Advantages of Bookkeeping
Bookkeeping is the first step towards financial accounting and reporting of your company’s business transactions throughout the year. It is the process of recording journal entries in your books and documenting the receipts and invoices. Regardless of bookkeeping being obligatory by law for certain entities, it comes with several advantages for a business. In this article, we will discuss a few reasons why every business – even startups – should regularly maintain their books.
- Real-time Transparency:
Having up to date records of your financials enables transparency and accountability with your customers and clients. You can always represent all your accounts and portray proof of past transactions immediately. Be it potential investors, banks and financial institutions, or current shareholders, you can be transparent about all the transactions that have occurred throughout the year, which will also enhance your credibility.
- Easier to Forecast:
Regular bookkeeping results in thorough historical data of your financials. This will allow you to clearly see trends in costs and revenues, and then you can tweak them accordingly to eliminate inefficiencies.
Having maintained data will assist you in making major decisions regarding expanding, investing, switching suppliers and more. So, you can easily prepare budgets and forecasts to predict outcomes of your business decisions through efficient bookkeeping.
- Tax Deductions:
Tax expense is a major cost incurred by business every year. One method of minimizing your tax expense significantly is claiming as many deductions as possible; however, tax authorities require you to provide proof of your transactions. A good bookkeeper will keep receipts of all business expenditure like, fuel expenses incurred on your daily travelling from home to office, to claim a tax deduction on it. Accumulating all little expenses shall result in a significant reduction in tax bill at the end of the year.
- Preventing Fraud:
Proper bookkeeping helps in cutting fraud because discrepancies can easily be detected by bookkeepers. If one of the employees is transferring cash elsewhere, or reporting fake revenue or assets, a good bookkeeping system can identify and alert the company about the fraud.
- Reduces Accountant Expense:
Maintained bookkeeping means faster analysis of your business’s financial performance. Proper bookkeeping will make it simpler for the accountant to prepare the financial statements and analysis report. Knowing for fact that accountants cost more, you can successfully minimize the accounting expenditure by reducing the accountant’s workload.
- Provides For Audits:
Keeping heavy profile of your transactions i.e. documenting your receipts, invoices, goods delivery notes, goods received notes, and other documents only makes the audit process easier. Having disorganized accounts, messy documentation, and outdated information will arouse suspicion and make it difficult for the auditor to audit. For a quick and simple audit procedure, efficient bookkeeping is the way!
Conclusion:
Even though bookkeeping is a frustrating and time-consuming task, it serves the business well. Doing good business is all about efficient money management and bookkeeping is just what makes it simpler to keep close tabs on where the cash goes.
Article courtesy of AD Bookkeeping Services:
https://www.yelp.com/biz/ad-bookkeeping-services-san-diego
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