Although recordkeeping is frequently the most overlooked task, especially by start-ups and small and medium enterprises (SMEs), there is no other way around. It is the heartbeat of any kind of business, irrespective of its size, type, field, or sector.
It is a sad fact that a significant percentage of companies are forced out of the market because of poor bookkeeping practices. Since bookkeeping can make and break your business, this week and next week, we want to help you appreciate why it is so important and what you can do to ensure proper bookkeeping practices.
Bookkeeping is important to help you understand;
1. How much you are investing and in what?
2. How much money are you making, are you are profitable?
3. How much you should be reinvesting in the business?
4. How much losses do you incur?
6. Credit and other small expenses.
Keeping a record of all the above will help you channel your funds better and to optimally make use of your money.
What is Recordkeeping?
Recordkeeping is keeping records of financial transactions. It involves classifying, reporting an analysing data. It is the essential part of accounting in all the business operations, and it is also such an important activity that decides your business strength.
Accurate bookkeeping is not a choice, but a necessity even if you run your own business. It may seem to be something of a chore, but it’s vitally important to keep track of your revenue and financial outflow. Many businesses which would otherwise have been successful, have been brought down by their failure to maintain proper financial records. Whether you do it for yourself, or hire someone else to do it, bookkeeping is essential.
What does it exactly involve?
Bookkeeping involves recording day-to-day financial details; spending, revenue, cash flow, budgets, bank and credit card reconciliation, inventory management, VAT management, monthly, quarterly and yearly financial statements.
• And the analysis of the all recorded financial data.
For these tasks to be properly performed, there is a need for well organised and accurate bookkeeping.
- Just by using the information of your Balance Sheet and Profit and Loss, you can easily check if the firm is doing well or not, discover possible flaws in your plans, and unearth issues that could ruin your prospects. Thus, business planning is made so much easier and efficient through bookkeeping.
- Keeping track of your cash flow is critically important for any business and its only possible if you have accurate financial records. Many seemingly profitable and growing businesses have failed because they were suddenly hit by an unanticipated cash flow crisis.
If you maintained accounts and kept your books in check, you will easily be able to forecast the future of your business. Accounts and bookkeeping cannot only help predict your business performance, but also help you plan a budget. It can help you evaluate your business and take corrective measures if something is going wrong.
- You will also be expected to provide information about the business to the Swaziland Revenue Authority (SRA), about your business’ profits or losses so that they can assess the amount of tax you owe. This information has to be accurate and presented in a professional manner. Failure to do so can lead to serious repercussions, as your business can be slapped with huge fines and penalties that could lead to the death of your business.
Profitability and Growth
- Accurate bookkeeping allows you to see whether or not your business is actually making a profit. It is surprising how often business owners fail to keep track of this, but it is obviously extremely important. Bookkeeping also allows a business owner to have a greater understanding of how much progress has been made. You can look back and see patterns and draw comparisons with previous business years. This can provide a greater understanding of the areas within the business which make a profit and where costs might be trimmed. This kind of financial analysis can help you to avoid problems of the future.
- Sole traders claim specific expenses which have been wholly or exclusively incurred as part of their business. It is better to pay expenses directly from the business bank account and submitted on a monthly or quarterly basis. This can help the person doing bookkeeping to have an understanding of outgoings and can monitor them for tax and accounting purposes. Easier Reporting- Proper bookkeeping will also facilitate the whole process of reporting to your investors on data and information concerning your firm’s financial condition and prospects.
You should be pretty convinced right now, at least about one thing: proper bookkeeping services is not a luxury, it is not a by work to your business, for the simple reason, it plays a vital role to your firm’s existence, its competence to meet its obligations, its planning and prospects, and its relationship with the SRA more than everything.
>> Quote of the week
“Making good judgments when one has complete data, facts, and knowledge is not leadership- it’s bookkeeping” –Dee Hock.
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