Most business owners appreciate the need for a good bookkeeping system in their business. However, despite its advantages, not every business owner pays adequate attention to the bookkeeping activities in their business.
Bookkeeping involves the documentation of the financial transactions of a business in an orderly fashion. It forms the first phase of producing many different forms of reports for a business such as business accounts, cash flow forecasts, profit forecasts, balance sheet and many others. If the bookkeeping part of the record keeping and transaction recording is carried out incorrectly, any reports generated from the bookkeeping operation will be inaccurate.
Bookkeeping can help you manage and track the financial operations in a small business. It helps business owners and financial managers to make the right financial decisions for their business. The following are some of the key benefits of a good bookkeeping system to a business enterprise:
1. Bookkeeping helps to manage the finances of a business.
Bookkeeping helps to monitor the expenses and revenues of a business. You will also be able to know the value of your business assets and liabilities. With a good bookkeeping system, you can keep your purchases, sales, receipts from customers and payments to suppliers recorded promptly and efficiently. This will help you to pay your business bills on time and identify customer payments that are overdue promptly. Efficient management of sales and purchases and related finances otherwise known as credit control is essential for the success of any business.
2. A Good bookkeeping system makes it easier to deal with tax returns.
Some businesses are always late to file their tax returns. This can be detrimental. You might end up being fined heavily and thereby use more money to pay these hefty fines. How can you mitigate this situation? You should consider being up to date with your bookkeeping systems if it is not already so. When bookkeeping is done regularly, you will not have to rush to collect and gather all the documents that will help you file your tax returns. Everything will be done at the right time. In addition, you will be able to file the correct tax returns.
3. Adequate bookkeeping system helps to provide financial reports quickly.
If you want to apply for a loan, your lender might ask for financial reports of your business. The nature of your financial report will determine the amount of loan that you will get. The lender will have to check your records before approving your loan application. In addition, if you have plans of selling your business in the future, the buyer might need to see the financial records. Book keeping can help you provide reliable and accurate records. You can trust that these records will be well organized too. This can increase the chances of selling your business at a good price.
4. Enables you to know whether your business has made profit or not.
The ultimate goal of any business is to make as much profits as possible. Bookkeeping can help you know whether you are making a profit or not. This includes recording all the money collected from customers and the amount of money used to pay for products and services. This can help you know whether your business is doing well or not. With an up to date bookkeeping system, a business owner should be able to produce draft profit and loss account as and when needed in order to see how much profit or loss the business is making at any given point in time.
Bookkeeping is not a function to be neglected if you want to run your business efficiently. With a good bookkeeping system in place, a business owner will be able to keep track of his or her finances more effectively. In addition, you will be able to make the right financial decisions. If you don’t already have the proper bookkeeping system set up for your business, consider doing so now. It will help your business to prosper in so many ways.