The Importance Of Bookkeeping In Running A Successful And Profitable Business
If you are dieting or exercising, you must track what you are doing if you want to succeed. You can’t figure out what’s wrong with your nutrition program if you don’t know what, and how much, you are eating.
The concept is the same with regard to bookkeeping and running a successful and profitable business. No matter what size your business is, from sole proprietor to one with hundred of employees, accurate bookkeeping is a vital and necessary function of the operation.
Whether you do it with pencil and paper, simple off the shelf bookkeeping software, or customized software for your business will depend on your company’s unique size and needs. But all companies need accurate bookkeeping.
Here are a few important reasons as to why bookkeeping is so important.
Your Cash Flow
You need to know how much money is flowing out of your business, where it is flowing to, now much is going out and when it goes.
You also need to know about cash inflows, where are they coming from, when do they arrive, what are they for and what is the amount.
This is vital to your business staying in business and it can’t be done in your head. Accurate records are needed. Without them, you could find yourself bouncing checks to suppliers, getting shorted by customers or worse. Managing cash flow in a business is vital to keeping the business going. If you don’t have the cash flow to pay your bills, keep inventory, pay employees, etc. you won’t be in business for very long.
With bookkeeping you can see at a glance what your cash flow situation looks like and take immediate action if it looks like there is going to be a problem.
Filing taxes for a business is tough enough. Doing it without accurate bookkeeping records is not only a nightmare but just about impossible.
If you keep good books,your tax situation can be monitored and kept under control and there won’t be any surprise come filing time.
Profit and Growth
Proper bookkeeping makes it easy to keep an eye on your profits and the growth of your business. This will give you an idea on how well you are managing and growing your business and allow you to make corrections to things like costs and marketing going forward.
Using proper bookkeeping or a firm of chartered accountants will help you to manage and keep an eye on many aspects of your business. Without it, you are flying blind and your chances of success are a lot smaller.