So you have started your small company. You have set all things up and are ready to wade the thick waters of entrepreneurship. But, you have one challenge. Bookkeeping seems to be a hard nut to crack, yet you understand it’s the essence. You are not alone.
Many people find the process of maintaining their financial records an uphill battle. Did you know that 82% of businesses fail due to poor management of their accounts?
It doesn’t matter how successful you are. If you don’t take into account the importance of bookkeeping, you might be winding down the road unknowingly.
We don’t want this to happen to you. There are many ways you can find yourself out, but there’s nothing better than enrolling in a dedicated bookkeeping course. To learn more about bookkeeping courses you could check out Performance Funnels. You learn what many corporations don’t want to know and avoid the mistakes they make.
For now, let’s have a look at some of the eight importance of keeping your financial records.
Reporting to Investors Becomes Easy
Since investors gave you capital for your business, they’re interested in its performance. And not only that, they want to have better ROI.
Reporting to the investors is always accompanied by a lot of hustling. You have to get all the presentations, charts, and list ready as they need credible information and you have no other choice.
With bookkeeping records on your laptop, the reporting is made a lot easier. Everything is well organized, and no information is lacking.
Robust Financial Management
Trying to determine your company’s financial situation needs a lot to take in. First, you must analyze your cash flows and have a knack of all the financial management practices. But this is easier said than done.
It all begins with proper bookkeeping. It gives you the freedom to peruse through all your transactions and come up with a financial decision when the need arises.
For instance, you can provide invoices at the right time, get to know how and where your money is spent. Once you have this on book, you can make decisions on how to reduce expenditure and maximize sales.
Meeting your Tax Obligation
Picture this, for example, the tax year is coming to an end, and it is time to file your tax returns. But since you had a “busy” year, you didn’t get the time for proper bookkeeping. You are running to every cabinet, opening files, and looking for missing paperwork. Pretty stressful, right?
Unfortunately, It’s an abyss many company owners find themselves in, and they risk getting hefty slaps of fines.
This would not have happened if you took the advice of bookkeeping seriously. It makes filling returns smooth and efficient.
Bookkeeping will not only help in filing your business’ returns but also yours. Remember that you are earning from your company, and the taxman will demand to see your paycheck. With bookkeeping, you have all your statements ready in one central place.
Analyzing business Performance
According to a study done by Researchgate, analyzing financial performance helps in developing funds and encourages external growth of the business.
The main recipe for doing this is in the financial statements. It’s the reference point for the company manager finding and will help a great deal in decision making.
With the financial statements, you can check the cash inflow and outflow and get credible information on which lines of the business are working and which ones aren’t.
After knowing the ins and out of your business, you can freely come up with strategies to meet your goals while strengthening your business’ performance.
Keep the Stress of Auditing at Bay
Whenever word goes out that auditors are coming, business owners are thrown into a frenzy, more so those that haven’t kept the financial records.
As a small company, auditors are more interested in your small corporation more than your huge counterparts. Why? There are numerous small corporations where the government generates most of its taxes. Plus, some small business owners fail to pay taxes with the excuse that they are “starting” and haven’t begun minting money yet.
It’s why bookkeeping is crucial here. When you have clear and straightforward books of accounts, the auditors won’t bug you. They’ll be quick to audit you, leaving you more time to enjoy your peace.
It Helps in Budgeting
The importance of budgeting for a small company cannot be stressed enough. A budget is a framework of what you want to spend in the production process. From there, you can make proper financial decisions.
As a company, spending without budgeting is the greatest vice you can do to your financial performance. However, it’s the scenario when you don’t have a proper record on your accounts.
So it goes without saying how bookkeeping comes in handy when you are drafting your budget for the day, week, or month.
Reveals if you are Making Losses or Profits
Operating a company without knowing your profitability is like walking in the dark while blindfolded. As an entrepreneur, your core reason for diving into the venture was to earn money. You need to know if you are meeting this objective or you are in the bandwagon which lacks a destination.
It’s not hard to know your profitability, just that you have a proper financial statement that is retrieved from your bookkeeping.
On your income statement, you’ll know the amount of profits you’ve made and the losses incurred. From there, you can determine if your company is profitable or not.
Other financial records you can retrieve from the bookkeeping are your balance sheet which reflects your business financials status. Plus, you can also make a cash flow that shows where you get most of your income and where most of it goes.
Bookkeeping plays a significant role in the success of any company. Just be sure that you have all your financial transactions in a book to avoid the stress that comes when you lack it. You shouldn’t wait to hire an accountant to do the task. With a few pieces of training here and there, you are good to go.