Why bother with bookkeeping?
Are you running a business? Do you know the importance of bookkeeping? Yes, I am sure about the importance of accounting and do not want to mess that up. Therefore, you are looking for someone to do your bookkeeping. Hiring someone is a good idea if you have the resources to pay for the job. If not, you can do it, no matter who does; keeping proper, accurate, and timely records is too crucial to ignore.
Let me look into to see why bookkeeping is so essential to run a business successfully.
Keeping track of your sales
All businesses like to know how well they are doing, which means how much income they get from sales. To get an accurate figure, you need to record it correctly daily. If your transactions are logged without errors, you can look into ways of growing your business. If you cannot provide the figures for the income received from your company, you cannot move forward in generating more sales. So, let me assume that you have the proper records of your transactions. Then do not forget to record the sales daily, weekly, or monthly. Because you need monthly figures to reconcile your records with bank statements and prepare a trial balance.
Keeping track of your costs
Keeping track of your expenses is essential, like the sales records. If you do not record your values, you cannot arrive at the profit that you have from your sales. You might incur a surplus or deficit; you need to have both figures; the difference between the two will be your profit or loss. If costs are not recorded properly, you might assume you have made a significant profit without realizing you might have missed out on some expenses in recording the transactions. Therefore, accuracy is crucial to making financial decisions or comparing the previous year’s records.
How will you check the balance?
Why bother with bookkeeping?
Let us assume that you make only cash sales, and all the costs and sales go through your bank accounts. Then when checking your balance at the end of the month, your profit is available at the end of the month. Nevertheless, ensure you do not have any outstanding bills that need paying. Before assuming the balance at the bank account is an advantage, ensure the balance in the books is the same as your balance at the bank. If not, there could be errors in your recording. You might have missed recording a sale or a cost in your books. Therefore, you need to check the bank statement that you receive from your bank with your internal records. People do not make cheque payments; hence, unrealized cheques should not be a problem. However, the bank could include bank charges or pay interest or rewards to your business. Therefore, these checks with bank statements and your internal records monthly are called bank reconciliation. https://tinyurl.com/y2hz8lg4
Finance Reporting
Financial statements are crucial for a business and are usually prepared at the end of the fiscal year for the company. Those are the profit and loss account and the balance sheet, which indicates your business’s assets, profit or loss, and creditors. If records are not appropriately maintained not feasible to prepare the financial statements.
Paying taxes
Any business has to file returns with the tax office and pay the taxes when filing your tax returns. Proper records need to be maintained to calculate the tax payable; if not, paying taxes without appropriate documents and calculating the correct fee payable becomes costly. Then when the business grows, the company becomes liable for VAT payments; again, proper record maintenance is crucial for VAT recording and making payments regularly.
Why bother with bookkeeping?
Therefore in future chapters, I will explain all the above tasks one by one in detail about setting up records, entering transactions, and calculating taxes and VAT.