A lot of new businesses are started by people who are really eager to get started doing their thing. They want to get customers, make their products, and just open for business. They are probably thinking that they can just spend a few hours a week keeping track of sales, purchases and other "figures" and call it bookkeeping. They are right, if they want to do it wrong.
Keeping good books not only tells you about your business, it also helps you make better decisions at tax time, where and when to take your business to the next level, and how to make your company a success. Understanding the method of bookkeeping and proper recording of information can help you see where your money needs to be recorded on your tax form. If you classify a purchase of a major piece of equipment as an expense instead of capitalizing the purchase, you might end up miscalculating your taxable income for the year as lower than it really is and then owe money in back taxes when the IRS looks over your return.
Keeping track of your company and it's expenditures can help you realize if you need to find less expensive parts (because you are not making a profit on certain items) or where you can raise your prices a little to make a difference in the profit margin. You might even find out that there are certain lines of manufacturing and service that are just not profitable and you need to decide if you should change your company's focus.
Another factor is that you need to know if you ARE making a profit, have enough money in operating funds and, maybe you can be investing your hard earned money and let your money make money by having investments. Products and services are not the only way a company can make money. Investment income is another.
Another year has passed and I am preparing for tax time with my own company, Oak Business Services and Notary. I will be looking at my income from the past year, preparing my taxes, and seeing where I can leverage more income. As a bookkeeper myself, I know that good financial records can make all the difference in making business decisions.