Keeping track of your finances is a vital part of running an efficient and successful business.
The way you manage your bookkeeping is a large factor in determining whether your business succeeds or fails. Studies show that 47% of small businesses want help with accounting when first starting out.
There are multiple aspects of bookkeeping that can greatly impact a business. Forget to pay a bill and your credit could suffer. Forget to keep track of receipts, and you’ll miss out on tax deductions. Lose track of invoices coming in and it'll be hard to maintain cash flow. Let’s explore why bookkeeping is so important!
What Do You Mean By Bookkeeping?
Bookkeeping is keeping track of financial transactions to effectively manage your business and meet tax requirements. Instead of books, think of them as your financial records. These records have important information such as revenue, expenses and cash flow. By keeping these organised, you can track your overall financial performance.
Manage Cash Flow Effectively
Effective cash flow management is not possible without organised books. Having positive cash flow is required to run the daily operations of a business. If you’re not sure of your business' cash flow status, there is a high chance your business may fail. Keeping track of your invoices and receipts is a great first step to getting your books up to date.
Evaluate Your Business Performance
Bookkeeping allows you to see your financial position at any time. With a quick glance, you can evaluate the performance of your business to know if you're growing or declining. Having these numbers at your fingertips is useful when making important financial decisions.
Grow Your Business
If records are easily accessible, you can start to make important decisions about growing your business. You can identify areas in your business to improve and where there are opportunities to make money. For example, you can easily identify expenses and where you can cut costs.
This will ensure the long-term growth of your business as you make more cost-effective decisions.
Plan For The Future
Bookkeeping makes it easier to set budgets and plan for the future. You can anticipate future purchases and prepare for unexpected expenses. Comparisons can be made between forecasted and actual figures so you can see the financial health of your business.
Set Projections And Goals
Becoming successful is all about achieving goals. With proper bookkeeping, you can set tangible goals (monthly sales, revenue etc.) and see if you’ve achieved them. This will show whether your business is on the right track so you can make changes accordingly.
Paying Taxes Becomes Easier
Tax time becomes a lot simpler with proper bookkeeping. No more chasing up missing receipts at the last minute. With an organised bookkeeping system, you can easily work out your tax payables. You may even be eligible for a tax refund, there's only one way to find out!
Bookkeeping Is Required By Law
You should have a bookkeeping system in place so you can meet your tax requirements. If you don’t lodge your tax returns on time, you could face heavy penalties from the ATO. Luckily, bookkeeping makes it really easy to lodge your taxes.
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