Bookkeeping is the process of tracking a business’s financial transactions. This is just the first component of the overall accounting cycle but also one of the most critical. It involves identifying all of the financial transactions that have happened over a period of time and then recording those transactions into the business’s journal ledger. This step lays the foundation for every step that follows in the accounting process. It’s the step that leads to financial statements being prepared, taxes being completed, and passing financial audits. The saying goes: “garbage in, garbage out.” It’s important to ensure that your business has accurate transaction data.
“Making good judgement when one has complete data, facts, and knowledge is not leadership – it’s bookkeeping” – Dee Hock
How does bookkeeping help your small business?
Organized records
Does it seem like you have been buying printer ink more than you use too? Do you have 20 extra minutes in your day to dig through your receipt drawer to see when you last purchased some ink? With proper bookkeeping, you would be able to answer that question in about 2 minutes. Having organized records saves you time to focus on your business in the areas that bring you the most joy.
Accurate financial records
It is critical for your business to keep accurate financial records. Your business literally depends on it. Accurate financial records give you insight into the health and viability of your business. All decision making, budgeting, tax filing, and forecasting start from looking at accurate financial records. The transaction data from your business is turned into financial statements. There are several things that rely on the accuracy of your financial statements such as getting investors, passing a financial audit, and filing your business’s taxes.
Budgeting
I know, I know, I know! This can be a triggering word for some, but your business needs a budget. You need to plan for the income you think you will receive as well as the money you expect to pay out. Bookkeeping allows you to look at past financial data in order to develop a realistic budget for the future. While budgets are not foolproof, it puts your business in a good position to make informed decisions. Are you on track to have an amazing year? Are you overspending in office supplies but have exceeded your revenue expectation for the 3rd quarter? Accurate bookkeeping provides you with the framework to develop a budget that can answer those questions.
Decision making
Bookkeeping makes decision making easier. The cost of living has drastically increased, can you give your staff a 2% raise? Your POS system is on its last leg, can you afford to purchase a new one in cash or should you finance it? Your small business is beginning to take off and you would love some help, can you afford a full-time assistant? These are all questions that can easily be answered if you have your books in order. The best decisions are made when there is easy access to all available data and bookkeeping provides that.
Tax filing
Everybody loves taxes, right? No? Well regardless of how much you may love it, taxes are a part of life. Bookkeeping makes filing your business’s taxes much easier. Have you ever had to take a box of receipts to an CPA during tax time? You know they charge extra when you do that right!? Bookkeeping compiles your financial data into financial statements that your accountant can use to filing your taxes.
Getting investors
Depending on the size of your business or the dream you have in your mind, you may get to a point where you need outside investors to take your business to the next level. Investors need to feel confident and knowledgeable before investing their money. Without proper bookkeeping, you may not have readily accessible financial records to provide upon their request. Bookkeeping allows you to have access to the data at a moment’s notice.
Compliance
Have you ever heard of GAAP? Generally accepted accounting principles refer to the U.S. guidelines and procedures that accountants or others required to present financial information follow. Public companies in the U.S. are required to follow GAAP but it’s not a bad idea for your small business to follow them as well. GAAP aims to improve the clarity, comparability, and consistency of the communication of financial information. A knowledgeable bookkeeper will help your business to maintain consistency in your financial information, reduce the risk of misrepresentation and avoid fraud.
Forecasting
Where is your business going? Forecasting uses current and historical data to predict future revenues, costs, and cash flow. Forecasting is important for planning purposes and…you got it! Bookkeeping can assist with that effort. Using accurate financial data allows you to forecast a year or more into the future. This futuristic view gives small business owners the opportunity to make confident decisions today that will impact the business for years to come.
Why hire Grade Bookkeeping Services?
Do you like spending hours each month recording your financial transactions and reconciling your accounts? Do you understand what your financial data is trying to tell you? Is the financial management of your business allowing you to concentrate on what really sparks joy for you? If you answered NO to any of these questions, allow Grade Bookkeeping Services to do these tedious work for you so that you can focus on running your business. Contact us today to schedule an appointment.