Importance of Bookkeeping Services for Small Businesses

Importance of Bookkeeping Services for Small Businesses

In today’s article, we will see the Importance of bookkeeping services for small businesses

What is bookkeeping now before we get to the definition of bit keeping let’s go back in time to 1494 in Italy when a man by the name of Luca Pacioli wrote and published a book which Pacioli wrote and published a book which translates a summary of arithmetic geometry properties and proportionality the book includes a section called the details of the calculation and recording and this was the birth of double-entry or known as bookkeeping in accounting.

The video on the history of accounting terms in modern accounting like debit credit journal and ledger all originated from this book bookkeeping was handwritten and still is used by many small businesses today but as businesses grew and transactions were becoming larger on a regular occasion most of the big firms invested heavily into electronically recording and storing their accounting data on computer software.

The Importance of Bookkeeping

I want to talk about the importance of bookkeeping and accounting in your business, it can really improve your chances of successful business bookkeeping for growth and business management. What are its benefits apart from being a legal requirement like why would we even bother with this so, first of all, you know that when you have a business then budgeting and managing are very important? You can actually estimate your future revenue and plan correctly if you want to buy a stock.

You need to buy something major. Know what is the best time to actually buy those things as well as keep track of your expenses like keeping track of the financial health of your business if you are losing money or something like that. Either you are losing money that you had last month. What is this month’s revenue which is very important to you and can help you to ascertain whether you need to make any changes in your business keeping accurate records for your future investors if you are going to raise funds? and if you are going to get a loan for something for your bank then it is very important as well how fast your business is growing bookkeeping can help you.

Small Business Bookkeeping Services

If you have a small business then there are different ways to grow your business. But all of them need a lot of time and energy to complete the tasks. Small business owners start doing their own bookkeeping, so they lag behind other businesses due to the high workload in the business. Ultimately, all you need to know is that professional accountants will handle all the financial tasks your business needs.

Preparing, filing annual returns, keeping track of business expenses, reviewing tax deductions and credits, and handling special essentials is never easy. You may feel like you have control over your business’s bookkeeping, but doing it yourself can backfire on more important goals or result in sloppy books.

Reasons of Why You Should Outsource Your Accounting

(1) You can focus on what you are good at – unless you have experience and training as an accountant, you will have trouble with accounting. However, you are an expert in your class, so if activities like accounting are absorbed, you can focus more of your time on the tasks you are great at which can lead to better productivity and better quality of work.

(2) Lower Employee Costs – When you absorb your accounting tasks, you can save up to 40% of expenses compared to an employee’s expenses, because you do not have to pay any benefits package for training and equipment for a man.

(3) Lower Tax Burden – If the accounting is done for you by someone else then you will not have to roam around the accountant during tax season and can focus only on your business as well as provide the best service to your customers. can provide Which will increase your productivity.

(4) Reduce Fraud – Fraud done by employees is a big problem and it is not possible that any business with employees is completely safe from any kind of theft. The statistics highlight that companies with less than 50 employees are most vulnerable to fraud. They have to bear heavy annual losses. Outsourcing your accounting can be one way to detect fraud within a business.

(5) They can offer Invaluable Advice – An experienced financial expert can be of great support in your decision-making when you are looking to expand your business or look for investment opportunities. They will have knowledge of similar scenarios. You may have invaluable information to consider. Which can help you avoid unreliable investments and reduce the cost of the ones that are suitable.

The Benefits of Bookkeeping

It is simply the recording of financial transactions of a person or an organization.

Bookkeeping records transactions such as purchases, sales, receipts, and payments by an individual or an organization.

There are two standard methods of bookkeeping.

(1) Single-Entry Bookkeeping – It is the system where there is only one entry for each transaction. Examples of Single-Entry bookkeeping are taxable income, tax-deductible expenses, and cash.

(2) Double-Entry Bookkeeping – It is the system where every transaction is recorded in two accounts, a debit to one account and a credit to the other account, For Example – Rent, Salaries, and Wages.

Most small businesses adopt the use of a Single-entry Bookkeeping system due to its simplicity and the lack of extensive knowledge in accounting.

We will be discussing 4 main benefits of Bookkeeping to a Small business.

  1. Maintains organized financial records.
  2. Helps analyze spending and improves budgeting.
  3. Bookkeeping helps secure a business loan.
  4. Bookkeeping is useful for tax filings and IRS audits.

Difference between Bookkeeping and Accounting

Bookkeeping and Accounting Procedures But many people are still confused when it comes to bookkeeping vs accounting, they want to know what are the differences. Why do I need them and how much do they cost in life accounting helps companies with bookkeeping and accounting procedures help companies prepare their financial statements and save companies a lot of money with tax preparation help can be found. So if you are in business it is really important to understand your financials.

One of the most common reasons why small businesses fail is due to a lack of capital or funds and from my personal experience, most small business owners understand their expenses. But where most people fail is they are not realizing their revenue, so they invest a lot of profits in poorly performing products and services. This ultimately leads to business failure but with proper financial procedures through bookkeeping, it is easy to eliminate some of those risks.

Accounting is a process of –

  1. Identifying
  2. Measuring
  3. Recording (Journal Entry)
  4. Classifying (Ledger Posting)
  5. Summarising
  6. Analyzing
  7. Interpreting
  8. Communicating

Bookkeeping is a process of –

  1. Collecting & sorting the source documents
  2. Recording – Record the relevant data/information from the source documents
  3. Classifying – Posting data into ledger/account
  4. Preparing Trial balance

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