7 Reasons Why Bookkeeping is Important for Your Business

Let’s get on a FREE 30 minute call, review where you’re at with your business, and see if Team BKA can help. I believe creative fulfillment is impossible without financial stability. Once book value vs. market value you do this, you’ve mastered the art of Money Storytelling and are well on your way to financial stability. You must learn to communicate with it and LET it work independently of you.

Bookkeeping is the process of keeping track of every financial transaction made by a business firm from the opening of the firm to the closing of the firm. Depending on the type of accounting system used by the business, each financial transaction is recorded based on supporting documentation. That documentation may be a receipt, an invoice, a purchase order, or some similar type of financial record showing that the transaction took place.

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After a certain period, typically a month, each column in each journal is totalled to give a summary for that period. Using the rules of double-entry, these journal summaries are then transferred to their respective accounts in the ledger, or account book. This process of transferring summaries or individual transactions to the ledger is called posting.

• We are on the pulse of modern technology, and thrive an offering a smooth and enriching collaboration.
• On the other hand, if you have in-depth tax and finance knowledge beyond the bookkeeping basics, you may be able to get the job done.
• It only works if your company is relatively small with a low volume of transactions.
• “I just need someone else to help manage the books so I can focus more on my business.”
• Assets, liabilities, and equity make up the accounts that compose the company’s balance sheet.

Accounts payable are usually what the business owes to its suppliers, credit cards, and bank loans. Accruals will consist of taxes owed including sales tax owed and federal, state, social security, and Medicare tax on the employees which are generally paid quarterly. Long-term liabilities have a maturity of greater than one year and include items like mortgage loans. Companies also have to set up their computerized accounting systems when they set up bookkeeping for their businesses. Most companies use computer software to keep track of their accounting journal with their bookkeeping entries.

Why QuickBooks

So, when HMRC demands a financial statement from your business for tax reasons, bookkeeping regularly means you’ll be able to predict the outcome more accurately is you have detailed balance sheets over time. As annoying as it is, businesses have to file their taxes at the end of the tax year. With a bookkeeping process in place, you’ll have financial information ready for tax season and the taxman won’t be breathing down your neck.

It also provides information to make general strategic decisions and a benchmark for its revenue and income goals. In short, once a business is up and running, spending extra time and money on maintaining proper records is critical. Business transactions can be recorded by hand in a journal or an Excel spreadsheet.

Business stage

Harold Averkamp (CPA, MBA) has worked as a university accounting instructor, accountant, and consultant for more than 25 years. Whether you’ve started a small business or are self-employed, bring your work to life with our helpful advice, tips and strategies. Let us walk you through everything you need to know about the basics of bookkeeping. Get in touch with us to set up a free consultation, or use the contact form to enquire whether our services are right for you. Let’s get on a FREE 30 minute call and review where you’re at with your business to see if I can help. If we’re a good fit, we’ll put together a package of services tailored to your business needs.

The bookkeeping transactions can be recorded by hand in a journal or using a spreadsheet program like Microsoft Excel. Most businesses now use specialized bookkeeping computer programs to keep books that show their financial transactions. Bookkeepers can use either single-entry or double-entry bookkeeping to record financial transactions.