The importance of understanding and keeping track of your business finances should not be underestimated. They are fundamental to the smooth operation and successful growth of your business.
When I was running Archway Books and operating a chain of bookshops in England’s northern counties, I learnt some valuable lessons about the importance of staying on top of business finances. For my business, I only had to invest a few minutes at the end up each day to cash out the tills and add the day’s takings to a spreadsheet.
By taking the time to do this each day, I was always aware of how well (or not so well) my sales were doing across all my outlets. I could easily compare weekly, monthly and yearly figures from my spreadsheets, and the insights gained helped me to manage cash flow more effectively and develop strategies to drive more business.
I also ensured every business invoice was dispatched in a timely fashion and always chased up late payments with customers before processing any more book orders for them. These processes in combination with bank reconciliation were crucial to the successful running of my business.
Since I’ve always enjoyed maths, doing my own bookkeeping was no big deal. However, I understand that a lot of people don’t like working with numbers. It’s highly probable that when you started your business, keeping accurate cash flow records was not your main focus.
Why is Bookkeeping Important?
There are many important areas to manage when running a business, including marketing, sales, customer relations, technology, human resources, etc. Accurate bookkeeping is also essential to the success of a growing business and should be given equal priority to other areas of your business.
You can decide to invest in bookkeeping education to learn all aspects of the field, but the reading material can take up a lot of your time. Bould Bookkeeping will keep you on the right track. Alternatively, you can outsource your business’s bookkeeping to a professional. When looking at the cost of outsourced bookkeeping services for your business, it’s important to keep in mind the long-term value such professional services could deliver to your business.
When you know your business has up-to-date, accurate records, you gain peace of mind. No longer will you find yourself waking up in a hot sweat worried about how you are going to meet tight deadlines for business audits. Instead, you can focus all your attention on the skills you excel at.
Learning the Differences in Bookkeeping
Bookkeeping has recently become highly automated and there is a wide range of reports available to help you better understand the state of your business’s finances. But are you using the reports available to your advantage? Do you know the differences between Profit and Loss reports, Balance Sheets, and a Statement of Financial Position? Do you understand the depreciation rate of your business’s assets over time? There are so many financial terms to understand and the entire task can seem intimidating.
Keeping Up to Date
The good news is that by keeping up to date with your financial record keeping, you can avoid penalties for late reporting of accounts as well as gain better control of your cash flow. The fact that you gain greater control of your cash flow is in my opinion the most beneficial feature.
I have seen too many businesses ignore their accounts for a whole year until they pass all the receipts and invoices to an accountant to process one day before the filing deadline. Ideally, you want to keep track of your business finances year-round and this can be done personally or with help from a bookkeeper.
By monitoring your accounts on a weekly basis, you can more easily identify key areas for profit margin growth and plan better for slow periods.
Key Benefits of Bookkeeping
• Easier audits
• Instant reporting
• Always in compliance with the law
• More accurate tax bill estimates
• Detailed historical financial records
• Better relations with investors
• Speedier financial analysis — save money on accounting services
• Easier business planning