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Guest post by: John Stewart Become an Author

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You may have an excellent understanding of your business, and can say that you have all the information in your head. But how accurate is that information?

It's tempting for small-business owners to want to handle their own bookkeeping and tax preparation. After all, there is a lot of excellent accounting out there to help them. But just because you can do something doesn't mean you should.

There are indirect costs involved with everything that falls into the do-it-yourself category. These include the time you spend doing it yourself instead of tending to other business matters, and the possible missed opportunities that come with not having something handled by a full-time expert in that task.

At some point early on, most small businesses need to hand off their tax preparation, and at least some of their bookkeeping, to professionals.

A bookkeeper is going to be focused on properly recording the day-to-day financial activities of your business. This may sound simpler than the review, planning, and tax-return preparation activities that your accountant engages in.

But without good bookeeping, and good books, accountants can't properly do their job. In fact, many accountants won't even take on a business client if the client cannot produce an accurate balance sheet and is unwilling to hire someone who will get his books in proper order.

Good bookeepers will record all your receipts and expenses, track accounts receivable and payable, and in the course of entering all your financial transactions also create a balance sheet for the business. Book-keepers can handle payroll services for clients; others prefer to work with dedicated payroll companies. Depending on the size of the business, book-keepers may work with a client a couple of days a week, weekly, or even just once a month or quarter.

Since many small business owners can not afford a full time bookeeper, they choose to outsource their book-keeping requirements.

We recently had a client who knew his business so well, that he boasted one client accounted for more than two – thirds of his business turnover. When we presented the figures, he was shocked to learn that the client actually accounted for less than a third in terms of income, and was actually taking up about 80% of his time.

The business owner had no idea of where his business was, he hadn’t looked at sales figures, had a vague idea about his pending orders, and was heading for collapse. Yet he took no notice of our warnings, because he regarded the bookkeeping to be an unnecessary expense, and only wanted the minimum of bookkeeping services.

Six months later he closed the doors on his business, before the creditors declared him a bankrupt. So he lost his whole business for the sake of a few hundred dollars in bookkeeping fees that he regarded as an expense.

Good record keeping should be the life-blood of your business, so ensure that you have a good bookkeeping system in place. Whilst the increasing amount of reporting required by the Internal Revenue for taxation purposes may seem to be a negative for your business, the necessary bookkeeping can generate reports that can be a bonus to the management of your business.

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