Why is bookkeeping so important?  It all starts with recording each transaction in a manner which supports Generally Accepted Accounting Principles (GAAP) and Internal Revenue Service Regulations.  And equally important is your ability is to make sure all tax deductible business expenses are properly recorded.

Your financial reports, the profit and loss statement and balance sheet need to be
“clean” so your income taxes on a federal and state level can be correctly filed.  In addition, you want expenses in the correct category so you can manage your business.  As an example, it is better to see communication costs listed as follows:  cell phone, land line, internet and other vs.  just one line item of communication costs.

Most accounting software provides you with the ability to drill down to get answers to
your questions, but this requires the software is set up correctly from the start when you first purchase the software. Understanding the balance sheet and profit and loss statement is key to managing the financial side of the business.