This week's topic is an often overlooked component of any small business, but it can sometimes be the difference between success and failure. Bookkeeping refers to the keeping of records of the financial affairs of a business but it is also a legal requirement for businesses to have records that are up to date.
Below are some of the reasons why good bookkeeping is essential for running a good business:
1. Tax obligations can be fulfilled - When tax time approaches, accurate and up to date bookkeeping allows you to easily meet your tax obligations and report accurately.
2. Improved financial management and analysis - Even though you are busy and hardly have enough time, it is important you focus on managing the cash flow of the business. In a situation where invoices are delayed, customers are allowed to delay payments because if there is no follow-up then the business could fail. With good bookkeeping, all these can be taken care of as it helps to create an organised system that can easily be followed and ensures that the business runs smoothly. In short, you can keep better track of your inflows and outflows.
3. Better business planning - With proper bookkeeping, you are able to know how much progress the business has made over time. This goes a long way in making it much easier to plan for the future of the business. You can compare previous years and months to the current period of business, know the areas of the business that are making a profit and decide on areas to cut back on or invest in.
4. DIY Bookkeeping versus Outsourcing - There are lots of great electronic platforms these days that help make bookkeeping easier, but when it comes to outsourcing, we'd suggest taking this option if you're time poor or if you don't have the right skill set. At the end of the day, everyone will have their own favourite electronic platform for bookkeeping, but as long as you're comfortable using it and the information is delivered accurately and in a timely manner, we'd suggest you use what's best for you and your particular business.
Number One Bookkeeping Rule
If you take nothing else from this article, we'd suggest you always try to keep your bookkeeping up to date and don't let it get on top of you. Catching up over a number of months becomes too difficult to complete in one go, so stay on top of this job. If you'd like to discuss how your bookkeeping can be improved for your business, just remember we're only a phone call or email away.