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How Better Bookkeeping Helps Me Understand Profitability and Taxes

How Better Bookkeeping Helps Me Understand Profitability and Taxes

Often, small business owners juggle various responsibilities while trying to grow their business. Bookkeeping and tax compliance tasks often get less attention than needed because they aren’t seen as urgent priorities for the success of a young business.  Unfortunately, when bookkeeping and taxes are left to sit on the back burner, even if only for a month or two, it can create real problems for a business owner.

Having a plan and system for managing bookkeeping information and ongoing tax compliance tasks is important. We have found that most owners could use a little help with this important aspect of operating a successful business. A relationship with an accountant you trust can help you systemize the stream of bookkeeping data, make sense of the information, and keep up with tax compliance on an ongoing basis.

What You Need to Manage This Information

Creating a systematic process for organizing bookkeeping data and keeping it organized is really important. Without organized data, it’s nearly impossible to understand a business’s financial position and profitability. In addition, organized financial information makes it possible to keep up with tax compliance requirements. Fortunately, staying organized is easier than ever with inexpensive, cloud-based solutions like QuickBooks Online and Xero.  

How Does Better Bookkeeping Help Me Understand Profitability and Taxes

Unfortunately, purchasing a software subscription isn’t enough. It’s also necessary to know to keep up with bookkeeping processes and operate the software. Unless the business owner plans to spend their own time on these tasks (which we generally don’t recommend), they need to delegate them to someone who is qualified and trustworthy. Ideally, this should be someone who:

  • Understand the fundamentals of bookkeeping
  • Has experience with modern bookkeeping software (QBO, Xero, etc.)
  • Can understand the story being told by a business’ bookkeeping data
  • Understands how business results impact federal and state tax obligations
  • Can provide proactive communication with the business owner

The Importance of Systemized Processes

Good processes are helpful in almost every aspect of a business, especially when it comes to managing finances. A system for keeping bookkeeping information updated helps avoid the frustration of having these tasks pile up into a disorganized mess.

It also makes it possible to know where you stand on taxes during the year – avoiding an unpleasant surprise at tax time.  Without a reliable system in place, it can be hard to plan for the future.

Making Sense of the Information

Most small business owners have never taken an accounting class. So, they need a little help to fully understand their financial information. It can be very helpful to have a relationship with a good accountant who is familiar with the business, understands the data, and can answer questions about its implications.  

Managing a small business is by no means simple, but it isn’t rocket science. Many successful small businesses can position themselves successfully by utilizing inexpensive tools and proactively communicating with an accounting service like TMA Accounting.

A reliable accounting and payroll service can effectively manage these challenging aspects of business ownership. Working with TMA can help avoid frustrations and allow you to focus more energy on operating and growing your business. Schedule some time to talk with us and see why so many small businesses count on us to help them get more from their business.

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