Is bookkeeping important for a small business?
No doubt, you are already aware that it is.
If you need to account for financial transactions, then bookkeeping in some form is a must.
Why is Bookkeeping Important for a Small Business?
In this post, I will explain the need and importance of bookkeeping. Also, what bookkeepers do for small business, and what they can do for your business.
Need and Importance of Bookkeeping
The following reasons show what makes bookkeeping important:
Better Business Planning
Like everything in life, you will find it easier to plan with as much information is possible. When you keep an accurate record or set of books, you can plan ahead much better.
Recording and Management of Cash Flow
How is your business doing?
How is your business doing compared to last month?
What about the month before?
Do you need a quick snapshot of your finances?
You will save much time, money, and effort with up-to-date bookkeeping.
Financial Analysis and Management
Good bookkeepers are quite analytical and pay close attention to detail. This is important for analysis and internal financial controls. I once designed, installed, and maintained financial controls for a large utility company. As a result, the customer accounts department improved its record-keeping.
Preparation of Financial Statements
Although this is carried out by accountants, they rely on the groundwork of bookkeepers. The accountant will use data from the bookkeeper’s work unless there are serious discrepancies. He or she may also make minor adjustments to tax efficiencies and statutory procedures.
Reporting to Investors
Is the investment capital of your business financed by shareholders?
They may want to receive detailed annual reports of the business. Needless to say, the bookkeeping has to be spot on.
With the help of your accountant, your bookkeeper will calculate tax liabilities and obligations. These are based on many statutory regulations. Any mistakes here, especially with under-reporting of tax due, can result in serious trouble!
What do Bookkeepers do for Small Business?
A good bookkeeper will be hands-on, communicate well, and work closely with you.
Compulsory Record Keeping
If a financial document or any business correspondence looks important in any way, it’s safer to assume that it must be kept safe. Here In the UK, for example, many business documents must be kept for 6 years or more.
A good bookkeeper will create and maintain files for various documents. For example, invoices, credit notes, purchases, credit notes, bank statements, and utility bills.
Transaction Recording (Bookkeeping!)
Your bookkeeper will use either a spreadsheet or a bookkeeping software application. In this way, you will access reliable records at least monthly, if not weekly.
Likely, your bookkeeper will perform a bank reconciliation monthly for you. It’s a form of internal audit and a great opportunity to ensure the accuracy of your data.
Are all your recorded transactions are present and correct?
Be sure to resolve immediately. Otherwise, the situation will get worse.
Identify Tax-deductible Expenses
Here in the UK, Her Majesty’s Custom and Revenue office (HMRC) publish tax-deductible business expenses. These will reduce your gross profit and so your tax liability.
As I mentioned earlier, it’s so much better to plan ahead with all the facts available. Your bookkeeper will help you to do that for as long as you make the necessary information available to him or her.
What Can a Bookkeeper do for My Business?
Is bookkeeping important to you?
The advantage for you is that you will save time, money, and effort. Your bookkeeper may even protect you from unnecessary expensive risks.
Are you good at bookkeeping? Can you afford to stay on top of things without losing earnings?
If you can’t answer yes to both, it’s wise to invest in a good bookkeeper.
He or she help may keep you organised and even rescue you from expensive problems now or later. Also, you may even receive day-to-day support and relevant training.
Are you considering hiring a bookkeeper?
Start here! But before you do, please share your experience below. And before you share this post with your networks, please tell us why you need, or don’t need, a bookkeeper.