With so many other activities demanding your attention, it’s easy for the business owner to neglect bookkeeping. You
see it as an unnecessary function that only wastes your time. You even argue that only large companies need to invest
in professional bookkeeping services.
However, you’re mistaken, as bookkeeping is an integral part of your business’s operations. Your problem is that you
don’t understand what bookkeeping entails. Also, you’re yet to realize the value of having proper books of accounts.
To help you out, keep reading to know what is bookkeeping and its value to your business.
Bookkeeping involves the recording of the day to day business financial transactions. For instance, you’ll record
your enterprise’s sales, purchases, and payments. Note that you only record transactions that have a financial
implication on your business.
For instance, placing an order for goods is not purchased until you receive the goods. You’ll, however, record this
transaction even though you haven’t paid for the goods yet. That’s why you need to learn how a purchases and creditors
Bookkeeping vs. Accounting
Many small business owners don’t understand the difference between bookkeeping and accounting. Some assume that both
of them mean the same thing, and you can use the terms interchangeably. Others argue they’re totally different things.
Understand that bookkeeping is an accounting segment. Bookkeeping involves the recording of financial transactions,
such as sales. Accounting, on the other hand, involves analyzing and summarizing these transactions.
So accounting helps in generating financial reports, such as the income statement and the balance sheet. These
reports are key to showcasing the business’s performance and financial position. So, you’ll rely on the information
from these accounting reports when making key business decisions.
How Bookkeeping Works
Proper bookkeeping requires timely and accurate recording of all business financial transactions. Also, it involves
recording these financial transactions in the right accounts. As a small business owner, it may be overwhelming to
handle the bookkeeping function.
So, hire a bookkeeper to help you undertake this task the right
way. A professional bookkeeper will guide you to know more about different accounting methods. Also, this expert will
guide you to know the ideal accounting method to use.
Also, this professional will guide you to know the ideal bookkeeping tools to use. You want to find an easy-to-use
tool with an in-built reporting function. So, seek tips on how to hire a qualified bookkeeper for your business.
Importance of Bookkeeping to Your Business
Now that you know what is bookkeeping, you may ask why it matters to your business. You want to know the specific
ways your enterprise will benefit from proper bookkeeping. You’re looking for justifications for incurring the cost of
hiring professional bookkeeping.
To enlighten you, here are some of the benefits of proper bookkeeping:
Makes it Easy Audit Your Business
To ensure that your business is moving forward, you must undertake frequent audits. You want to see all your revenues
and expenses for a given period. You also need to check your current liabilities and assets.
It’s challenging to do this work without proper books of accounts. You’ll struggle to search for receipts and
invoices to access this information. So, to ease your work, you should invest in proper bookkeeping.
You want to easily access information on how your business is doing. For instance, you’ll compare your expenses with
the budgeted amounts. So, you’ll see if you’re sticking to the set budget or not.
Also, bookkeeping will
give you information on the expenses to eliminate. These are expenditures that offer zero value to your business and
only eat your profits.
So, to ease doing these audits, hire the best bookkeeper near you. You want to have information that simplifies
financial planning and increases your business’s odds of success.
Simplifies Generating Accounting Reports
To know your
business’s performance, you’ll need to prepare various accounting reports. For instance, you’ll need to prepare
an income statement and balance sheet at the end of the year. It’s a nightmare trying to generate these reports
without proper bookkeeping.
You’ll end up guessing things and inputting the wrong amounts, thereby generating erroneous financial reports. So
these reports will give you false information on your company’s performance. For instance, if you underestimate
expenses, you’ll end up reporting more profits than the ones you earned.
So, to overcome this problem, you need to hire a professional bookkeeper to record all your financial transactions.
You want to have accurate records that help you generate accurate financial reports. So, you’ll get the right
information that guides you when making major business decisions.
Helps with Tax Prediction
Many small businesses have a hard time filing their annual taxes. The reason is that these businesses lack enough
financial reports to guide them. So, they end up filling the wrong tax amount and facing problems with the IRS.
Don’t be like these businesses when you can ease things through proper bookkeeping. You want to have records that
guide you on the taxes your business should pay. So, you’ll ensure that you pay your business taxes on time, avoiding IRS penalties.
Also, proper books of accounts will help you predict your business taxes even before the deadline. So, you’ll set
money aside early to pay these taxes. Doing this will make financial management easy and smoothen your business’s
Simplify Business Decision Making by Investing in Proper Bookkeeping
Bookkeeping helps you to collect data that you analyze to understand your company’s performance. So, you need to
learn how to handle this business function. That’s why you should weigh the need to hire a professional bookkeeper.
You want an expert who’ll ensure you keep timely and accurate books of accounts. Also, the bookkeeper will guide you
when developing accounting reports. You’re looking for reports that’ll guide you to make smart business decisions.
For more Business Management advice, please see our other articles.