you make the mistake of just going through your books in a single blitz once every few weeks. Similarly, discrepancies and compliance issues are more likely to appear, and even if you spot these in time it will be harder to investigate them if you don’t see them until weeks or even months after the fact.
For this reason, your business will be a lot healthier and run far more smoothly if you keep a closer eye on your books and deal with them more regularly. You should set up regular sessions for dealing with your books and getting your latest records in shape, with short intervals in between. Weekly sessions are ideal.