KEEPING TRACK OF YOUR FINANCES

As a Small Business Owner

By Montaque Swanepoel

As accountants, we are often asked, “Why is bookkeeping important?”

As this question has come up regularly in recent interactions with our clients, we thought it might be useful to explain why a (good) bookkeeping system is essential for any growing business…

Not missing expenses (and the tax benefit of those expenses) The first rule of good tax planning is to make sure that you claim all allowable business expenses. In the chaos of a business, some expenses are paid with personal funds and others in cash or with personal credit cards, and slips often get lost as time goes by. It’s little wonder that it can be a challenge to try to consolidate everything months later, or at financial year-end. Regular bookkeeping is the simplest solution to this problem.

Knowing where you stand Information is key, and the balance of your checking account is not your profit. Knowing where you stand in real-time with cloud-based bookkeeping systems is valuable information for any business owner. Knowing that things are not going as planned allows you to make changes to rectify the situation before it gets out of hand. It also allows you to know when things are going right, and when you should keep doing what is currently working. Estimating your tax liability during the year Few things in life are certain, and as the saying goes, tax is one of them. Tax season can be a daunting experience for many business owners, especially if you don’t have a clear idea of your tax liability. With a good bookkeeping system in place, you can always have a good idea of your profits and be able to make a sound estimation of your profit tax liability. A good bookkeeping system also gives you a good sales tax liability balance. This allows you to keep some funds aside for when the payment is due. As far as business goes, knowing what’s coming is certainly better than constant surprises!

Tax season becomes a breeze Collecting and summarising all your financial information just before tax season is a bit like cramming for a big exam the night before – you may pass, but you know that you could have done better and experienced a lot less stress. Doing your bookkeeping during the year makes tax season much less stressful, and with the right system giving your tax accountant the right information, it really is as simple as ticking a couple of boxes.

Good bookkeeping systems make invoicing easy Most modern cloud-based bookkeeping systems make invoicing for the many different types of systems a breeze. Perhaps your business has a fixed fee every month. For that, you can set up a repeating invoice. Maybe you issue an invoice for every task or service. For that, your staff can invoice on a tablet the moment they are done. A good modern bookkeeping system even allows time tracking, project tracking and a host of other integrations that make invoicing from many other systems a breeze. For some businesses, invoicing alone is reason enough to get a good bookkeeping system in place.

Happy bookkeeping!

ABOUT THE AUTHOR Montaque Swanepoel is a chartered accountant and the founder of CFO360 – chartered accountants and auditors that help business owners to streamline their processes and understand their finances so they can spend less time on admin, and more on the things that matter. Find out more at www.CFO360.co.za or get in touch directly at montaque@cfo360.co.za.