SIGNIFICANCE OF BOOKKEEPING
If you are a small business owner and you want to do your bookkeeping but don’t know how to do it this article will help you a lot. We’ll discuss what bookkeeping is, why it is important, and steps to do it properly.
It may be defined as the part of accounting that is concerned with recording data is called booking. It mainly pertains to data regarding transactions having financial implications in the account book.
No matter how small or big a firm is, the importance of bookkeeping cannot be ignored. It helps in keeping a track of all financial activities. It is a book which tells you where your income is coming from, where are you spending more, and thereby helps in making informed decisions.
Why Book Keeping Matters?
It is important for several reasons. Some of them are given below:-
- It helps in catching more tax deductions. When you record and categorized every truncation, you will be able to see which expenses are tax-deductible so that nothing falls through the crack.
- Bookkeeping helps in getting business loans. If you are applying for a small business, banks are going to need to see the financial statement. You need to show something that indicates your expenses and revenue. This will be achieved through proper bookkeeping.
- It plays important role in catching financial mistakes. When you are doing it, you are keeping a close eye on the transaction in your business. You’d be able to catch banking mistakes, invoicing mistakes, subscriptions, and fees for services that you forgot to cancel.
- It gives a clear picture of where the money is going. When you have kept it in place, you’d be able to keep a track of expenses so you can budget better. It also helps in understanding the cash flow.
Steps involve in bookkeeping
Here are some of the steps that need to be followed for bookkeeping:-
- Separate your expenses from the business. Make sure that these two are not intertwined. For large businesses, it is important to have different accounts for personal and business expenses.
- Selection of entry system is the next important step i.e. single or double entry. Double entry is recommended as it enables you to create financial statements.
- The third step is choosing between cash and accrual. Cash is the amount you received and accrual is the one you earn when the invoice for it is made. For small business dealing/bookkeeping in cash is recommended.
- The next step is to choose between the bookkeeping systems. You can either do it manually or on a computer/laptop using the software. If you chose to use software, few options for small businesses are Smith booking keeping/account, QuickBooks, zero, or wave. You can get access to the first-mentioned website by bookkeeping Ardmore and it will help you create simple financial reports. It has users in Philadelphia, Levittown, Chester, Delaware for accounting, tax preparation, payroll, and new business formation. It is also recommended for bookkeeping Ardmore PA, and nationwide. However, keep in mind that you’d require the help of an accountant to use these applications/websites.
- You need to keep a record for your bookkeeping.
Doing your booking is free but it’s complicated, time-consuming, and keeps you away from running your business. However, if you decide to hire someone to do your bookkeeping, it helps save time, gives you confidence that your books are being done properly, and makes tax time very easier.