Why is bookkeeping important?

Hello and welcome back to our weekly blogs for business owners.

Today, we are going to be reviewing the importance of bookkeeping for business owners. Most of the time, leaders often forget the importance of bookkeeping. Well, we are here to remind you about its importance.

Bookkeeping is a crucial part of running a company. Businesses can collect and keep track of financial information and do financial analysis with the help of bookkeeping. If you keep good records of your books, you will be able to draw accurate conclusions about the financial health of your business.

However, this is not the only reason why bookkeeping is essential for companies of this size and scope. Here are some reasons why you should not skip bookkeeping:

1.The government requires that you keep specific records and employ accounting methods in order to keep tabs on your revenues and expenditures.

2. Tax Return: Keeping accurate books and records simplifies the process of submitting a tax return for your company. You won't have to worry about wasting time searching for receipts and invoices if you keep accurate records of your earnings and carefully organize them. This is because all of your records will be correctly documented.

3. Attracting Investors: In order for potential investors to decide whether or not they want to become involved with your company, they require information regarding its financial success. Bookkeeping supplies information that is both recent and easily available, which is attractive to potential investors.

4. Making Accurate Financial Decisions: Business entrepreneurs have a lot of decisions to make. The quality of your business decisions depends on the information you have. You can make accurate financial records if your data is organized. You can do a lot of things with those records. Budgeting and financial planning are made easier with bookkeeping for small businesses. You can look back on records from the past and create a plan of action if you have accurate, well-organized, and clear records.

Now that we have reviewed the importance of bookkeeping, let's review the 3 main type of accounting methods.

1. Cash Basis accounting method: To simply put it, this system only records transactions when cash has either been paid or received. With the cash accounting method, you can only use cash accounts. This means you can record things like cash, expenses, and income. However, long-term liabilities, loans, and inventory cannot be tracked. When it comes to reporting taxes, cash basis requires you to report income in the year you receive it. And, you report expenses in the year you pay for them.

2. Accrual Basis accounting method: This accounting method allows you to record transactions as soon as they occur, whether or not cash has been deposited or paid. When using accrual basis, you use more advanced accounts, such as accounts payable, current assets, long-term liabilities, and inventory.

3. Modified cash-basis accounting method: As the name suggests, this type of bookkeeping combines aspects of both cash and accrual accounting into one. For long-term and short-term assets, it tries to obtain the best of both worlds by recording sales and expenses on both an accrual basis and a cash basis.

Bookkeeping might seem like an additional task, especially when running a business. However, it should not be skipped regardless of how small or big your accounts are.

One of the ways we help manage your day-to-day operations is by keeping accurate records of your books. We help in recording your transactions, posting each transaction to the right accounts, reconciling your bank accounts and preparing your monthly financial statements for you so you can be properly informed before making your business decisions.

Ready to get started with your brand's success? You can book your free consultation today: