How Accurate Financial Records Can Increase the Value of a Small Business
Businessman/owner checking kitchen supplies

Whether you’re looking to sell or just want your business to operate at peak performance, here’s how accurate business records can increase the value of a small business.

Using accurate financial records for your small business isn’t just good organization. It’s vital for improving the value of your business. This quick guide will help you learn the importance of accurate record-keeping for your small business.

When it comes time to raise your business’s value, say for the purpose of selling it for a good profit, keeping accurate financial records will help you reach your goal. Proper record-keeping can also help your business to run at peak performance. Here are several ways that maintaining accurate records can help your business all around.

Error reduction

No one likes errors in financial record-keeping, and errors are not only frustrating, but they can cause problems that will cause your business to lose money (and value) down the road. Such errors will serve as a red flag to would-be investors who would otherwise add value to your business. While everyone would like to believe that their employees are all honest, illegal activity does occur, and can hide far more easily when a record-keeping system is already full of errors.

Reviewing your accounting statements is a good way to catch any mistakes or discrepancies that can crop up before they cost your business money in the short and long-term future. This will help to spot any unscrupulous activity taking place within your business and can help you to correct small errors before they add up.

Trust and transparency

As with errors and illegal activity, few enjoy investing in a company that lacks transparency in its financial record-keeping. Investors are more likely to add value to a business that is working hard to ensure its records are accurate and working just as hard to show that investment dollars will be put to good use. Some companies have closed because they have hidden major losses from the outside world, and you do not want to be one of them.

Being able to show that your small business is not suffering major losses due to errors, and better yet, is able to turn a profit, will attract outside investment. Being transparent about every financial number in your business is also a must, no matter how small. These numbers must include not only earnings from cash, but from accounts receivables, profits before and after taxes, interest payments, and asset depreciation, if applicable.

Accurate reporting helps reduce your tax burden

Unfortunately, taxes are a big part of small business operation. Higher profits will of course mean higher taxes which is why it’s important to find any legal way possible to reduce your business’s tax burden.

This can be done through accurate financial records which will help you identify those business expenses that can be used to reduce your taxes. A good accounting partner will be able to help you identify ways to reduce your burden and report this accurately to the CRA. Reducing your tax burden will help you to maximize your profits and your business’s worth. Another reason to maintain accurate financials: errors in reporting can result in penalties and fines should an audit occur.

You can plan for the future and pay (and be paid) on time

Knowing exactly where your business stands will help you to make important decisions for your small business’s future. Ensuring you can pay your employees, invoices, and dividends accurately and on time will depend on accurate financial records. Failing to keep proper records can result in an inability to pay your debts, leading to possible financial ruin and lost value in the future. Failure to keep the right records can also result in your accounts receivable not getting the payments they need, as unpaid customer invoices can go unnoticed in a disorganized system.

If you have new plans for your business, having the correct financial records will help you and management reach a decision on whether to move forward or make a new investment.

If you are in need of an experienced accounting partner who is able to take your small business to the next level, contact us today to get started.