Bookkeeping generally involves recording a business’s day-to-day transactions and monitoring its financial records. This process contributes to the success of businesses of all sizes and across all industries.
If you’re a business owner, you need to make staying on top of bookkeeping one of your top priorities. The following points illustrate why. They explain how bookkeeping can not only help you avoid costly obstacles but also how it can propel the growth of your business as well.
Reason 1: Financial Organization
Many compare bookkeeping to the process of balancing a personal checkbook. This is an apt comparison that serves to distill the value that bookkeeping delivers to a company.
It’s challenging to operate with total confidence in your day-to-day life if you can’t manage your money. If you don’t keep your finances organized, you may struggle to pay bills, set a budget, etc. On the other hand, generally speaking, it is far easier to thrive and get ahead if your finances are in order.
In this way, running a business is quite similar to succeeding in your personal life. Inefficiencies will be far less likely to bog you down if you stay on top of bookkeeping.
Reason 2: Tax Compliance
An accountant may be the professional responsible for ensuring a business complies with all relevant tax laws at a larger organization. However, if your business is somewhat small, a bookkeeper can handle your tax preparation function to ensure that the business is tax compliant.
Be aware that bookkeepers and accountants also tend to rely on each other in critical ways. For example, an accountant’s work often involves analyzing and reviewing the data a bookkeeper gathers. An accountant confirming that a business is complying with tax law will need accurate data from a bookkeeper to draw a proper conclusion.
Reason 3: Budgeting and Forecasting
Effective budgeting and forecasting allow a business owner to make informed decisions about everything from whether they can hire more staff to whether they need to take out a loan. By tracking the day-to-day finances of an organization, a bookkeeper ensures a business owner has the information they need to set a realistic budget.
Reason 4: Cash Flow Management
Business owners don’t just need to know how much cash they have (or don’t have) to make smart financial decisions, they also need to know how it comes in, where it comes from, how frequently, and in what volume. Then they also need to know the corresponding cash outflows. Understanding cash flow in this manner can allow a business owner to identify areas where money is being lost when it should not be, as well as potential opportunities for bringing in more cash.
Monitoring cash flow is an essential function of bookkeeping.
Reason 5: Financial Analysis and Decision Making
A bookkeeper’s work often supports many other aspects of a business, from research and development to recruitment. The people who make crucial decisions in these areas typically need to base their decisions on relevant financial data.
Who provides this data? A bookkeeper does. Without bookkeeping, you might not know whether you could afford to invest in developing a new product, expanding a department, and more.
Reason 6: Access to Funding and Investment Opportunities
It’s extremely common for businesses to rely on outside investors to support their growth. As your business becomes larger, the odds are that you’ll be unable to fund its expansion on your own.
When you approach investors, you have to offer thorough evidence and documentation indicating they won’t be taking an unreasonable risk by investing in your business, and that they can likely anticipate a decent financial reward. This requires providing investors with objective and practical information about the financial health and potential of your business.
Again, a bookkeeper can offer this information. Be aware that bookkeeping doesn’t just involve tracking a company’s day-to-day finances and transactions. Often, bookkeepers are also involved in generating reports that summarize a business’ financial prospects.
Reason 7: Fraud Prevention and Detection
Don’t assume your business will never be the victim of fraud. Any business can suffer because someone inside or outside the business is attempting to defraud it in some way.
One of the most effective ways to identify fraud and guard against it, in general, is to monitor a business’s finances for discrepancies. This is a task bookkeeping inherently involves.
Reason 8: Time and Resource Management
Business owners typically have many responsibilities. To operate with maximum efficiency, it is important to simplify and delegate as many tasks as possible or necessary.
This is one more reason bookkeeping will help you thrive as a business owner. When you hire a bookkeeper to handle your bookkeeping needs, you’ll be able to concentrate more of your bandwidth on the various other duties you may have.
However, if you can’t justify hiring a bookkeeper just yet, you could likely handle your own bookkeeping with the help of bookkeeping software, even with minimal experience.
While you’ll have to devote some of your time to bookkeeping tasks if you handle this work yourself instead of hiring someone to do so for you, prioritizing bookkeeping will still free up your time and resources by guarding against financial complications and compromise that could otherwise impede the progress of your business.
Reason 9: Regulatory Compliance
Tax laws aren’t the only rules and regulations a bookkeeper can help you comply with. Depending on your industry, you may need to comply with various other regulations involving your finances.
Bookkeeping can help you in this capacity. As such, bookkeeping will continue to help you save money by guarding against fines and other such losses.
Reason 10: Business Growth and Expansion
Bookkeeping allows you to make strategic plans. It uncovers areas where financial losses may be greater than expected. It also tells you when you can afford to spend money, and when you should cut back on spending.
All of these inherent features of bookkeeping play a critical role in the growth of your business. Make bookkeeping a priority, and you’ll be more likely to unleash your business’s full potential.
Bookkeeping: A True Business Necessity
Whether you’re the only employee of your business, or your company is a major enterprise, you can’t ignore bookkeeping. Luckily, taking advantage of the numerous benefits that bookkeeping has to offer doesn’t need to be a challenge. Whether you hire a professional or use bookkeeping software to address this business need on your own, you’ll find that the time and effort you devote to bookkeeping will be beneficial to the business.
