Pawn business owners have unique accounting challenges. They must maintain records of quickly rotating inventory, track cash sales and loans, and record money earned from scrap activity.
While neglecting to claim every red cent might seem like a harmless way to keep a little extra money in hand, making the effort to keep comprehensive records can actually earn your business more money in the long run.
Three reasons you should track every red cent are:
1. At some point you may wish to refinance your business loans or extend another line of credit, but if your ability to receive those loans is based on the revenue you show on paper, claiming less might not get you the money you need to grow or sustain your business.
2. If tax time feels like an unnecessary evil, remember that keeping good records is not just about claiming what you earn, but also about using your expenses as tax write-offs. If the IRS does happen to pay you a visit, having detailed records makes for a much smoother audit.
3. When the time comes to sell your business, having a good exit strategy in place is key, but if you do not keep detailed records along the way, you may still be forced to sell your business for less than it is worth. Not only is valuation determined by past revenue and current sales, but also by estimated future earnings. Claiming every nickel and dime now can help you get more ROI when it matters most.
It is better late than never to begin keeping comprehensive records. Claiming all transactions can help you keep your business off of Uncle Sam’s naughty list as well as create more opportunities for you to make money in the future.
Share