What Do CFO Services Do for Businesses?

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Financial management is one of the main difficulties preventing your company from growing as quickly as you would like. That is, you just can’t pull the statistics together to tell you where your greatest dangers and possibilities lie in the future, much along the path to financial health and prosperity.

Your accounting staff will do an excellent job of staying on top of tax and compliance concerns, but they need the knowledge and expertise needed to develop the data and reports you need to take your company to greater heights and beyond.

You may be considering if it’s time to recruit a professional with industry experience who can start supplying you and your board of directors with the kind of vital data that you need. However, a skilled CFO is not cheap, and for a small and developing firm, this is a significant financial commitment.

It’s essential to know what does CFO services do for your businesses and if it’s financially worth it for your company to take on the extra cost. Let’s take a deep dive into the topic for more information.

What is a CFO?

An outsourced CFO is a finance executive that works outside of your company and provides top-notch financial, business, accounting, and operational advice. A full-time, part-time, or interim outsourced CFO might be used for the duration of a project.

Who Benefits From a CFO?

  • Your business isn’t performing well and you need an outsider’s perspective on what the next steps should be
  • Entrepreneurs without enough knowledge, time, or know-how to get the job done themselves
  • You run a success small business but don’t understand the financial side of things
  • You need to give investors an update but are unsure on how to do it
  • Your company needs to replace or enhance the bookkeeper’s roll to someone with additional financial information

Types of CFO Services

CFO services are available in several types. It’s crucial to pick one that’s knowledgeable and appropriate for your company. You can look into the following types of CFO services below.

  • Virtual CFOs: This option provides a longer-term answer to your managerial accounting needs, in which the firm supervises your financial employees but is not present on-site, in person, or involved in daily tasks.
  • Consultants: Most often seasoned CFOs who will work with your organization for a limited time to build and teach about things like reporting and procedures. They can even act as a temporary fill for a specific project.
  • taffing Firms: This option consists of larger firms that will assign you to anybody they have available. When choosing this type of CFO, realize the individual may not be fit for your industry.
  • Single Source CFOs: This is an individual who offers CFO services to a variety of clientele. If you have an urgent project, you’ll want to be certain this person is acquainted with your business and has the resources to fulfil your needs.

What Do CFO Services Do For Businesses?

They Focus on the Future

A CFO service shall prepare a budget and financial forecasts to provide you and your company with the most up-to-date financial information in order to make business choices about your future of the company, and also the skills to hold your employees responsible for meeting your objectives.

These predictions can also incorporate possible situations, allowing you to be a genuinely future-focused CEO and analyze the possible effect of critical decisions quantitatively prior to actually making that next expenditure.

They Create Thorough Reports

A CFO service can produce reports tailored to your business and current needs on a monthly or even weekly basis. The CFO service helps gain a thorough understanding of your company and industry, as well as assist in the construction of reports that are simple to read for you and your board of directors, allowing you to fully comprehend where your business is currently and where it is going.

They Keep Everyone On Track

A CFO service may supervise your existing bookkeeping and accountant team to make sure that all procedures are subject to a number of checks and balances in order to increase security and show accurate financials.

In order to run your business as efficiently as possible, the CFO service will verify that you are using the correct and most up-to-date financial software.

While a CFO service won’t actively supervise your IT department, it will collaborate with it to ensure that necessary safeguards are in place and that your staff’s equipment and software needs are met. The CFO service additionally could ensure that your company follows all income needs.

Bottom Line

Given these responsibilities, several financial analysts claim that a CFO’s most important responsibility is to detect and minimize threats. A CFO must determine where a group is lacking, why profits are squeezing, and what possible dangers could undermine the company’s performance through constant financial data analysis.

Is It Worth It?

Hiring a CFO full-time used to be a costly matter that only large corporations could manage. Although the experience of a CFO would benefit small businesses, the expense was just not justified. Thanks to the increase in technology and outsourcing, CFO’s are more affordable now than ever before.

There’s a better approach to hiring a CFO in recent years compared to when the job was first created. You can outsource a CFO on a part-time basis using a CFO online marketplace to find the ideal person for your business’ needs. It’s important to check with your staff to determine whether it’s the ideal moment to hire a CFO and create a strategy that’s tailored to your individual needs.

They’ll become a valuable asset who can turn your financial data into useful information.
The appropriate CFO can assist you in growing your company more quickly and intelligently. If your company is financially able, it may be in your best interest to interview CFO’s to see how they can help your brand meet your goals and fix potential financial issues you may be dealing with now.

Now that you know all about CFOs, maybe you want to learn about bookkeeping next. If so, check out this article on why bookkeeping is important for new businesses. Or, perhaps you’re just getting started on your business journey and need some info on starting a business. If so, check out this great article on starting a business in Orange County, CA.

We hope this article on what do CFO services do for your businesses was illuminating and answered many of your questions. At My OC Bookkeeper, we pride ourselves on providing the best bookkeeping services in Orange County. Unlike most bookkeepers, we love nothing more than doing financial analysis, analyzing data, and building financial models. If you are looking for a different kind of outsourced back office, give us a call.

You can reach us by phone at 949-345-0639, email us at admin@myocbookkeeper.com, or contact us here.

10 Ways Bookkeepers Help Save Businesses Money

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There’s an age-old adage: time is money.

One of the greatest ways to grow your business is to have the time available to spend nurturing it. Being able to clear up as many daily time sinks as possible will free you to develop your company, find new clients, and discover new and efficient ways to run your business. Innovation is crucial to overcome competition and draw new clients, so being able to dedicate yourself to new ideas is the life’s blood for your agency.

An easy way to make this happen is to outsource your bookkeeping to a trusted agency, which can not only save you an enormous amount of time but can also save you money in many ways.

Here are 10 ways that calling in a professional bookkeeping service can save your business money.

Professional Efficiency

Bookkeeper agencies have spent years (or even decades) specifically handling records, and they know how to do it in the least amount of time possible. They’re up to date with the most proficient methods to ensure that everything is done in an orderly and efficient way.

As they are well versed in legal processes and are adept at performing the job, you will not have to worry about facing penalties due to failures to meet financial deadlines.

Also, these services will spend far less time working on accounting than an employee who is not as well-versed in the realm of bookkeeping. You can end up saving money simply by cutting down on the costs due to the extended time an employee could spend trying to accomplish the same tasks.

With those responsibilities taken care of, that employee could be used somewhere else, which can allow you additional resources for other projects.


Errors can cost a lot of money and the less qualified a person is, the more likely they are to make mistakes in the books. Incorrect financials skew the value of your company and can cause you penalties and other detrimental results if the errors are not discovered. If they are, that’s more time spent researching and making corrections.

Professional bookkeepers are elite at their craft and are unlikely to make costly mistakes. When you put your trust in the experts, you will be able to bank on accuracy and ensure legal qualifications for your accounts.

Payroll Savings

As you won’t need to hire part-time (or full-time) help to maintain your books, this can save you on hourly wages. Plus, you won’t have to worry about providing benefits or other necessary expenses since you are not covering accountants.

You also have a variety of payment options with these companies and can choose if you want to do hourly rates or a fixed amount for services provided. That means you only pay for what you actually need and nothing more.

Productivity Benefits

With the saved time-expenditures a bookkeeper provides, you and your employees will have more time to focus on other projects, which can have mental health benefits. With less multi-tasking required, employees suffer less fatigue and make fewer mistakes and increase their job satisfaction.

Focusing on a small number of tasks means that those tasks can be done more efficiently and with increased results, which will help your company meet its goals and reach a broader audience as you can spend your time where it matters the most.


You aren’t required to give over every aspect of your accounts if you do not want to. You can opt-out of specific aspects and pick and choose which services you wish for the bookkeeper to provide. That way if you want more control over what is happening with your finances, but still want to save time and money on some arduous tasks, you can pick a plan that works for you.


As business waxes or wanes, you will find that you will have more or less time. In situations where you have less time, the bookkeeping services can prove invaluable. If, however, you are experiencing a slow period, you can take over your accounting again to save on costs.

The ability to determine when you need the services and when you don’t can help you remain flexible to keep your costs down and provide the best budgeting for your business during peak and slow periods.

Shopping Around

While outsourcing is more cost-effective than having a full-time employee handle the same work, you can also take advantage of shopping around to reduce costs on your professional bookkeeping.

Compare prices and negotiate with bookkeeping services so that you can save even more money by working out a deal that fits your budgets and finding a reputable service that will work with you on whichever features you wish. There is a multitude of options that provide different services, so you can find what you need at a cost that works for you.

Technological Savings

Keep in mind that while your business may not be able to afford top-tier bookkeeping technology, professional bookkeepers can. They will be using the top tools of the trade which can provide you with incredible statistical information and improved details on your finances.

Not only will you save money by the time spent, but you will receive the highest quality data and save money since you will not need to purchase the high-level technology to enjoy the same results.


As professionals, these bookkeepers have taken steps to provide optimum security for your data. As you are not placing sensitive data in the hands of regular employees, who may or may not prove trustworthy, your financial data will be safe and unlikely to face risks that can come with placing secure data in the hands of others.

They will also have high-quality protection software to keep your data safe from cyberattacks, so the added security in itself is an added bonus that saves you money and peace of mind.

Tax Benefits

With a bookkeeping service’s accuracy, attention to detail, and legal proficiency, tax time will be a smooth and easy process. Putting the responsibility in the hands of someone who deals with taxes all the time and knows what they’re doing will ensure that your company gets its taxes done in time and with alacrity.

We hope you enjoyed our article about the ways bookkeepers help save businesses money and how important they can be for the success of your business. MY OC Bookkeeper has the experience and expertise to help you with bookkeeping and business advisory services. Make sure to contact us here for a free consultation.

Outsourced Accounting Services | 8 Reasons Why You Need a Seasoned Accountant in Your Corner

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Proper financial management can make or break your business. Most small business owners choose to go it alone and not bring an accountant onto their team. You may be thinking that you can handle it, or that an accountant isn’t worth the money, but what is the cost of not getting one? If you are not keeping your books and accounting properly you could:

  • Fail to claim expenses that are value and miss out on tax breaks
  • Fall behind on invoicing
  • Get in trouble with the government due to underestimating your tax bill
  • Get fined due to late tax return and compliance paperwork filing
  • Have books with mistakes that can take hours to fix
  • Not be able to make real-time decisions because you don’t have access to the information you need on-hand

These are just a few things that could happen without outsourced accounting services with a seasoned accountant in your corner. The following are eight reasons why you shouldn’t be handling your accounting all on your own and should hire a professional.

Your Time is Valuable

If you choose not to have an accountant, you’re stuck doing your taxes yourself each year, or you are having another employee doing it. However, if you or the employee are stuck putting in hours and hours of work on taxes, then there is no time to be doing what is otherwise required of you or them. If you have the time to do this, then it could work, but only for a little while. As your business grows, you’ll have less time to do any work that is not the work that pays.

Taxes Don’t Have to Be Stressful

Taxes can be stress-inducing, but they don’t have to be as stressful as you think. If you have an accountant in your corner, then you don’t have anything to worry about if you get a letter from the IRS. An accountant can eliminate the stress of taxes because they will be ensuring your business’s finances are all accounted for.

Hiring a professional will also eliminate the stress of having to do it all yourself. Your sanity is important, and a key factor is running your business smoothly—keep your sanity by handing your finances over to someone who knows what they’re doing.

Your Business’s Financial Health is Important

Without a bookkeeper keeping tabs all year, you may not be totally aware of how well your business is actually performing throughout the year. A professional can keep tabs on your revenue, expenses, and performance throughout the year. This can help you to have a better understanding of your cash flow, determine the market patterns that are beneficial for you and the business, and identify circumstances that can reduce costs. A professional accountant can monitor all of these things which can enable you to make better decisions overall for your business.

Outsourced Accounting Services Allows for More Growth

There are always going to be circumstances that grow the business but make finances more complicated, whether this is expanding the number of in-house employees or signing a new contract. While you may have been able to manage your finances at first, in order for your business to grow you need to be able to handle it financially. A professional will be able to keep up with business growth, ensuring that all laws and paperwork is meeting the requirements.

Your Financial Plan May Not Be the Best for You

Having a solid financial plan allows you to better assess the business’s growth. If you properly plan, you can keep tabs on the capital required to start and grow the business, as well as the revenue, expenses, and profits.

In addition, a professional can also help you to determine the best legal structure for your business. While most small businesses think that sole proprietorships are the best and simplest option, an accountant will be able to help you determine the legal risks that can accompany your current legal structure and whether another one may be more beneficial.

You Can’t Afford to Make Mistakes

Not only will tax and accounting mistakes cost you time and effort to correct, but they will also cost you money. While you may not make any mistakes, there is still always a risk if you’re doing your accounting and bookkeeping yourself.

These mistakes can cause an audit, make you miss key tax deductions, have you spending resources on services that aren’t profitable, on top of many other things. Correcting all of these mistakes is something that you may not have the money for, but also something you can avoid altogether by hiring a professional.

You Aren’t a Pro

There’s no denying that you are not equipped with the knowledge and resources that a seasoned accountant is. At the end of the day, professionals are able to handle things that are thrown their way.

They are also aware of all the possible issues that could arise because they’ve seen a lot and they work hard to avoid these issues. You may not even know what half of these issues are so how can you expect to be proactive? You aren’t a professional accountant, so it’s better to leave these things to the professionals.

Advice Whenever You Need It

Aside from handling taxes, having an accountant in your corner allows you access to them whenever needed. You then have access to all of the information that they’ve gathered through their monitoring of the company finances. Most importantly, this allows you to make decisions in real-time with information at your fingertips, which is both more professional and more efficient.

Keeps You Focused on What’s Important

Even though you may not be a professional in accounting, you are good at what you do for your business. You are a key asset to the business, helping it to grow and thrive with your own unique expertise. By hiring an accountant, you are able to stay focused on what you do best. Furthermore, you’re able to stay on top of the things that are important to the business aside from the finances and legalities.

We hope you enjoyed our article about outsourced accounting services and how important they are for the success of your business. My OC Bookkeeper has the experience and expertise to help you with all of your bookkeeping and accounting needs. Make sure to contact us here for a free consultation.

What is Bookkeeping, and Why is it Important for Business?

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What is bookkeeping?

Bookkeeping is the procedure of recording a business or company’s financial transactions on a regular basis. One of the key aspects of bookkeeping for your business is managing a general ledger. Keep in mind that this is the main document where bookkeepers maintain all their records, receipts, and expenses.

Bookkeepers or business owners record data of business activities by checking the supporting documents and following the company’s accounting principles and standards.

Note that these documents can be receipts, bills, purchase orders, invoices, or financial reports that can give you records of transactions. Based on your needs and requirements, you can store data in Microsoft Excel or a journal.

However, due to modern technology and the growing need to maintain data, it’s best to use bookkeeping software to minimize various risks.

Plus, saving all the accounting data in cloud-based bookkeeping software minimizes the risk of losing data in the future. The best part is that business owners can check the financial records of their business at any time they want.

Importance of Bookkeeping

Whether you have a small startup or a massive corporation, the importance and significance of bookkeeping can’t be ignored. Proper bookkeeping is important for your business as it gives companies a reliable and dependable measure of their profitability and performance. And it also offers information to make key strategic decisions.

Helps You Budget Accurately

This process of storing your data is important for your business because it helps you create your budget. When your expenses and income data are appropriately organized, it will be easier for you to review your costs and financial resources.

Keep in mind that a budget develops a financial roadmap for your company. If you know your monthly or yearly budget, you can determine which expenses you will likely incur so that you can act accordingly. Moreover, if you don’t maintain your books, it will be challenging for you to estimate expenditures.

Makes Tax-filing Simple

We all know that tax preparation can be a challenging and tricky task, especially for small businesses. But it should not be. You will understand the importance of bookkeeping when the tax season comes.

Instead of finding receipts and checking each document in the pile of papers, bookkeeping ensures that you get the information you need in an organized way. Bookkeepers prepare invoices and other documents required for taxes beforehand. This way, you will know any possible tax write-offs and prepare your tax return in less time.

Meets Government Regulations

The state or national government establishes new laws and regulations every now and then, aiming to make taxing businesses and other tasks easier for them. When your records are maintained precisely and accurately through the bookkeeping process, you will not struggle to comply with the laws.
All you need is to have the right information about the company’s finances, which you need to use according to government laws.

Additionally, a trained and experienced bookkeeper can help you follow government rules and laws, as it can be hard for you to understand the regulations.

Bookkeeping and Taxes, Does My Business Need Bookkeeping, What is Bookkeeping?, What is the Purpose of Bookkeeping

Protect Small Businesses in an IRS Audit

You need to understand that the IRS can audit small businesses, even if they are fully compliant with the laws. Well, only 2.5% of companies are audited, but you never know when you might have to get audited. Bookkeeping can protect you from IRS fines and penalties.

Well-maintained and accurate books can give answers to all the questions the IRS may have. They can easily determine your losses, income, tax deductions, product prices, and other things from the recorded data.

Helps with Business Analysis

Analyzing your business and its profits, loss, capital, and other things are crucial to estimate its value in the future and make strategies. Bookkeeping is the best procedure that helps you analyze your business whenever you want. You can say that it is a tool that enables you to understand your business performance and profitability.

Furthermore, the most important part of the bookkeeping procedure is preparing financial statements. You need to regularly prepare financial statements so that you can use them for analysis and reporting purposes.

Also, bookkeeping offers you information about which business lines or segments are not operating profitably. Analyzing your company through this method will help you focus on your business’s strengths and work on its weaknesses.

Provides Better Cash Flow Information

Recoding expenses, revenues, receivables, and liabilities regularly allows you to track how much money you have paid your vendors and when your customer invoices are paid.

It is important to pay customer invoices on time. On the other hand, you should pay vendors’ invoices on 3time to prevent penalties and late fees.

Moreover, bookkeeping helps you improve your cash flow by giving your information about your invoices, such as issue date, vendor or customer name, due date, and amount. You can use this information for creating cash flow policies.

Bottom Line

While bookkeeping is an important procedure for any business, not many business owners have the ability, time, and skills to do it on their own. In other words, bookkeeping requires an understanding of accounting procedures, taxes, state regulations, and business goals. Only a trained and qualified bookkeeper who knows bookkeeping can store your data and prepare your financials securely and accurately.

We, My OC Bookkeeper, offer you a broad range of bookkeeping services, such as power BI modeling and financial modeling that help you access organized and well-maintained data. Our team of experts uses modern techniques to record your company’s financial information. Contact us here for more information.

On top of that, we help you file taxes, so you never have to deal with these challenging tasks on your own. So, are you ready to learn how you can improve and strengthen your business with reliable bookkeeping services? Schedule a consultation right now.







Advantages of Hiring an Outside Bookkeeper – 2018

Advantages of hiring an outside bookkeeper

What Are the Advantages of Hiring An Outside Bookkeeper?

Business owners often wonder what the advantages of hiring an outside bookkeeper are. The answer is simple: there are a lot of advantages. Take a look below to see My OC Bookkeeper’s list of some of the most important benefits of hiring an outside bookkeeper. The advantages listed are: lower costs, decrease turnover, keep your focus on what you do best, make sure your books aren’t biased, flexibility, elimination of distractions and expertise. Read on to learn more!

Lower Costs

One of the most important keys to business success is keeping costs down. Whether you are a brand new startup or a seasoned company, low costs are central to success. Hiring an outside bookkeeper can be an excellent way to do just this. Unlike with a full time in-house bookkeeper you don’t have to worry about paying payroll taxes, benefits, or paid vacations. Nor do you have to commit to a full time (or even part time) employee salary and if cash is temporarily low can potentially briefly delay bookkeeping operations. (Although we certainly don’t recommend doing so for too long. In fact, situations like this are a perfect time to discuss strategy with us!)

Outside Bookkeepers Lower Your Costs

Decrease Turnover

The unfortunate reality is that employee bookkeepers tend to come and go often, creating a high level of staff turnover. This can be problematic for many reasons: the cost of repeatedly on-boarding and training new employees, a negative impact on morale, labor shortages, and an inability to complete the desired bookkeeping tasks in a timely manner. Imagine, for example, if your bookkeeper left just before tax season! This would be a colossal headache. Working with an outside bookkeeper can help you to avoid all of these issues. Rather than working with an employee you are working with a company, and good bookkeeping companies are around forever. Don’t be surprised if your bookkeeping company is still going strong when you are ready to retire.

Keep Your Focus on What You Do Best

Running a small business can be an exhausting and challenging exercise. (Not too mention incredibly rewarding.) Sometimes there is a temptation to take on everything yourself but this can cause problems when you have too much work and / or are doing things you don’t really understand. Issues like this can cause real problems come tax time, and on some occasions can compound other problems to really put you in a bind. A great way to avoid this is to hire an outside bookkeeper so that you can focus on what you do best. Or, another option would be to hire a bookkeeping company to provide you with some formal training. Either way, properly designating responsibilities is crucial for business success.

Make Sure Your Books Aren’t Biased

Sometimes it can be problematic for an owner, or someone with a vested interest in a company to handle the books. There can be subjectivity in managing books, and it’s important that whoever is taking care of them won’t be influenced by anything but getting them right. Emotional attachment to the business, for example, can cause people to either interpret things incorrectly or make what an unbiased individual may consider to be an error. Unintentional errors made without emotion can also cause problems. If one of the partners makes a mistake then there may be accusations of misconduct which can create a toxic work environment.

Advantages of an Outside Bookkeeper


This is related to lower costs but worth mentioning on its own. When you hire an outside bookkeeper they can expand their workload or decrease their workload overnight. This gives you an incredible amount of flexibility that can be extremely valuable. When you have a bookkeeper on staff, changing their workload is generally a long term commitment with significant lag time. If you convert a part time employee to a full time employee because the workload has gone up, converting them back to part time status can be extremely problematic. Likewise, telling a full time employee to take a week off unpaid is never good. When you work with an outside bookkeeper you don’t have to worry about these issues.

Elimination of Distractions

Onsite bookkeepers often get pulled into tasks unrelated to their official positions. In some cases this can cause inefficiencies and problematic work flows. By working with an outside bookkeeper you can be confident that your bookkeeper with be entirely focused on what they are supposed to be — bookkeeping.


While there are many great internal bookkeepers out there, they rarely hold as much expertise on as wide ranging accounting topics as an outside company. Bookkeeping companies have various employees with various kinds of expertise, and work with all kinds of clients. They also may have managers and owners with expertise of their own. This enables them to help you on a wider range of issues than an internal bookkeeper usually can. At My OC Bookkeeper we can help you with everything from day to day bookkeeping to developing advanced financial models. It’s not likely that you will find an internal bookkeeper with that level of expertise.

Do you agree with the advantages of hiring an outside bookkeeper that we have noted? Does that mean you are looking for a great outside bookkeeper? My OC Bookkeeper is Orange County, CA’s best bookkeeping, accounting and tax specialist. We partner with great businesses all over Southern California and the world. Reach out to us and let’s do great things together.

Did you enjoy the blog post? Check out My OC Bookkeeper’s blog, the best bookkeeping and accounting blog in Orange County, CA. Prefer videos? We have some great videos on accounting, bookkeeping, and business on our YouTube channel. Or, just reach out to us here.

Want to learn more about the advantages of using outside bookkeepers and the services that My OC Bookkeeper offers? Take a look at the video below.

What is Bookkeeping? Does My Business Need it? (Yes.)

A question mark on a piece of paper symbolic of the question: what is bookkeeping?

What is bookkeeping and why is it important?

Today we ask a very simple question: what is bookkeeping? On its most basic level, bookkeeping is the recording of day-to-day financial transactions. Whether for a business, nonprofit, government agency or individual, bookkeepers ensure that every financial activity related to a specific entity is documented in a consistent and accurate way. Some of these transactions include sales, purchases, payments, and expenses. This documentation is important because it helps business owners and accountants understand the financial well-being of a company.

What is the Difference Between Bookkeeping and Accounting?

Whereas accounting refers to comprehensive financial management and planning, bookkeeping is the specific task of recording and categorizing each transaction. While bookkeeping and accounting and are often referred to synonymously, bookkeeping is actually a subset of accounting. However, bookkeeping is more than simple financial data entry. It is a through storytelling of financial health, both at present and historically. By using the numbers you have recorded, you can analyze your current situation and compare how it looks over time.

What Can Bookkeeping Show A Small Business?

As bookkeepers know, if companies don’t record and understand their numbers, it is very difficult to grow them. The cycle of money coming in versus going out is known as cash flow. Keeping track of cash flow is one of the most important jobs of bookkeepers. Say for example you own a brewery and know only the total number of beers sold instead of how each type of beer is selling individually. Maybe you are making money, but you don’t know specifically where your money is coming from and therefore cannot grow your business. If you don’t know what your strengths and weaknesses are, you can’t strategically plan for continued success. In the case of a brewery, it’s important to note each individual beer that you pour in order to know which beers are selling better than others.

While this may seem obvious, often times businesses allow their books to fall months (or years) behind. This is dangerous because companies may be unable to see they are in financial trouble until it’s too late. Or, they may miss opportunities for expansion because they are unaware of their current strengths. Or, they may be unprepared come tax time. (More on this below.) Say you run out of your best-selling beer without realizing it’s your best seller. By the time you brew another batch your business may have lost out on revenue simply due to a lack of planning. Therefore, one of the major benefits of diligent bookkeeping is the ability to make better financial decisions and to plan for the future based on concrete numbers.

Basic Bookkeeping Categories

When you start to monitor each transaction individually, it’s easy to become overwhelmed by the sheer amount of activity. This is another important function of bookkeepers: keeping everything organized. Bookkeepers use five top level categories to achieve this organization. This creates a universal language that all bookkeepers can read without requiring additional knowledge of the business.

The categories are: assets, liabilities, equity, income, and expenses. (There are also a large number of subcategories, but we will address those in a follow up post.) These categories are used to create three financial statements: the balance sheet, the statement of cash flows, and the income statement (also know as profit and loss statement). You need all three to understand the overall financial health of your company, and they all start with the diligent categorization work by your bookkeeper. (For more detailed information on bookkeeping categories see our Basic Bookkeeping Categories blog post. And if you still want to learn more, check out this blog post to learn some income statement basics and check out this blog post for an introduction to balance sheets.)

Bookkeeping and Taxes

Bookkeeping is essential for tax purposes. As we have already noted, bookkeepers organize a business’s transactions. This means having all of the pertinent information at one’s finger tips come tax time, and being confident that it is correct and supported by a digital paper trail. Otherwise you will find yourself in a mad scramble for financial data and be far more likely to make costly mistakes, or even get audited. Forgot to include a $2,000 expense back in July? Too bad, you’ll have a higher tax bill. Don’t know how much money you spent on your work automobile? Can’t write that off anymore. Accidentally double counted your expenses? Time to prey for forgiveness.

If you do happen to get audited having organized and up-to-date bookkeeping records will make your life far easier. Because IRS agents will be able to access all of your financial records easily, the audit will be quicker and therefore less painful than it would be if your numbers are not up-to-date. (Looking for more information on taxes? Check out the IRS website here. Or, take a look at all kinds of great websites for small businesses here.)

What is Bookkeeping – Summarized

So, what is bookkeeping? Bookkeeping is the systematic recording of each financial transaction that affects an entity. To organize all of this information bookkeepers use established categories that are combined to create financial statements. Bookkeeping is important because it allows you to track your company’s financial behavior showing you where you are making money and where you are spending it. It also paints a picture of the financial stability of a company, which allows for better planning and decision-making. And finally, bookkeeping is essential for taxes because it ensures that every transaction has been recorded appropriately.

Enjoy our post? Be sure to reach out to My OC Bookkeeper, Orange County’s best small business bookkeeper for your bookkeeping and tax needs. And check out Orange County, California’s best bookkeeping blog here. Last but not least, enjoy the video below to learn a bit more about the advantages of using an outside bookkeeper and the services that My OC Bookkeeper offers.