Bookkeeping and payroll for small businesses across central Virginia.

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What happens if I don't keep good financial records?

The consequences show up in different places at different times. Some are immediate. Some don’t surface until you need something from your business records and discover they’re not there.

Tax season becomes expensive. Without organized records, your accountant or tax preparer spends hours sorting through bank statements, receipts, and guesses about what various charges were. That cleanup work gets billed. Then you miss deductions because you can’t prove legitimate business expenses. A contractor who can’t document $15,000 in vehicle expenses pays taxes on money that should have been deductible.

The IRS becomes a bigger risk. Without records, you’re more likely to make mistakes on your return. Underreport income because you didn’t track all your revenue sources. Overclaim deductions you can’t support. If audited without documentation, the IRS can estimate your income based on industry averages and assess taxes accordingly. They don’t need your records to send you a bill.

Cash flow surprises you. Business owners with messy books often don’t know their real financial position. You think you’re doing fine, then suddenly you can’t make payroll or pay a supplier. The warning signs were there, but without regular reconciliation and accurate records, you didn’t see them coming.

Banks won’t work with you. Try to get a line of credit, equipment financing, or an SBA loan without clean financial statements. Lenders want to see profit and loss statements, balance sheets, and tax returns that match. If your books are a mess, the answer is either no or “come back when you have better records.”

Selling your business becomes harder. Buyers want to verify revenue, see profit trends, and understand the business they’re acquiring. Due diligence requires documentation. Disorganized records reduce your selling price or kill the deal entirely because buyers assume the worst when they can’t verify the numbers.

You make bad decisions. Without accurate job costing, you don’t know which projects or customers are profitable. You might be losing money on your biggest client and not realize it. You set prices based on gut feeling instead of actual costs. You hire when you can’t afford to or hold back when you should be investing.

The fix is usually harder than prevention. Working with a Richmond bookkeeper who charges a few hundred dollars monthly costs far less than catch-up bookkeeping that runs $3,000 to $5,000 plus whatever you lost in missed deductions and bad decisions along the way. Good records aren’t about paperwork for its own sake. They’re about knowing where your business actually stands.

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More Questions

What financial reports should I be reviewing every month?

Start with the profit and loss statement, balance sheet, and cash flow statement. Add accounts receivable and payable aging reports to track money coming in and going out. Monthly review catches problems while they're still small.

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Which QuickBooks plan is right for my small business?

The right plan depends on user count, inventory needs, and whether you track project costs. Most small businesses do fine with Simple Start or Essentials. Plus is worth it only if you manage inventory or need job-level profitability.

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How do I track tip income and tip-outs for my restaurant?

Track tips daily using your POS system or a written tip log, record all tip-outs to support staff, and run tips through payroll since they're taxable wages. Both credit card and cash tips need documentation.

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How do I set up job costing in QuickBooks Online?

Enable the Projects feature in QBO Plus or Advanced, then configure your chart of accounts to track costs by category. The software setup is straightforward but the structure you choose determines whether your job reports are actually useful.

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What's the best way to categorize expenses in QuickBooks?

Consistency matters more than the specific categories you choose. Use QuickBooks defaults as a starting point, keep things simple, and match categories to tax return line items for easier year-end prep.

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Will I get in trouble with the IRS for falling behind on my books?

Falling behind on bookkeeping itself doesn't trigger IRS penalties. The problem is what happens next. Messy books lead to inaccurate tax returns, missed deductions, and late filings. Those are what create real trouble.

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Virginia bookkeeping firm focused on small businesses. Bookkeeping, payroll, and fractional CFO services from a local Richmond team. A decade of working with businesses like yours. QuickBooks ProAdvisor certified.

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