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Bookkeeping is essential if you own a business of any size. However, bookkeeping is more than just keeping track of money in and money out; it also requires an analysis of the income to expenses. The results of that analysis paint a picture of your company’s financial health.
What Needs to Be Accounted For
Everything. All of the money that comes in and all of the money that goes out needs to be
recorded. This includes any income your company makes, any loans and any interests your accounts may accrue. It must also reflect payroll, bills paid, materials purchased, utilities paid and services used. It can be tedious for sure.
But this is not as tedious as it once was. There are plenty of programs that simplify the process for you by connecting to your bank account and recording all transactions.
Why Does Everything Need to Be Accounted For
Knowing what you spend your money on and where your money comes from is important. It allows you to make decisions when you make your budget. It is important to know the clients, employees, products and services that bring in the most money. And maybe there are some you lose money on. Knowing these things allows you to make informed decisions.
There will be times when you need to tighten your budget. Looking for more affordable materials or vendors is impossible if you do not know how much you are spending on your current materials and vendors.
Another area of the budget that will require analysis is advertising. Looking at the amount of money you spend on advertising and marketing is critical. Is it worth it? Is new money coming in from your new efforts?
Your books are the data you need to make informed decisions. The more data the better to plan for your future budgets.
No One Likes Paying Taxes, But It Doesn’t Have to be Painful
If your books are in order and up-to-date, and you are using a system (even if it is just a spreadsheet), preparing taxes is much easier. With an organized bookkeeping system, you will simply have to print off pages from your books and send them off to your accountant.
Bookkeeping = Less Stress
There are a ton of stressors as a business owner. But one of them does not have to do “I am not sure how much money we have.”
Being able to open up a program or document and seeing in real time how much money you have coming and going will give you peace of mind. Even if the number isn’t what you want to see, the data is there for you to make a plan.
For many, the stress can be alleviated with a plan.
Here are some simple tips
Start keeping accurate books early
Use a debit or credit card to make it easy to trace transactions
Keep business and personal expenses separate
Keep your receipts
Reconcile your books regularly, preferably weekly
Hire a bookkeeper
While money may not be the most important reason you went into business, it is likely at the top. And even if it isn’t, it is pretty impossible to continue running an effective business without money. This is not a place to be lax.
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