Why It's Important To Track Your Business Finances
‘If you don't track your business finances, you might set yourself up for disaster'.
That's very true.
If you don't know your numbers, your business might turn into a turmoil without you even noticing.
In this post, l will share with you some of the reasons why it's important to track your finances as a business owner – maybe this might help some few business owners out there.
Thus, read till the end if you’re interested in this topic.
Let's Get Started....
1. It Helps To Assess Performance
First and foremost, tracking your business finances helps to assess the performance of your business i.e. is your business thriving or striving.
But when we talk about business finances, we’re not only talking about revenues – but also, expenses.
The reason being that, your business might be $100k per month in revenue – which sounds like a lucrative number – but if we factor in the expenses, you might realize that the business isn't profitable at all.
Yes, you might be making $100k per month in revenue, but if your expenses are $115k, you're technically making a loss of $15k per month.
Thus, it's important to track your business finances i.e. both revenues & expenses – so that you can know if your business is profitable or not.
2. It Helps To Come Up With Viable Strategies
Once you've assessed the performance of your business, you can be able to device some viable strategies which helps to improve your business.
Assessment helps to identify areas where you're not fully maximising your gains – and once you identify them, you can easily work on them.
Not only that, but you can also be able to identify which areas are taking unnecessary money from your business – and once you've identified them, you can easily cut them off.
In simple terms, what gets measured can be improved.
3. It Helps For Budgeting Purposes
Knowing your finances also helps a lot when it comes to budgeting.
If you know your numbers, you can easily prepare a budget on how you're going to use that money that you've made.
Though making money sounds great for most business owners, it's also important to properly manage that money – otherwise, you might be making $100k/month & still be broke i.e. if you spend all of it on dump-stupid purchases.
It's not about how much money you make. It's all about how much money you keep – as well as how you use & manage that money.
4. It Helps For Tax Purposes
Last but not least, tracking your business finances helps a lot when it comes to tax purposes.
I’ve seen a lot people who makes a ton sh*t of money in a short period of time – but then, they blow it all away on luxurious items like fancy cars, expensive penthouses, or even going to Vegas (casino).
But then, they get stressed when it comes time for paying taxes – because they might have overspend some money that was supposed to go towards taxes.
And in some cases, some people might end up getting sued for evading taxes – or in some cases, they might end up selling all those fancy items for cheap – just to raise money for taxes.
But if you know your numbers, you can easily know what's your tax bill is (roughly) – so that when it comes time for paying taxes, you wont panic like most business owners.
Wrapping Up
So these are some of the reasons why it's important to track your business finances.
Let me know in the comments section if you have any questions.
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