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Why Small Businesses Need Bookkeeping?

January 11, 2012

Bookkeeping job can be very time consuming. Every monetary amount that is paid or received must be recorded. Accuracy is of the supreme importance, making keeping the books in a quick manner a very bad idea. Because most of small business owners are often lacking in time, many choose to hire bookkeepers to keep company book well maintained.

Accurate bookkeeping is required by both federal and local tax agencies. A company’s books are used to determine the amount of taxes the company must pay. They are also used in preparing income tax returns. Sometimes, the Internal Revenue Service (IRS) or a tax agency may decide to investigate the information reported on a income tax return or other type of tax-related document. In such cases, business owners are required to present accurate records for the tax agency’s inspection. In the U.S, for example, the Internal Revenue Service requires business owners to keep financial records that are complete and up-to-date. State and city tax agencies may require businesses to maintain accurate records as well. Failure to perform acceptable bookkeeping practices may lead to significant monetary fines or in severe cases, imprisonment.

Surely bookkeeping is also necessary and beneficial to business owners. Businesses can effectively manage cash flow, stay well-informed on company performance, and develop plans for the future by perform proper bookkeeping.

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