Before we delve into why good bookkeeping is crucial for business, let’s take a look at what bookkeeping is.
What does a bookkeeper do? In simple terms, a bookkeeper manages a business’ financial records. He/she will update statements, keep track of financial transactions by recording and file them and check the accuracy of financial records to ensure everything is in order. While a bookkeepers services are much more complex than that, that is the gist of what they do.
Whether you’re a small business or a large firm, bookkeeping services are essential for your business. Here’s why:
1. Quick and Easy Financial Analysis and Management
Financial management is one of the most important aspects of a business. At any given time, you should know about your business’ financial situation. Cash flow management is essential for running the business smoothly. Invoices should be paid on time, and any financial transaction that occurs should be recorded. When bookkeeping is done efficiently, you will save a lot of time and effort that could otherwise be wasted on tracking your finances.
2. Maintain Goodwill
As mentioned earlier, with proper bookkeeping, you will be able to make payments on time, taking care of any loans, bills, invoices promptly.
Doing this will help you build goodwill and a good business relationship with your business affiliates, clients, investors and any other parties associated with your business.
3. Makes Business Planning Easy
Proper bookkeeping will also make business planning a much easier job. Just a quick glance at the profit and loss statements and your Balance sheet will give you a clear idea of where you stand. You can then make sound business decisions based on your present financial position. You can forecast the future based on your present situation, take calculated risks, and move your business on the right path.
Knowing the financial situation of your company so well will also mean that you won’t be caught off-guard by a sudden financial crunch. When you take the guesswork out of financial planning, you can make decisions purely based on numbers, which would benefit your business to a great extent.
4. Makes It Easy to Keep Investors Informed
It is good practice to keep investors periodically updated and informed about how the business is faring. With an efficient bookkeeping system in place, this job becomes so much easier. All you need to do is to create some graphs and charts, with information gleaned from the account books, to let your investors know how the business is doing.
5. Makes Tax Time a Breeze
Proper bookkeeping will make tax filing a breeze. When you have all the required invoices, bills and expenses recorded and filed meticulously; tax time doesn’t have to be a chaotic, stressful affair. Instead, you can easily file your taxes, submit all the required documents and be done with the whole thing in a very short period.
You can also avoid tax penalties and fines when your bookkeeping is on point. If your accounts are not managed properly, or you do not have the required invoices and other documents as proof, you run the risk of having to pay a fine or penalty. Avoid this by hiring a good bookkeeper to take care of your business’ financial record keeping.
6. You Can Claim Tax Deductions
There are some legitimate tax deductions that every business can claim. But if you’re bookkeeping is not up to standard, you run the risk of not being able to claim those deductions. Only when your book of account and financial statements are in order can you look into tax deductions, by way of finding expenses that are tax deductible.
7. Gives You Peace of Mind
Sloppy bookkeeping can cause a lot of stress, leading to you spending hours on end trying to sort out your financial statements.
Good bookkeeping practices will give you peace of mind since everything is accounted for, with records to back them up. Knowing that your bookkeeping is kept up to date can be a huge relief.
8. Makes You Look Professional
Even if you’re a small business that is just starting out, having a bookkeeper to take care of your financial records makes you look professional. It lets potential investors know that you are a legitimate, well-run business.Not having a bookkeeping system will make your business look amateurish and badly managed.
9. Leaves No Room for Error
When all your invoices are filed and organised, you don’t have to worry about ever getting into a squabble over unpaid invoices and other such mishaps. You will have the proof at hand to back up your side of the claim, and this can settle any grievances quickly.The last thing that any business needs are to have a strained or irrevocably damaged relationship with its suppliers, resulting from fights over supposedly unpaid bills and other such issues.
Having your reputation slandered and were labelled as someone untrustworthy can be very damaging for your business and can greatly affect your prospects. Thankfully, good bookkeeping can go a long way in avoiding such scenarios and helping you navigate the day-to-day business affairs with ease.
10. Saves Time
With all the above-mentioned points, it becomes obvious that efficient bookkeeping will help save you a lot of time. When it comes to the business world, time is money. It is all about working smart rather than working hard. And bookkeeping is a part of that process. By being smart about your bookkeeping, you save a lot of time, effort and money in the long run.
Bookkeeping is one of those very basic yet very essential aspects of running a business. Proper bookkeeping will help you in a myriad of ways, ensuring that your business is run in an organised manner. If you have plans to expand your business, one of the first places to put right is your bookkeeping, which is what will help guide you make the right business decisions over time.