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Why is Important to Keep Financial Records?

Important Reasons For Keeping Records

The one area of business that all enterprises have in common is accounting. No matter what your business is, you need to know what your financial status is on a regular basis and you need to meet your financial obligations to local, city, state and federal taxing authorities. There are several reasons for keeping financial records and getting help from a bookkeeper:

You need to know where your company stands daily, weekly, monthly, quarterly and annually. Are you making money, is your client base increasing or decreasing, do you have enough money in the bank to meet your obligations, are you meeting the goals you set for your business? Without this knowledge, you have little or no control over your business. You need to know how much inventory you have on hand, how much you need to order, when you need to order, the credit terms your suppliers offer, the balance in your bank account to cover your payments for running your business such as rent, utilities, office supplies, inventory, employees’ wages, and payroll taxes. Also, you are likely to be in non-compliance with local, state and federal regulations without proper controls on you finances. Keeping your books up-to-date and accurate is the best remedy for your business’ financial health. It allows you to efficiently manage your business cash flow and obtain the best prices from suppliers as well as the best interest rates from your lenders. The first items your lenders will ask for are updated financial statements and recent tax returns.

You are responsible for meeting your monthly, quarterly and annual federal, state and city tax obligations. These obligations include payroll taxes—employee withholdings and company share for federal income tax, social security and Medicare—state and local sales taxes, local business taxes, and licenses and fees to do business in the jurisdiction your company is located.
Your company must file timely monthly, quarterly and annual tax returns including federal, state and city annual income tax returns, quarterly 941 and annual 940 returns, state and city sales tax returns (these may be monthly or quarterly), quarterly state unemployment tax returns.

Why You Should Hire a Bookkeeper?

A bookkeeper can ease the burden of the above responsibilities so you can focus on building your business. He/she has the knowledge and experience to help you understand the financial aspects of your business, knows what taxes are due and the filing dates of returns.

If you have a high volume of customer billing and/or vendor payments, you may want to consider hiring a clerk to process customer invoicing, collect receivables and pay bills. The bookkeeper may come in monthly or quarterly to make sure everything is handled properly.

We use the term bookkeeper but depending on the size of your business you may need to consider an accountant to oversee the financial aspects of your business. This person may also be helpful in devising strategies to protect your income. Plans such as Simple IRA’s, Flexible Spending Accounts may be helpful in reducing your tax liability and increasing your personal wealth.

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