It is not uncommon for bookkeeping to be dismissed as yet another administrative task of a business. It is often overlooked, but failure to deal with it is likely to take its toll on the company’s prospects.
Bookkeeping is defined as the process of recording a business’ financial transactions and forms the basis for the accounting process (the classification, reporting and analysis of the data). However, many businesses fall short at this stage, making mistakes and overlooking important matters.
Running a business alongside keeping track of all the finances can appear to be a seemingly arduous task. But poor bookkeeping could lead to much bigger problems such as poor business information and incorrect reporting of profits. Besides an actual ‘requirement’ – what are the advantages to your business of doing a killer job of your bookkeeping?
Better management information for growth
Without efficient bookkeeping in place it is impossible to forecast and truly understand your business. This is just as important at the very early stages of a business as in the latter stages. Before growth is even anticipated, having solid practices in place will help cash flow management. Furthermore, it will ensure that you are aware of the potential cash flow issues before they actually arise.
By getting things in order and completed in advance of deadlines you can carry out a detailed review of the business using something called ratio analysis; a variety of financial insights you can use to understand the efficiency and profitability of your business. A business ready reckoner or reality check, if you will. For example, what is your breakeven point? Is your stock managed efficiently? Are your customers paying on time?
Bookkeeping for borrowing & reporting
There may come a time when you approach the bank, or other individuals, for borrowing. You need to be able to tell the bank exactly what your finances look like. If you’re financial information is clearly inaccurate it will be far more difficult to borrow. Furthermore, there may come a time where your investors require up to date reports and financial information from you. Having up to date accurate information will help your relationship with investors; those you already have and those you are trying to attract.
It will save you money
By ensuring you have accurate up to date financial information, you will ensure that your advisors will be better able to help you plan an effective tax strategy and ensure that the year-end accounts are prepared quickly and efficiently, saving you time and money.
In conclusion, bookkeeping is crucial to every business and not just a ‘nice to have’ idea. Often the best thing to do is to hire an accountant who is competent and experienced; leaving your time free to run your business. If this is of interest to you please get in touch with us today to see how we could help you and your business.
Wilson Wright LLP
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