8 Reasons you should avoid year end bookkeeping!admin
With Demonetization, GST, Digitalization & a swift spurge in electronic and cash less way of doing business, its high time that we leave behind the traditional old way of doing business.
It is the time of change not only in the way you were doing your business but also in the way you were maintaining your accounts.
A proactive business man will always sense the shift in the approach & intentions that current and upcoming events would bring and a smart business man would always like to pace up with the change
Here’s the insight and reasons to leave behind the one time (year-end) bookkeeping that we have been following since ages.
So here are the 8 reasons I believe its expiry time for year- end bookkeeping:
#1 You could never do a tax review before filing
Waiting until the year end could cause haphazard tax planning, you might not come across things which could save you tax or you might miss few things that should have been reported. A periodic track on bookkeeping and a periodic tax review is more important than your final income tax return. You will know exactly where you stand in regards to your tax situation. For instance, you know what’s your advance tax liability and if you owe money at least you have several months warning and can prepare to pay the tax liability. If you are due for a refund, then you can start planning how to use the money best to benefit you and your business. There are many more tax advantageous moves that can be made prior to the close of the year than there are after the calendar turns to a new tax year.
#2 With year-end bookkeeping you are running your business blind
Don’t you experience a hassle accounting environment at your business premises as the year end approached. Have you ever wondered whether the standings and balances of various ledgers are in order or not? Putting checks and balances into a bookkeeping system will give the owner piece of mind.
For instance, having your bookkeeper handle all aspects of Accounts Payable
and having the owner handle the final step of the process which is verifying the details of the checks and signing them. The many aspects of Accounts Payable such as amount verification, terms, dates, etc. can be tedious and the time dedicated to this is critical.
Have you considered your accounts receivable balances and status? How old are they? Are they overdue for collection and not yet called for?
Avoiding year end hassled book keeping and moving on to an organized and periodic book keeping will certainly give you better control of the resources!
#3 You have always missed focus on forecasting & budgeting by following year-end bookkeeping
The first month of each quarter should be a time for budgeting and forecasting, not for bookkeeping. If you reach the last month of your tax year with updated bookkeeping it will benefit you in many ways as you would have the data and inputs ready to forecast the financial aspects of your business and to prepare the budgetary positions. This would enable you to plan for future years and you will have the standards for comparison ready for coming years. All of this will certainly keep your resources more focussed and controlled which would certainly give you an edge over your competitors.
#4 You might be filing your taxes incorrectly
How often do you feel confident after filing the taxes? Do you revise the tax returns? How often do you receive a notice from the tax department, you certainly don’t want to overpay your taxes. However, at the same time you don’t want to underpay your taxes either. By keeping updated and accurate books you will ensure that you are filing your taxes correctly and reduce the chance of tax notices and scrutiny. In addition, you will never have to file for a tax extension, which will keep you from paying unnecessary late fees and interest.
#5 You generate sales but not sufficient cash.
By keeping your books of accounts updated, you will always have a better control over your overdue customer balances as you would be aware of the updated debtor’s balances, their ages and collection due. You can then send statements to overdue accounts, which will result in less Accounts Receivable and more cash flow for your business. Having a good healthy cash position will never hurt your business. Cash flow will enable you to invest in your business which will ensure a bright future.
#6 If you have made targets, you do not know your real-time status
Without an updated bookkeeping system, you will never have a real-time picture of your operations and transactions. You might be having some revenue targets, but you would never know if you are near or far to achieve them, you will never know if you are going smooth or rough. You might be overlooking or you might be unaware of the potential problem that you might face. An updated bookkeeping system will reveal any potential problems versus your budget and projections. If you are short in sales or over in expenses, you will be able to quickly identify the problem and attend to it before it gets out of control. Having a system in place that allows you to focus on growth as well as controlling expenses will guarantee your business is running at maximum profitability
#7 Eliminate theft and fraud
A good bookkeeping system will have checks and balances built into it that will eliminate theft and fraud. Bookkeeper theft is becoming a more common problem. You should partner with a good bookkeeping service that will put the proper procedures in place to eliminate the possibility of theft and fraudulent acts.
#8 Lower your CA bill- Pay for tax planning not for fixing your accounts
You might not even be aware buy you might be paying your chartered accountant more money than the services that you are getting. He might seem to you as a saviour who has sorted the mess of your accounts and presented a fair picture at the year end. How confident does it sound? It cannot ever be more confident than a system where you could have handled a prepared set of accounts to your CA and pay him for a better tax planning than just a quick book keeping for year-end presentation
Believe me, if you hand your CA an organized set of books come tax time you will be sure that you are paying as little as possible for tax preparation.