Bookkeeping is critical to help you keep accurate financial records for your company. However, many businesses still fail to use this essential process properly. Not only does the law require you to maintain accurate records and books, but it will save you a lot of frustration and hassle in the future.
Poor accounting is one of the main reasons why so many businesses fail. You are driving your business blind without accounting or bookkeeping.
Are you still not convinced that you need to focus on bookkeeping? The following are 15 reasons why bookkeeping is so critical and why places like bookkeeper Devon is essential in your day to day business life.
Bookkeeping Helps You With Your Budgeting
One of the main reasons why bookkeeping is so critical is because it helps with your budgeting. When you properly organise your income and expenses, it makes it easier for you to review your expenses and financial resources.
Having a budget provides your business with a financial roadmap. A budget allows you to plan for expenses in the future and the resources that you anticipate you will need to cover these expenses.
Tax Preparation
Your business will most likely need to file tax returns each year. Millions of small business owners every year are left scrambling around looking for missing paperwork. Does that sound familiar to you? When your company has a good bookkeeping function set up, it can make your tax filing process much more efficient.
Bookkeeping is also essential when you file your personal tax return. A high percentage of a business owner’s income comes from their business. To know the amount you have earned, you first need to know what your small business earned.
Once you have your bookkeeping process implemented, your financial information will be ready to use at tax time. So instead of having to scramble around looking for invoices and receipts, your financial information will be organised in a single centralised system.
Organisation
All business owners should have the skill of being organised. It is important to be able to find information about your business whenever you need it.
There are several parties who have an interest in your business’s financial records, including lenders, investors, customers, employees, and tax authorities. Being able to supply the information that these parties request are critical to your company’s ongoing operations. If you fail to provide records that the tax authorities request could result in you having to pay fees and penalties. If you do not provide records that lenders or investors request, that can stop your cash flow. When your books are disorganised it can compromise your relationships with those parties or completely end them.
Bookkeeping involves organising financial information. When your financial records are kept organised it makes it easier for you to find and provide them to the right parties.
Analysis
Bookkeeping is critical because it helps you analyse your business. Management uses it as a tool for analysing the performance of their business.
Bookkeeping produces financial statements. They should be generated on a regular basis and then used to analyse your business.
When financial statements are analysed, you can track your cash outflows and inflows.
Bookkeeping provides you with important information on which lines of your business are working well and which are not. This kind of analysis lets you focus on the strengths of your business and improve its weaknesses.
Improved Decision Making
Analysis can improve your decision making. To make the best possible decision, you need access to all of the information that is available. This information is provided by bookkeeping.
In order to make profitable decisions, you need accurate financial information.