Keeping track of your business’s finances is a mandatory task, and it’s one that most business owners outsource to someone else, whether it’s a bookkeeping agency or a financial advisor who will guide them through the process.
However, knowing what’s to come is a crucial step in becoming an experienced entrepreneur, and as complicated as it may sound, bookkeeping is something you can actually do on your own.
By recording all the transactions your business makes, you can get a better idea of what to expect in the future as well as understand what you can do in order to make sure your business grows at a steady pace.
On top of it being something you can do on your own, bookkeeping software has advanced to an incredible degree, allowing even a newbie to keep their company finances in check with ease.
Why is it important
No matter who you ask, a well-kept set of finance books is one of the most important ingredients to running a successful business, and this applies to small and large businesses.
A good bookkeeper will let you know whenever you’re making more money than your company is spending, which may give you some insight into when it’s a good time to start expanding your operations.
All this information can help you plan for the future and budget in a way that’s optimal for the strategy you’ve got in mind, meaning that if you see a cash crunch up ahead, you’ll be more than equipped to deal with it.
Another benefit of accurate bookkeeping is the fact that you can complete your tax returns with 100% accuracy, sparing you any fees that would normally pop up if you were to file your taxes incorrectly.
The low-down
Recording and reconciliation are two of the most important things to keep in mind when doing bookkeeping for your business.
While these terms may sound overwhelming at first, they’re about as simple as they come, and we’ll try to break them down to the basics in order to give you a crash course on how bookkeeping is done.
Recording your sales is something that was previously done by writing every transaction down into a cashbook or a spreadsheet, but this has long since become a bit too old-fashioned, seeing as there’s software that can automate this process from start to finish.
That being said, no business-related expense should be overlooked, and if you’re willing to use that expense as a tax deduction, you’ll want to keep the proof of purchase just in case.
On the other hand, reconciliation refers to the cross-referencing of your books and bank statements, which can then ensure that your transactions and balances match.
Reconciliation can be done as often as you want it to be done, and you’ll figure that out based on the number of transactions you make.
Of course, the sooner you reconcile your transactions, the sooner you’ll discover any potential errors, and if you do it more often, the work won’t pile up.
Use technology to your advantage
In the digital age, bookkeeping software has practically replaced the average financial advisor and bookkeeper, giving even the smallest businesses access to professional-level bookkeeping.
This software can pull transaction data straight from your bank, completely removing the need for any cross-referencing you’d normally have to do.
This way, you can always have a solid grasp on where your company is, financially speaking, as well as have access to your cash flow data at the press of a button.
All the bills will be paid automatically, and you’ll receive notifications whenever a sale invoice has been paid.
Regardless of how you look at it, automated bookkeeping is the future, and sooner or later, doing your own books with pen and paper will become a thing of the past, and as technology becomes more reliable, you’ll know for sure that every single dollar was accounted for.
Bottom line
At the end of the day, as long as you’re able to retain profitability while also receiving a high-quality service, you’re going to come out on top.
Sometimes, business owners won’t have enough time to do the bookkeeping on their own, and it’s why so many of them outsource this work to smaller companies or those dedicated to this line of work.
By doing this, you can get some modest bookkeeping at an acceptable price and slowly rank up toward more advanced services as your business grows.
Of course, a high-quality financial advisor is invaluable, and you’ll be doing your business a favor if you allocate some extra money to these services.
Invest a bit more to ensure that your business won’t start bleeding money in the early stages, and if you do everything properly, your business will grow at an astounding rate.
