Every business, big or small, needs to deal with its finances. Apart from managing your products or services, your finances become your top priority.
Practicing proper bookkeeping and having basic knowledge of simple accounting tasks will take your business a long way in budgeting, forecasting, and dealing with taxes. Not only will it make your entrepreneurial life simpler, but it will also help you analyze your business activities by understanding your cash flow.
If you’re still in the process of beating yourself whether or not you should adopt a bookkeeping system, stop those baffling moments for a while and join me as I talk about the basics of bookkeeping and its advantages in a business.
What is bookkeeping?
Let’s begin by understanding the term “bookkeeping.” In its simplest explanation, bookkeeping is the recording of your daily financial business transactions.
More than just recording numbers and items, the process of bookkeeping follows a systematic method ensuring correct, updated, and complete records.
Why is bookkeeping important in business?
The importance of bookkeeping both targets the legal and financial areas of your business. It saves you from the troubles of tax audits and possible tax evasion cases and gives you a better picture of your business growth for the previous and coming years. It helps you stay ahead of the game by planning based on your financial predictions.
The most prominent feature of bookkeeping is accuracy and timeliness. Missing one crucial detail can lead to accounting troubles, expenditure, and accumulation of debts.
Now that we know that efficiency is vital for bookkeeping, this leads us to wonder if do-it-yourself bookkeeping is better than hiring bookkeeping services. We’ll be discussing more of this as we go along. But first, let’s talk more about the advantages of bookkeeping.
What are the advantages of bookkeeping?
Whether you decide to do bookkeeping on your own or hire someone who could do the job for you, at some point, you would need to know basic bookkeeping strategies. Here are some of the benefits you get to enjoy when you decide to exercise bookkeeping for your business.
1. Maintain thorough records
Detailed records mean taking note of all the business-related transactions daily. Nothing beats up-to-date records, especially when there’s a need for you to monitor the ins and outs of your finances or when pulling out a statement during audits.
Plus, should you decide to do bookkeeping on your own, it makes things easier for an accountant to go over your accounts, in turn saving time and money.
2. Your business stays legally compliant
An excellent bookkeeper stays updated with the legal changes related to tax laws. When you do bookkeeping for your business, it’s essential to ensure that the reports generated and submitted are under state legislation. This helps you avoid penalties and charges.
3. It becomes an essential tool for business planning
Pulling out reliable data can help you see which side of the business is bringing your profits. On the other hand, the negative figures can give you an idea of planning for the losses. Having accessible reports can give you a glimpse of what is to come and be prepared for it.
4. Easy access to financial statements
Have you got a probable investor? Showing a thriving business through an updated balance sheet will give you the upper hand.
5. Financial analysis can be done easily
A flawless financial record can help expedite the job of the accountant. Analyzing and reconciling accounts becomes a smooth process for these professionals, thus, allowing you to diminish the cost of accounting.
Now that we’ve covered most of the benefits of bookkeeping in a business, let’s jump to the different options.
Should I DIY or hire a professional?
Okay, here’s what you need to consider before looking into the advantage of having a bookkeeper vs. the benefits of being a bookkeeper.
Do you have time to invest in skills and knowledge?
If you think you have it and just need the proper support, you might want to consider taking classes that teach basic bookkeeping. However, you should know that it takes time to absorb the concepts and do them in actuality.
What is the situation of your current financial records?
Are your statements currently in terrible shape? Learning to deal with things on your own might not be a practical option for now. If you have a backlog of months or even years, it’s best to have this taken care of by the professionals.
Done doing a quick self-check? Great! Now, here are the options you can choose in managing bookkeeping in your business.
Many businesses, particularly small ones, have been doing bookkeeping themselves to bring down costs and be in tune with the company’s financial standing. It might seem complicated initially, but the benefits of being a bookkeeper in your business will help you keep things private while saving on resources.
Since any small amount of errors aren’t welcome in your records, it might also help automate things using accounting software. There are paid and free versions online. You can start looking at QuickBooks, Sage50, SlickPie, Autobooks, and the list goes on.
Automating some of your processes will help you ensure a detailed and accurate book. These accounting applications help integrate multiple accounts and keep track of all your business-related transactions.
Hiring a professional
If you think you could function best by taking charge of your business growth strategies rather than keeping up with your records, you’d probably enjoy the advantage of having a bookkeeper.
The benefits of hiring bookkeeping services or a freelance bookkeeper will significantly help you save time. Better time management will allow you to spend more on the core part of your business―which is sales, leading you to increased profits.
Since DIY bookkeeping is more prone to errors, having a professional can lead to lesser accounting fees. Ang guess what? The possibility of paying fewer taxes as well!
There are tons of advantages to getting a professional for your accounting needs. Other benefits include the ability to track unpaid invoices, well-prepared statements for tax season, loan security, and more. Just make sure to hire the right person with extensive knowledge and experience so you can get the most out of the acquired services.
No matter what your preferences are, it’s essential to make sure that it’s done right. True enough, the DIY approach can keep small businesses function cost-effectively. But, not all are in the best disposition to do so.
Should you decide to hire someone to do bookkeeping for you, remember to be proactive in upkeeping your financial records. If you don’t do your part, you will face loopholes in your processes, making your bookkeeping methods ineffective.