Why small business owners should not take bookkeeping lightly – View from Brian C Jensen
Brian C Jensen

Why small business owners should not take bookkeeping lightly – View from Brian C Jensen

Managing finances well is the topmost priority for any small business owner and the reason why bookkeeping is so much essential for them. Bookkeeping is the system of maintaining the records of all financial transactions. It can include expenses across different heads like payroll, services, materials as well as the payments received by way of sales from clients and customers as well as from other channels like rental income, explains Brian C Jensen

Bookkeeping is essential because the availability of updated financial data does away with the laborious task of tax computation when filing tax returns. Business owners often find it challenging to file tax returns on time because of unkempt bookkeeping. Depending on the business size and organization, you can have your staff do the bookkeeping or outsource the service to some company for a cost-effective solution to your bookkeeping problems.

Aspects of bookkeeping explained by Brian C Jensen

Bookkeeping was a labor-intensive task during the days of manual systems and prone to errors. Keeping the financial records updated was nearly impossible as the volume of financial transactions was just too much. Things changed drastically with the digitization of bookkeeping as various available software makes the task more manageable and error-free.  The bookkeeping tasks consist of maintaining ledgers, payroll services, handling accounts receivables and payables, invoice processing, inventory services, and prepare for tax returns as well as business or investment advice.

How is bookkeeping beneficial

One of the most important contributions of bookkeeping is that it helps maintain smooth cash flow that keeps businesses buoyant. It helps to understand the company’s financial position at any instant that helps to make the best decisions for maximizing the return on investment (RO), explains Brian C Jensen.  There are some more benefits too.

Eases decision making – Bookkeeping helps business owners to understand where they stand financially and whether they can maintain the right balance between income and expenditure to maintain steady profits. Bookkeeping helps to keep a close tab on debts so that the company does not become debt-ridden that can cause its slow death. Proper bookkeeping ensures that all accounting records are up to date, based on which it is easy to take business decisions to drive the business in the right direction.

Reveals the business health – The financial records reflect the health of businesses, and if bookkeeping lags, business owners can never evaluate the growth prospects. The balance sheet and trial balance are the outcome of bookkeeping and are important health indicators. It is normal to evaluate business performance based on the financial records to envisage the trend of profit and loss based on which business owners can foresee the growth prospects.

Accurate budgeting – Creating a budget and adhering to it is critical for businesses to carry out their operations within a defined boundary to avoid the problem of biting too much than they can chew. By knowing where the money comes and where it goes, the budgeting is more accurate.

By following the cash flow, it is possible to identify the wastages so that by plugging the gaps, it is possible to reinforce the cash flow and strengthen the business.