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Keep IRS audits at bay by sprucing up your business accounting game – Expert tips

Accounting is the methodical and extensive record-keeping process of each and every financial undertakings of a business. Stakeholders find accounting details to be vital for making economic decisions. A few instances of stakeholders who utilize accounting details include suppliers, shareholders, government, management, tax authorities, etc. Accounting in business organizations helps in making tactical and strategic decisions that help in expanding the business.

Accounting firms like Williams Accounting & Consulting refer to accounting as the ‘Language of Business. It is one of the most popular means of communicating financial details to various users. 

Business accounting and its purposes

  • Documenting financial transactions

The fundamental purpose of accounting is in maintaining an accurate, methodical, and all-inclusive record of monetary transactions of any business firm. Maintaining the documentation of all transactions forms the backbone of any accounting system. Owners can review and retrieve all their transactions whenever they can. 

  • Assists in making decisions

Business accounting helps in simplifying the decision-making procedure and assists business owners in properly implementing business policies that could boost the efficiency of their business. The prices of products and services, the resources required to make these services and products are some of the decisions made based on accounting details. 

  • Secures your financial position

The financial statements which are generated after the completion of a cycle of accounting reflect the financial state of a business. This shows the total amount of capital that has been invested, what ratio of funds have been utilized, and the profit and loss involved. It also gives a clear idea of the number of liabilities and assets of a business. 

  • Gives a score of your business performance

Business owners can determine the overall health and performance of a business by taking into account the accounting reports. Hence, these financial reports are one of the most trustworthy sources of determining the basic performance indicators. Business owners compare themselves by taking into account their previous performances. 

  • Backs up your income tax return claims

Most small business owners fear the task of tax filing, particularly when they don’t have any idea where to start. The first step to filing your income tax return is assembling all your financial records. Unless you have all the records right, you won’t put in the right numbers on your return. Even if you get audited by the IRS, you have to prove to them that you’ve done everything you could. 

  • Necessary for getting loans or investments

Lenders and investors require learning about you before they lend you a loan. This is done by checking out your business accounting details. Generally, if you’re interested in taking out a loan, you should let them prod into your financial statements. This way, they get a clear image of your profitability and credibility. Without financial forecasts, you can never claim to be profitable. 

You ask any small business owner and he’ll tell you that the success of a business doesn’t come from laziness. Hence, get active with regard to your accounting books.