Keeping a record of financial transactions and preparing financial statements such as balance sheets or income statements is called bookkeeping.
A bookkeeper is the official record keeper of all your business transactions. He has to ensure that in the daily records of finances, employees are filing invoices and expenses correctly.
Whether you own a multi-million company or a start-up, keeping clear records of what you have and what you owe is requisite for setting a road map for any business. It’s not an exaggeration to say that bookkeeping is crucial for the sustainability of any business. It prevents you from making caostly, and needless to mention illegal, decisions. It also helps a person monitor his business growth and to identify all income sources.
The following are some of the most important records that you should keep accurate and orderly:
- Payroll and employment taxes
- Sales and purchases
- Bank statements
- Profit and loss statements
- Cash flow analysis
Accounts receivable and accounts payable are two most important and basic records to keep. Receivable accounts show the claim for an uncollected amount. It is the sale made on credit. Account payable is the amount owed to a vendor or credit for completed goods and services.
Importance of bookkeeping:
Bookkeeping helps a business keep clear records of finances. It helps to make budget, prepare for tax returns, keeps it organized, and much more.
Here are a few of the most important aspects, why bookkeeping is crucial:
- Helps you budget correctly:
If you have up-to-date books and accurate records of your income and expenses, it’s much easier to prepare the budget for a business. With organized records of income and expenses, it’s much simpler to review financial disposition.
Without proper records of finances, every financial decision is, at best, a guess. With a budget in place, you can make decisions that will lead to future growth and success. It provides a business with a roadmap toward success.
- Tax Returns:
Every business has to file the tax returns at the end of the financial year. With well-organized books and detailed statements, the company can provide all the records that are asked for, anytime. So the taxman won’t be breathing down your neck.
- Easier to see and achieve business targets:
With up-to-date books and a budget, business goals could be calculated accordingly. Without a record of proper resources, you will just be guessing, what you want to do, what you can do, and at what speed, which will lead to disappointment.
By staying on top of your books and finance records you can map out your business’s future steps.
- Meeting government regulations:
Now and then government introduces initiatives that are mainly to serve their purpose, and to make things easier for them. But every initiative that they introduce has to be followed by all the businesses in that country.
One such initiative recently was Making tax digital. So now every business has to pay tax digitally through an app so on top of keeping records you also have to have an app for that specific purpose.
If you install an easy-to-use app for your bookkeeping, it’s easier to keep clear records. It also saves you money because, you will not have to outsource these services.
- Extra peace of mind:
If you are an entrepreneur the last thing you need is bookkeeping issues weighing on your mind. When you are answerable to the IRS or Tax department, it induces panic and stress.
When your books are complete, up-to-date, and tidy, they won’t keep you up at night, and you will be able to focus on other areas of your business.
- You learn during the process:
It is not a problem if you are a newbie to bookkeeping or a veteran Digital Bookkeeping apps help you learn during the process. There are tons of YouTube demo videos. It helps you fill in knowledge gaps and keeps your skills updated.
Bookkeeping can help you learn a lot more than just business finances. Everything you come to know, during the process can help you make better decisions for the development of your business.