Good knowledge and understanding of your business’s financial numbers are integral in running a business smoothly and maximising returns.
I mastered this vital lesson of keeping up with your financials by actively managing my business, Archway Books – a chain of bookshops across Northern England. I used to cash up cash inflows while consistently recording the totals for specific indicators in a spreadsheet. Record taking for my business was a job that took only a few minutes from a typical working day, although some small businesses prefer to outsource bookkeeping to a company such as Bould Bookkeeping.
I found recording keeping simple but with tremendous benefits for my business because I could accurately tell how each of my stores was performing. I had the required data on cash flows to compare business performance between weeks, months and years, thus identifying all the issues hindering growth.
Late payments are often the main barriers to business expansion. With accurate financial data at my disposal, I ensured invoices were sent to customers on time and pushed for late payments settlement. An accurate record of financial data helped me with prompt bank reconciliation, thus averting business losses from unaccounted book sales.
I like working with numbers, so completing my bookkeeping accounts was not that hard of a task. Unfortunately, not all people like numbers. Worse, when setting up their business, few proprietors provide the required attention to bookkeeping detailing. To these people, a simple profit and loss calculation will suffice.
Keeping an accurate record of financial data should be on top of your priorities for your business. Read on to find out why bookkeeping is essential.
Why is Bookkeeping important?
Bookkeeping should never be overlooked because it is just as important as any other department in your business like sales and marketing, ICT and customer relations. Bookkeeping shows where you are losing money, helping you expand business operations and profitability.
Though time-consuming, a proprietor can learn all about bookkeeping and do it for their businesses. Alternatively, a business proprietor can outsource bookkeeping to a trained professional/accountant.
When considering outsourcing bookkeeping responsibilities, think about the gains you and your business stand to gain against the physical cost of contracting the bookkeeping job. Remember, the cost of hiring a bookkeeper will affect your business’s profit margins.
Outsourcing some business responsibilities brings unique benefits to you and your business; you get peace of mind and free time knowing a trained professional is watching your business finances’ performance. Free time is the impetus for the business owner to focus on the core operations of business objectives.
Recently, the world of bookkeeping has evolved drastically with an increase in demand for efficient bookkeeping services. A large part of bookkeeping has been automated, and an extensive choice of financial reports are now available in the financial markets. Different financial statements have been necessitated by the growing need among entrepreneurs to understand their financial health better.
Unfortunately, financial reports are of limited use for the business owner who has little or no bookkeeping understanding. It matters if you are familiar with a Profit and Loss report, Statement of Financial Position, or Balance Sheet before you can explain your business’s financial position to interest parties like a lender.
Also, financial reports include asset depreciation to the need to know-how assets in your business lose value over time. The list of considerations in financial reporting is quite lengthy – it is why the entire process may seem daunting to many.
Whether bookkeeping is a difficult task or not is beside the point, but it has many benefits and will help you avoid penalties from late accounting submissions. Accurate bookkeeping provides up to date accounts and information required for rational decision making for your business.
How Often Should I Complete Records?
The number of times you need to do bookkeeping for your business is probably one of the most important tips I could share with you.
From experience, I have learnt that most businesses (using their accountants) complete bookkeeping/accounting records once a year. However, the truth is that your business’s finances must be checked and updated more often than yearly, either by you or your accountant.
Keeping a close eye on business records requires that you closely monitor several key indicators such as profit margins, both gross and net, to your expected turnover for you to plan better for higher and steady cash flows.