The primary purpose of using QuickBooks to keep books is to provide financial and management information in order for you to run your business, make sound business decisions, and to prepare your taxes.
Most business owners are very worried about generating income; however, running a business involves a lot of other tasks. You will need to invoice customers, record payments from customers, pay your own bills to outside vendors, perhaps manage inventory, and analyze your financial data to see where you need to focus your efforts next. QuickBooks is a tool that you can use to automate the tasks you are already performing as a business owner or to set up a new business.
- Running your business
- Recording money coming in
- Recording money going out
- Using Reports to
- Understand how your business is doing
- Make decisions
Unfortunately, many contractors have bookkeeping systems that are or have been designed by accountants and/or bookkeepers which are designed to provide tax information as their primary goal. While you certainly need to have information to complete your tax returns, how they have set things up does not always make sense for your needs or purposes, and there really is not any requirement to keep your books as a mirror image of your tax return.
Bookkeepers and accountants know taxes; after all, that is what they do best. Most are unfamiliar with the construction industry and its intricacies. We will teach you how to setup QuickBooks so that both you and your accountant will get the information that you each need in order to perform your respective jobs.
If there wasn’t any conflict between your management needs and your tax needs, this wouldn’t be an issue. Unfortunately, the IRS does not know much about the construction business either. Their goal and their rules are focused on forcing you to calculate your profits, and thus your taxable income, in a manner that produces consistent results across all types of businesses. In short, they only want to “box” you in and limit your parameters for calculating your income so that you can only fudge your numbers to a limited extent. None of this exercise has anything to do with managing your business!
Six Ways Financial Management Helps Your Business Succeed:
Why take the time to learn and use financial management methods?
Accounting is the language of business, so you and other parties (banks, IRS, etc.) should all speak the same language in order to:
- Stay on top of your cash flow: Track money in and out of your business. Even a profitable business can go bankrupt if it does not track cash flow.
- Manage your customers and sales: Track what they are buying, keep records up-to-date so you can contact them.
- Track Production and Inventory: Know how to obtain goods and services from your vendors and establish credit.
Once your records are centralized, you can create reports for a variety of important activities:
- Filing with the IRS
- Understanding how your business is doing (this will help on pricing products and services)
- Sharing your financial picture with third parties (banks, SBA, etc.) to secure loans
And then, of course, tracking the money going in and out of your business. All companies, even huge established one’s with billions in revenue and tens of thousands of employees, rely on financial management for these areas.
Whatever your business, sound financial practices are a toolset that can help you get the greatest return from your efforts.
Information is Power!
There are certain questions that all business owners would like answered. Businesses that practice sound financial management and record-keeping will have the answers to these questions (and more) at their fingertips.
Ok, so you “might” have some rough figures in your head, but without proper record-keeping, you will never “really” know.
Financial Accounts – Why they matter to your business
- Money in from payments received
- Data on customers and vendors
- Record of your bank accounts
- Money out for checks written, refunds, and other expenses