You’re probably passionate about whatever product or service your business offers.
(After all, that’s likely the reason you went into business for yourself in the first place!)
At the same time, you’re probably far less passionate about your business finances and accounting.
I mean, you know your accounting is important, but keeping up with all of the specifics seems to require a lot of complicated, tedious work.
That’s why you gave the bookkeeping and accounting work to your accountant and bookkeeper.
And now that you’ve turned over your business’ accounting (or when you do), you might be tempted to think: Whew! I never have to deal with any of that again!
But there are many reasons why you should remain in touch with your business accounting practices–even if someone else is doing the day-to-day work.
Here are 4 major reasons why business owners should engage with their accounting and business’ financials:
1. You’ll make better financial decisions.
When you understand how much you’re spending, you’ll know how much you need to minimally bring in.
When you also understand things like how much profit you’re making on each sale and what percentage of your monthly expenses are vital to keep your business functioning, you’re much better prepared to make financial decisions that are good for your business. (For instance, is everything you’ve subscribed to necessary and adding to your bottom line?)
2. You’ll get better tax deductions.
If your business can afford a full-time accountant, you might be able to relax and trust that accountant to get you all of the tax deductions that your business qualifies for (this scenario also assumes you’ve hired an awesome accountant).
But if you are someone who hands your records to an accountant at the end of the year (an accountant who cannot be that familiar with all of the details of your business), and you assume your tax filing will show every deduction that your business qualifies for, you will be disappointed.
For smaller businesses, it is incredibly valuable to understand the tax deductions your business qualifies for. That way, you can make sure that your every-day accounting records accurately and clearly portray the deductions your specific business should be taking.
3. You won’t be dependent on someone else.
Being engaged with your business financials and accounting will give you a better understanding of the questions to ask bookkeepers, accountants, lawyers, other business owners’ and any other professionals you might bring in to assist with your business operations.
Best yet, you avoid losing knowledge about your business’ tax deductions when you transition to a new accountant (or a new bookkeeper), which is something I’ve seen happen frequently.
4. You have room for proactive tax planning.
One of the largest benefits of being engaged with your accounting practices and having your accounting ducks in a row is that it gives you the ability to proactively plan for taxes.
What does this look like?
It means that instead of belatedly realizing at the end of the year that you have a large amount of income sitting in the bank, you are able to anticipate this surplus and you have time to allocate that money in the most helpful way from a business tax standpoint.
Anyone say end-of-year bonus payroll? Score!
So Over to You –
Have you ever had an accounting problem that could’ve been solved if you’d only engaged with your accounting? Any stories to share? Share below!