Bookkeeping is a vital component of running a business. Every financial transaction should be recorded in a ledger, which these days is more often than not an accountant software package, and this includes sales, purchases, receipts, payments and all information from bank statements. One of the primary functions of bookkeeping is to ensure that business owners are able to correctly calculate profit and loss and accurately report financial information to the government for tax purposes.
Bookkeeping Underpins Everything
But bookkeeping goes further than that. The bookkeeper will also be responsible for reconciling the bank accounts, offering budgetary advice, reporting on cash flow, and managing payroll and inventory. With this information, decision-makers are able to understand the position of the business and make financial decisions with the knowledge that they have all of the facts and figures at their fingertips. Let’s take a closer look.
Financial Statements
If you’re running a business, you need to be fully aware of your financial position and health at all times. Understanding these gives you insight when it comes to decision-making for growth strategies and future investments. In order to do this, bookkeeping needs to be provided in a timely manner and reliably accurate.
Cash Flow Monitoring
The most basic way of tracking a business financially is money in and money out; looking at the balance between these two gives an excellent insight into any cash flow issues before they become critical. This means that the financial decision-makers are able to adjust future strategies, look at ways of revenue generation and cut spending so that the business survives and gets back on track.
Applying for Finance
Business growth often requires an injection of cash which comes in the form of borrowing. A lender will be looking to see accurate and complete financial data before they can make a decision. It is much more likely that a favourable decision will be made if you can evidence financial statements and high-standard bookkeeping.
Tax Compliance
Tax compliance isn’t technically a financial decision, more and necessity, but breaching any regulations and tax laws can end a business. It’s much better to know without a doubt that all of your financial information is being updated and recorded accurately and efficiently every month. Penalties and fines can be crippling and are not really a good use of company money.
Smart Decision Making
Making decisions like when it is time to grow the business, invest in new personnel, or purchase new equipment is difficult at the best of times, but with accurate financial information from the keeping informed decisions mean you are much less likely to get it wrong.
In Conclusion
Bookkeeping is one of the core parts of any business; some might argue that small businesses need to be even more diligent because they have a more precarious cash flow. Probookkeeper understands the challenges facing businesses and offers a fully comprehensive, highly recommended bookkeeping service if you do not have the capacity to take on someone in a full-time role. Why not get in touch for more information?
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