Bookkeeping is the record of every single financial transaction your business does. Yes, every single one. It’s going to give you a headache if you don’t have a clue how to do it, but if you can, it will give you the most detailed report of your cash flow. After all, the pennies make the dollars. Some business owners that are new to being their own boss, simply do not get how important bookkeeping is to their growth and expansion. Here are 5 reasons why you should pay attention to it.
It Tracks Your Daily Activities
The most important part of bookkeeping is tracking your daily activities. If you don’t know how much you are spending day to day, then you cannot know how much you are spending for the week or month. Pretty soon you won’t know accurately, how much you are taking in, spending or owe by the next financial quarter. It’s vital that you use professional Bookkeepers to help you record, track and understand your daily expenses, intake and more.
Keeping Them On Track
Employees sometimes have expense accounts which they use to pay for services and products required for them to fulfill their role. One way to prevent your employees from overspending is to keep a track of what they are using their budgets for. Bookkeeping does this, and helps you to see who is applying more financial discipline and who may be excessively spending.
It’s important you understand the cash flow of your business for a few reasons.
- You will know how much money you have left to spend at the end of the week, therefore what you may be able to carry on over to the next week
- So you have proof of profits and losses when it comes to taxes
- So you can spot where you are making a lot of profit i.e successful products and services standing out
- So you can show investors your bookkeeping is accurate to quarterly reports
- So you are keeping evidence of transactions should a non-customer file a lawsuit
Sometimes trends occur within a week or a month. If you can see how much money you have to invest into trends and grow your business while riding the wave, you can have better financial performance across the year. So bookkeeping helps you to see how much financial firepower you have right now at your fingertips without needing to make an entire financial plan.
Perhaps most of all, you get clarity. You can see every little transaction, so you can log it into your books and study your business behavior. If you can’t get to sleep at night, not knowing how every single penny goes in and out of your business, bookkeeping gives you a simple way to track everything. It becomes a normal business activities and helps you to understand how your business operates from the very large and very small details.
Bookkeeping is so important to your business, yet so many small businesses can’t see the value in it. It helps you to stay on top of overspending, prevents employees from doing the same and can help you spot investment opportunities.
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