Here, it is very important to differentiate the terms Bookkeeping and Accounting. While Bookkeeping involves the recording, on a daily basis, of a company’s financial transactions, Accounting is a high level process that looks at business progress and makes sense of the data compiled by the bookkeeper by building financial statements.
Proper bookkeeping ensures proper business performances are measured as information provided are used to make general strategic decisions because as your business is up and running, proper records for all revenues and spending are maintained.
On the other hand, Accounting does more as a process of summarizing, analyzing and reporting these transactions to oversight shareholders, agencies, regulators, tax collection entities and other stakeholders in form of financial statements that summarize a company’s financial performance (Statement of Profit or Loss and other Comprehensive Income), financial position (Statement of Financial Position or Balance Sheet ) and cash flows (Statement of Cash Flows) over a particular period.
What are Your Method Options?
As a new business owner, you are sure to find a Bookkeeping/Accounting solution that will suit your business needs. There are a range of options available for you;
- Choosing a Do-It-Yourself method by using a sound and complete Accounting Software such as QuickBooks Accounting software or alternatively, you could use a simple Excel spreadsheet.
- Outsourcing your bookkeeping services or using a part-time bookkeeper within your reach. However, there is the need to consider how reliable this can be for your business.
- When your business is big enough, you may opt to hire an in-house bookkeeper and/or accountant to carryout the job of you.
Reasons why Proper Bookkeeping/Accounting is very Important
Many business collapse today as a result of failure to maintain accurate financial records and implement this integral process. Many business owners try cut corner when is required under law to maintain accurate books and records. Reasons for you to the right thing now are highlighted below;
- Helps in Budget and Budgetary Controls since it’s easier to review financial resources, expenses and future planning when income and expenses are properly maintained.
- Accurate and timely tax preparation/returns, tax filing process is made more efficient . You bet don’t want to join issues with tax authority.
- Ensures organization of financial information. Keeping your financial records organized makes it easier to locate and provide to appropriate parties.
- Business analysis is very critical for every business growth, bookkeeping is a tool used by management to analyze business performance.
- In order to make the best decisions possible, available information must be relevant, reliable and timely. Bookkeeping provides this information, and with proper analysis comes better decision making.
- The product of bookkeeping is financial statements, which allows investors to have up-to-date and accessible information to make better, well informed, decisions which is the ultimate purpose of accounting.
- Tracking of business Profitability and Growth is a function complete and accurate bookkeeping and accounting, it is possible to determine whether a business is profitable or not. Without this information, it is impossible to determine the growth level of your business.
It’s time to employ the services of professionals in your business planning!
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