The dream of every entrepreneur is to own and run their businesses successfully. Bookkeeping is one of the commonest tasks that are ignored by entrepreneurs when they start businesses and this could lead to detrimental effects on the success and future of the entity. They are usually too busy running other affairs of the business to pay attention to the books. Most financial institutions will require some form of historical financials in order to extend credit facilities to businesses.
Bookkeeping is the process of keeping accurate records of company spending and revenue. Some small business owners decide to do their own bookkeeping to save on costs while others prefer to hire a trained accountant. Without bookkeeping, it's impossible to measure the true success or failure of a business. A smart business owner realizes bookkeeping has several undeniable benefits, some of which are discussed below:
Bookkeeping records offer benefits that help you make smart business decisions. With bookkeeping, you can identify money-making opportunities, avoid cash-flow problems, and find ways to increase income or decrease spending. Good bookkeeping records also are beneficial when you're applying for a business loan. By keeping good and accurate records, you make it easier for lenders to make decisions about your business.
A comprehensive bookkeeping system allows a business owner to analyze spending and revenue one item at a time. The data can be grouped by the week, month, quarter or year to be analyzed and compared to past years. This is one way that business owners can discover ways to cut back on company spending and improve profitability.
Certain benefits of cash management include the ability to manage supplier and customer accounts by seeing them on paper, create a business budget, and track deposits and payments. With cash management, you're able to account for every cedi and pesewa your business spends. Bookkeeping provides the cash management you need to create a financial paper trail.
Companies require an accurate report of current spending and revenue to help compare actual results with projections in the annual budget. A bookkeeping system facilitates up-to-date company financial information that can be cross-checked with the budget to make sure that the company is not overspending. Bookkeeping also identifies instances of under-spending so the company may find new uses for the extra money to help productivity.
Two risk-reducing benefits associated with bookkeeping are the ability to detect fraud and embezzlement. You might not want to think about, but there's always a chance that your business will experience fraud or embezzlement if you have employees or business partners. If your bookkeeper is honest and good at the job, he will be able to spot suspicious business transactions. If you've hired a bookkeeper instead of doing it yourself, keep checks on the bookkeeper to make sure he's doing an honest job.
Bookkeeping services include checking the accuracy of each payroll period to make sure that each employee receives the proper amount -- an especially important function in organizations that pay bonuses, sales commissions and supplemental payment based on a percentage of revenue. Confirming payroll numbers keeps employees satisfied with their pay and prevents the company from over- or underpaying payroll taxes as well.
“Lending is not based primarily on money or property. No Sir! The first thing is character”
-John Pierport (JP) Morgan.