When people hear the word “bookkeeping,” they often envision long columns of numbers, dense spreadsheets and piles of receipts, not to mention lots of math. Little wonder that many people prefer not to think about bookkeeping at all.
5 Benefits of Bookkeeping
- Improves cash flow management
- Provides info to make informed decisions
- Helps a startup obtain financing
- Ensures compliance with regulatory and tax requirements
- Helps develop a budget and then measure results against the budget
Bookkeeping, however, is worth paying attention to. It may not be glamorous, but it plays an outsized role in determining a business’s success.
Simply put, bookkeeping is the process of recording your company’s financial transactions into organized accounts. It’s more than just keeping tabs on your bank balance, though.
Too many small businesses and startups relegate bookkeeping to an overworked office manager or neglect it altogether. The results can be costly, ranging from tax issues to legal problems to lost opportunities. Regardless of size or industry, every company should establish a strong financial foundation from the outset. Accurate bookkeeping is the key.
Why You Need Bookkeeping
First, your business needs up-to-date, reliable information so that you can make good, sound business decisions. Things will be much harder without that strong foundation from the get-go. It’s much more efficient and cost-effective to keep accurate books from the beginning rather than try to organize them retroactively.
There are very real dangers to poor bookkeeping, such as not having enough cash to cover your expenses, strained relationships with customers and vendors, and owing back taxes, interest and penalties. Understandably, small and early-stage businesses need to save money, but skimping on bookkeeping is often a false economy.
Understandably, small and early-stage businesses need to save money, but skimping on bookkeeping is often a false economy.
Bookkeeping is particularly important for startups with an eye on a future exit. Buyers and private equity investors will want to see that your bookkeeping is in order, that your accounting cycle is planned so that you have relevant, timely reporting and that your documentation can be pulled together efficiently. This allows for preliminary discussions and makes for a much smoother due diligence process.
And if your dream is to go public? It is imperative that you’re able to provide a history of accurate financial information. Don’t wait to put a system in place. The less organized your books are, the more time-consuming and expensive this process will be.
Benefits of Doing Your Own Bookkeeping
Doing your own bookkeeping may be the right decision, especially for small business owners or solopreneurs who are just starting out.
The most obvious benefit is cost savings. For bootstrapped businesses with limited budgets, a DIY approach can save money that can be reinvested into other areas of the business. Especially at the early stages when your finances are relatively simple anyway, doing your own books may be a sensible choice.
A less obvious benefit is a deeper understanding of your company’s finances. When you manage your own books, you’re directly involved with every transaction and financial decision. This helps you understand the nuances of your business’s financial health and improves your ability to manage finances more effectively.
You’ll also gain a better understanding of financial principles and bookkeeping practices. This will allow you to communicate more effectively with accountants, vendors and any bookkeepers you hire in the future. You’ll be able to ask the right questions, understand the advice given and make informed decisions based on their recommendations.
Benefits of Professional Bookkeeping Services
For many small businesses and startups, outsourcing your bookkeeping can be the smart choice. As your business grows and transactions become more complex, bookkeeping will become more time-consuming and difficult. A professional bookkeeping service will minimize errors, help ensure your financial records are compliant with current accounting standards and tax laws, keep your books organized and keep track of KPIs (key performance indicators).
It’s also more cost effective than hiring a dedicated employee, especially for small businesses or startups that may not need a full-time bookkeeper. Professional bookkeeping services can easily scale their services up or down based on the business’s needs. This flexibility is particularly helpful for businesses experiencing rapid growth or seasonal fluctuations, ensuring that the bookkeeping support matches the business’s current requirements.
For the best results, look for professionals who offer services such as tax planning, accounting and mergers and acquisitions advice in addition to bookkeeping. A trusted advisor with a strong team can grow with you, providing consistent, customized service as you scale.
Perhaps the most significant benefit of outsourced bookkeeping is peace of mind. With the day-to-day financial operations in the hands of experts, business owners can give their undivided attention to strategic planning and growing their business.
No matter what size your company is or what industry you’re in, you need bookkeeping. Whether you hire a service or get a professional on staff, it’s worth the time and expense. Let the experts focus on your bookkeeping while you focus on your business.
