Business
The Role of Bookkeeping in Business Success
Running a business, although rewarding, can be a very frustrating and time-consuming process. There are many aspects a business owner must maintain to ensure that the business running properly. From hiring employees to ordering needed stock, a business owner’s work is never done. To ensure all the work is properly managed, it is a good idea to get help with some of these things. Hiring a bookkeeper is an option many business owners should consider.
What is Bookkeeping?
Bookkeeping is a vital part of running a successful business. It is defined as the activity of maintaining records of a business’s financial affairs. A bookkeeper is a person that logs the daily spending, sales, and other monetary movements of a business. Anyone starting or running a business is wise to get bookkeeping services for their company.
Organization
An important aspect of bookkeeping is organizing financial information. Every penny that passes through a business must be accounted for. A bookkeeper is trained to maintain the financial records of a company to allow easy access to all financial matters.
The money used to start a business is often kept in a bank account and must be recorded so that companies can know how much is there on a daily basis. Every penny spent on business equipment, employees, etc., must also be recorded so that a business owner knows what is going out. In addition, records of the money coming into the company must also be maintained to help with other aspects of the company.
Budgeting
When the financial records are properly maintained, it makes it easier for a business to know what they can and cannot do with their money. A bookkeeper assists a business with its budgeting. A company cannot spend more money on equipment or employees if there is not enough money coming in to cover those costs.
If the bookkeeping is maintained as it should be, a company can plan its finances accordingly. If there is an increase in sales or other income, the company will know it can afford to make certain expenditures. If the expenses go up, a business owner can look to the company budget to determine where changes can be made.
Analysis
Bookkeeping is an important part of analyzing a company’s financial status. Proper bookkeeping allows a business to easily generate a financial statement. This statement provides a clear picture of the flow of money that goes in and out of the business. It can help business owners identify the strengths and weaknesses of a company.
Planning
The financial statements over a specific period can provide an important tool for planning the future of a business. If profits are increasing, an expansion may be possible. If profits are dwindling, shrinking the business may be beneficial. A bookkeeper can assist businesses in identifying areas where they can find resources to expand or shrink the business.
Taxes
Every year, a business must file taxes with the IRS. Some many different laws and regulations define how much a business must pay. However, proper bookkeeping is a vital part of the tax process. Although bookkeepers do not normally manage the taxes of a company, they do maintain the books and can provide financial statements to aid in the process.
An accountant is often the best option for preparing a company’s taxes. They are cognizant of the current tax laws and can ensure a business pays only what is necessary. They can also help reduce the chance of errors and fees due to such errors. For a business, the accountant’s job is made much easier by the work a bookkeeper does throughout the year.
Kenneth is a proud native of sydney, born and raised there. However, he pursued his education abroad and studied in Australia. Kenneth has worked as a journalist for almost a decade, making valuable contributions to prominent publications such as Yahoo News and The Verge. Currently, he serves as a journalist for The Hear Up, where he focuses on covering climate and science news. You can reach Kenneth at [email protected].
