The differences between a bookkeeper and an accountant can sometimes be confusing because their roles in a business overlap in many ways. Bookkeeping is the day-to-day recording and categorization of a business’ financial transactions, while accounting is the process of putting that financial data to use through analysis, strategy and planning.
Bookkeeping is fundamental for maintaining accurate financial records. Regularly monitoring your finances and keeping accurate books is a crucial practice and is a key difference between success and failure for many businesses. It can also save you from driving yourself a loss at the year end.
Here is a list of reasons why bookkeeping is important for your business:
1. Bookkeeping Helps You Budget
Budgets are important for any business; they are the financial guidelines to success. A bookkeeper is able to assess your financial resources and manage income vs. expenses.
2. Tax Preparation
Bookkeeping makes filing a tax return easier for your business. With a proper organisation of records on your earnings, you won’t have to worry about scrambling for receipts and invoices because all your records are properly documented.
Organisation of financial records is of utmost importance. You should be able to easily assess your financial information at anytime. This will help when it comes to applying for grants, loans, or even attracting investors.
4. Business Analysis
Financial statements’ analysis allows to easily manage your cash inflows and outflows (i.e. profit and loss). Bookkeeping is used to assess your business performance and identify your strengths and weaknesses.
5. Improved Decision Making
The best decisions are made when you have comprehensive access to all your business information. Bookkeeping provides all accurate information regarding your business, which allows you to make decisions for growth.
6. Planning Purposes
Bookkeeping helps to present past financial performance of your company and helps to plan for the future.
7. Attracting Investors
Investors need to know the financial performance of your business to determine if they would like to get involved. Bookkeeping provides up-to-date and accessible information to attract investors.
8. Financial Management
Bookkeeping is important in staying in control of your business finances. Reports show your income and expenses.
9. No worries
Being a business owner alone can bring it’s own stress! With a complete book, you can rest knowing that your business is secured.
10. Track Profit and Growth
Profit is a key metric for any business. Bookkeeping will allow you to track profit from one month to the next, and also help you better understand your business cycles.
11. Better Cash Flow
Bookkeeping is as important as the business itself because it also aids in improving your cash flow. It provides all information on invoices –customer/vendor name, amount, date issued and due date. The routine recording of revenues helps you to keep track of when your customers and vendors invoices are paid.
12. More focus on strategic planning
As a business owner, you want your business to grow so you need to make some tactical plans on how to develop your business. With the information in your bookkeeping, you can focus on your short and long term goals. You can also be track results and adjust your goals accordingly.
13. Provides an overview of Your business
Bookkeeping provides an overview of your business with financial statements like; balance sheet, income statement and bank statement. These statements provide all the information and you can be able to evaluate the performance of your business.
14. Requirement under Law
Finally, it is the law that you keep financial records of your business. To avoid the termination of your business, you have to obey the law!