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Many business owners took a couple of accounting classes as part of obtaining their bachelor’s degree, but very few believed they’d actually need the knowledge they learned in those courses. Sound familiar? If so, you’re not alone. Accounting is seen by small business owners (SBOs) as a necessary evil. And often, it’s more of an afterthought than anything else. This is a dangerous stance to take, though. Accounting isn’t just for your clarity, it’s required by the IRS and other regulatory firms.

7 Reasons You Need to Take Accounting Seriously

As a business owner, you absolutely must reconsider your accounting processes. Here are a few reasons why your bookkeeping habits matter:

• Clears up legal issues. As any experienced business professional will tell you, you never want to end up on the wrong side of a courtroom. However, if someone brings a charge against you for something financial-related and you don’t have clear bookkeeping records to prove your side of the story, you may end up seeing a lot more of the courtroom than you’d like. Accounting processes are taken seriously and lawyers will chew you up if you don’t have financial records to back up your claims.
• Tax planning. You can’t possibly develop intelligent tax planning strategies without knowing where your business stands. You must know things like how much revenue you produced this year, whether or not you’re operating at a profit or loss, and if you qualify for certain tax breaks. You can only know these things if you’re keeping careful records.
• Protection from audits. If the IRS thinks something is suspicious about your tax return (or if you’re randomly selected), you could be audited. At this point, the IRS is looking for something and they’re more likely to find it if you don’t have good accounting records. On the other hand, if everything is organized and documented, you’ll stand a better chance.
• Better real-time decision-making. The fast paced nature of many industries requires businesses to make quick decisions in real-time. If you don’t know the financial status of your organization – or can’t readily find it – you can’t possibly expect to make smart choices. By tightening your accounting procedures and focusing on better organization, you can make informed decisions without risking the well being of your company in the process.
• Reduces unnecessary stress. From an extremely practical stance, better bookkeeping habits allow you to unwind and relax a bit. You aren’t constantly distracted by a lack of organization and can actually begin to focus on the things that matter. You’ll also find it easier to retain employees, as people will no longer jump ship based on your disheveled systems and stressful environment.
• Accurate debt collection. If you aren’t keeping good records, how do you know if you’re getting paid on time? While you may issue sales invoices to customers, are they taking two weeks or two years to pay you back? Unfortunately, you may never know unless you carefully track invoices and hunt down missing payments.
• Chance of selling. Do you ever want to sell your business and ride off into the proverbial sunset? Well, complicated books and poor accounting procedures are a sure-fire way to scare off interested investors. However, by straightening things out, you can encourage potential buyers to focus on the things that truly matter.

Get Organized Today

As you can see, accounting isn’t arbitrary or optional; it’s a requirement. If you aren’t taking it seriously, you’ll eventually end up in hot water. Follow the tips mentioned here and either hire a full-time accountant or outsource your efforts to a local CPA. Your business is far too valuable to ignore this important component.