Bookkeeping is of utmost importance when it comes to managing the financial records of the business such as ledgers, tax records, financial statements and so.
The importance of bookkeeping cannot be underestimated especially concerning a small business as any error can lead to affecting the financial health of the business, which is the last thing you would want. Still not convinced? Still think that bookkeeping is an overrated aspect? Here we list down 6 important reasons why bookkeeping is important for a small business:
- Keep Track of Cash Flow and Expenses
Cash flow is an important aspect for a business and managing track of cash flow is vital else you can hit by a crisis that will lead to unexpected consequences, derailing your operation, management and other core functions. Bookkeeping helps keep track of the passage of money, including outgoings related to tax purposes.
- Come Clean on Audit
Bookkeeping keeps your finances in the good order and therefore if there is an audit done, your status will be healthy and therefore no threat of penalties and sanctions under the concerned authority rules.
- Tax Saving
Bookkeeping helps to monitor finances and know when to file for taxes without any delay in the payments. It also enables better account records for improved tax returns, along with applying for applicable tax deductions. All these become difficult when you have ‘bad books’.
- Budget for the Year Ahead
When you have proper records maintained with full transparency, you are knowledgeable of the income and expenses and therefore can create the roadmap ahead. This clarity helps in clear and strategised future expense planning.
- Evaluate Growth
The accurate numbers of finances at your desk gives you a clear and detailed idea about the profitability and growth you have made. Bookkeeping provides you a greater insight into how you have managed your finances with respect to last year, and whether you have made progress or have fallen behind.
- Financial Analysis and Better Decision Making
Bookkeeping is key and most important tool for you to make all the financial analysis for the past, present and the future. This analysis provides deep insight and provides you with a platform to make informed decisions for the future.
Accounting and bookkeeping are not product and service of a company, but helps small business in tracking and monitoring every little transaction and financial process with a detailed record that is critical for the financial health of the business.