Downside to Not Have Your Books Together

Are you a business owner who adds up all your expenses at the end of the year and then rushes to hand over totals to your tax preparer last minute?

This might be for you.

While there is nothing wrong with adding everything up at tax time and handing it off to your tax preparer.. I'd like to share with you what you're missing.

Lack of Real-Time Financial Visibility

You might have already heard me say this: "Knowledge is power and data is king"

It's something I swear by.

When you are equipped with the data to make an informed decision within your business - damn, that's gold.

Making the Wrong Investments

I'm not going to sugar coat it.. when you don't know where your finances are at and you're making decisions based on cash on hand instead of your whole picture - things can get messy quick.

Confusion and Being Terrified for Tax Time

When you don't have an overall understanding of where your finances are or how it all works to flow into taxes, tax time can be really scary!

When you have your books together you can start to see how it all flows and won't be caught off guard come tax time.

Difficulty in Expense Tracking and Budgeting

While this is a lot like making a wrong investment, it's also a category all on it's own. When you don't have a great feel for what's coming in and out, that's when it's easy to accumulate overdraft fees, late fees and penalties because you don't know what to expect or prepare for.

Added Errors

Like we just talked about, errors lead to fees, penalties and interest - YUCK! I don't know anyone who likes that.

However, this also leads to ... are you capturing everything at year end?

I don't know about you, but I barely remember what I did yesterday if I didn't write it down.

It's not a secret - if I don't write it down, in my world, it didn't happen. Plain and simple.

You might have a longer memory retention than me, but is it over a year long? That's really the question you need to ask yourself.

When you don't have your books together it's easier to miss a deduction that's rightully owed to you.

This also shows up when going through an audit.

The auditor asks for a specific line item and if you don't have your books together - do you have a clear record of what exactly went into that category?

Missed Tax Deductions and Credits

The last one sort of led into this.. but more often than not, in my experience, I've noticed that a lot of expenses get missed.

Not even because they don't tally up their direct expenses incorrectly, though that is also something I see.

I'm talking about freeing up their capacity to understand the deductions and credits available to them since they are no longer focusing only on the rent, internet, or labor.

When you have the system in place to have a grasp on your finances, you get to explore the candy land that is the American tax code.

Everyone gets their knickers in a wad about taxes but that's mostly because they don't take the time to realize what's available to them.

Financing

OOOPH - this one is difficult as an entrepreneur.

Why?

Well... that's a rant for another day.

However, you're further shooting yourself in the foot by not having your books together.

Let's say it's June and you need a loan but you piece together your finances every year for taxes.

Not only are you adding to your stress by trying to put this together last minute when you need it most, you're also unsure where you're at!

Neither are ideal when you need it most. This is doing you a disservice.

Last but not least

Year End Stress

Wouldn't it be lovely to simply review and analyze your years finances instead of putting it together last minute?

I recently chatted with an amazing realtor and she talked about how her amazing husband would fall asleep at the kitchen table while they piece together everything for taxes.

If you're reading this and resonating with this it might be time for you to level up, my friend!

Not having your books together takes so much more from you than what simply putting them together and maintaining them gifts.

I say this because I've heard it and I've seen the relief it brings - not only from those I've helped but from people I didn't even do the book build for!!

That's why I truly believe in the power of it.

Did this post change your mind on doing your books regularly as oppose to annually?

Comment below or send me an email!
audrey@thegracefulpenny.com