Any proprietor will need to know and understand their business’s financial numbers to run and grow operations in any meaningful manner.
I have been fortunate to learn how to use record keeping to stay on top of my business finances by managing Archway Books, my chain of bookshops located North of England, and now I use a bookkeeper in York. I used to spare some minutes to cash up, record, and calculate totals on spreadsheets in my working day.
Simplistic as the task may seem, it helped me know how sales were growing in all my bookstores. I had the necessary data to compare growth in key performance indicators between the weeks, months, and years.
Accurate data records gave me a solid basis for rational decision-making, helping me steady cash flows and drive my business forward. For instance, I had the numbers to track late payments and halt book supplies for payment settlement. I could ensure invoices were completed and sent out, and we followed up on late payments on time. With accurate bank reconciliations, recording keeping played a vital role in supporting my book business growth.
I like working with numbers, and probably that is why I never found bookkeeping an arduous task. However, I understand we have different interests in our businesses. When setting up a business, entrepreneurs are likely to focus on other departments other than bookkeeping. However, bookkeeping, if anything, should be the top priority of a profitable business.
Why Is Bookkeeping Important?
Bookkeeping is just as important in running a successful business like any other department such as sales and marketing, ICT, and customer service; bookkeeping should never be underrated. Good bookkeeping practice helps identify inefficiencies limiting smooth operations and business expansion.
It is possible to learn and master bookkeeping and do it for your business. Alternatively, if you find it time-consuming to learn bookkeeping, you can always outsource the service to a professional, e.g., an accountant.
When considering outsourcing bookkeeping, you need to weigh the benefits you and your business stand to gain against the physical cost of hiring a professional. The professional fee to an accountant, among other expenses, will directly impact your business’s profitability.
Many entrepreneurs prefer having a professional keep track of the financial numbers in their business. Outsourcing responsibilities free time, allowing proprietors to focus on core business tasks. Simultaneously, there is more peace of mind knowing a professional is watching the business finances for you.
Over the past few years, bookkeeping practices have evolved drastically as entrepreneurs continually yearn for extensive profiling of their business’s finances. Many bookkeeping processes have been automated, and multiple types of financial reports have emerged. Business owners recognize the need to understand the financial position of their business better.
Making the best of the available financial reports to run a successful business requires that you are familiar with and interpret a Profit and Loss report, a Statement of Financial Position, a Balance Sheet, among other types of financial information. These reports are what explain the financial position of your business.
You need to understand how each itemised financial metric on a financial report says about your business assets’ value. For instance, how assets like furniture, buildings lose value over time through depreciation. Depreciation is just one in a long list of financial considerations usually captured in a financial report.
The bookkeeping process may seem intimidating initially, but there is plenty of value in keeping an accurate track of a business’s finances. For instance, bookkeeping helps companies avoid penalties for late accounting submissions and provides updated account records to support decisions that grow cash flows.
How Often Should I Complete Bookkeeping Records for My Business?
The number of times you complete your business’ accounts in a year is an integral part of bookkeeping. I have come across many companies that complete their accounts one time in a year with an accountant’s help. However, you (or your accountant) need to check and update your business’s finances more often than just once a year.
Maintaining an accurate record of the business accounts means you can track how key performance indicators for your business, such as profit margins or gross and net revenues, change over time. Bookkeeping provides the requisite knowledge to enable you to plan for business cash flows better.