Bookkeeping for Small Businesses
Making sound business decisions and having a healthy cash flow requires accurate and up-to-date financial records. Unfortunately, as your small business expands to include more stakeholders, keeping your financial data updated is a tedious and complicated process that may take a toll on you.
When you reach such a point, you will need assistance from the professionals. You may wonder who between an accountant or a bookkeeper is the right call. You may not even know if there is a difference between the two accounting experts since sometimes people use the terms interchangeably. However, they play different roles in your business.
So, as an entrepreneur, why do I need bookkeeping for a small business?
You may question the relevance of a bookkeeper but since you are running a business, filing and paying tax is mandatory. In effect, you can only file taxes if you keep your accurate records. A handwritten journal and stained receipts are not sufficient. Instead, you need to break down your cash flow, and bookkeeping enables you to make proper reports.
Further, without keeping proper accounting records, how will you know your debtors? Bookkeeping comprises receiving payments after you send out invoices to your debtors. The early stages of your small business may not necessitate detailed records since you can use your memory for follow-up. However, as your company expands, the debts can be too much to remember therefore you need a system to track down your receivables and payables. Besides, your salary will depend on how well you can manage your cash flow.
Your cashbook and bank records can have differences; therefore, you will need to perform monthly bank reconciliation. It helps to spot bounced cheques from your debtors, know the bank commissions your bank is charging you, and other causes of differences. You can only reconcile such differences if you keep accurate records which will also help to prevent financial problems from banking errors.
The main reason you start a business is to make profits so unless you can keep good bookkeeping records, you will not know whether you are operating at a loss or profit. You may have money in your bank account, but that does not mean you are making gains. Having records that show your income and expenses is the only way you can gauge your profitability.
You want to reduce the taxes you pay but do you know failing to keep good records of your expenses will increase your liability? Costs reduce your tax liability therefore if you cannot track the little expenses you incur every day, chances of paying high taxes are high. You may ignore minor costs and concentrate on your debit and credit card charges, but they will add up eventually to bring down your liability.
Can I do my own accounts?
Although a good bookkeeping is a valuable asset to your company, you may feel you can do your accounts until you have the money to get outside help. If you can start keeping proper accounting records and manage your daily expenses from the onset of your business, you will be an apprentice learning from your company, and gaining skills "on the job". Still, you can seek professional advice from the pros when in doubt to avoid running your business down. After all, bookkeeping can make or kill your business depending on how you well you can do it.
Hiring a bookkeeper to come and do something you can't do as well is a significant step for you. However, do not focus on the money you will part with to pay for their fess; instead look at the benefits it will impact on your business. Bookkeeping and accountancy are among business undertakings that will help to save you money and time. You may not understand how, but your accountant can prove it to you.