Bookkeeping is vital for your small business because it helps you to stick to a budget, prepare your tax returns and allow you to make informed decisions that will help to drive growth. In this post, we’ll run through the importance of the bookkeeping process and how essential it is for your small business.
- Keep Track of Business Targets and Make Informed Choices
- Create and Stick to a Budget
- You’re Always Ready for Tax Deadlines
- Attract and Impress Investors
- Add Another String to Your Bow
- Comply with Making Tax Digital (MTD)
- Easily Track Profit and Growth
Why a Good Bookkeeping Process is So Important
1. Keep Track of Business Targets and Make Informed Choices
Bookkeeping allows you to better track how your business is performing and whether it’s going to meet the targets you’ve set. It’s always important to know the health of your company finances so you can make the right business decisions.
For example, if you know that your company’s cash flow situation isn’t the best at a particular moment, you can use that information to hold back on any purchases you were thinking of making.
With an effective bookkeeping process in place, you’ll have the cold hard figures and stats available to support your business decisions. You’re able to map out business aims better and achieve your desired growth.
2. Create and Stick to a Budget
Budgeting is business 101. You need to make sure you don’t overspend otherwise you’ll quickly find yourself in financial trouble. Bookkeeping can help you to create an accurate budget that you’ll find more comfortable to follow.
With an effective bookkeeping process in place, you’ll have your income, expenses and other financial information organised and accurate. This makes reviewing your finances and creating a budget nice and easy.
3. You’re Always Ready for Tax Deadlines
Tax deadlines are a nightmare for any small business owner. If you aren’t careful, they can sneak up on you and catch you by surprise. If you don’t have the funds available or you make a mistake when filing your returns, then there are serious consequences for your business.
Bookkeeping allows you to put all of those worries aside. When tax deadlines do arrive, you’ll have detailed balance sheets and accurate financial records that ensure you complete your returns quickly, easily and without any mistakes - one less thing to worry about.
4. Attract and Impress Investors
If you’re looking for third-parties to invest in your business, then you’ll need to present it in the best possible way. If you can’t produce accurate records or your finances appear disorganised, then they’re going to take their investment elsewhere.
Getting into good bookkeeping habits ensures that you’re ready to present your business at a moment’s notice. You’ll be able to access organised financial information, present company growth targets and convince any potential investors that their hard-earned cash is safe with you.
5. Add Another String to Your Bow
There’s a common misconception that financial understanding and bookkeeping are complicated and you need a series of qualifications to be able to achieve them. This couldn’t be further from the truth.
With a little help from blogs and videos, you can quickly get to grips with everything you need to know and manage your bookkeeping effectively. This is a great way of learning a new skill that you’ll use as a business owner.
6. Comply with Making Tax Digital (MTD)
The government recently introduced MTD - yet another initiative and set of rules to get your head around. Its aim is for businesses to start to do their taxes online, using things like apps and computer software to help.
It’s nothing to worry about and with the right help, you’ll be easily able to meet the new regulations. If you’re already practising proper bookkeeping, then you’ll find it easy to do. The only difference is that you’ll need a simple app to file returns digitally.
7. Easily Track Profit and Growth
You’ll already have a good idea of the money your business is making. But with bookkeeping, you can see exactly which areas of your business are the most profitable. The income statement outlines where money is coming from so you have everything you need to make informed business decisions.
Because you’re so busy, it can be challenging to see exactly how much your business has grown since you first started it. Proper bookkeeping allows you to see trends and how you’re comparing to other periods. It’s a great way of spotting any early warning signs and dealing with them before they escalate.
Now you know just how vital bookkeeping is for your small business, it’s time to get to work.
Get Started With Our Bookkeeping Checklist
We’ve put together a comprehensive list that’s packed with useful bookkeeping tips and advice. From how to stay organised to the best tools out there that can help, the checklist has everything you need to get started.
Download your free copy now using the link below.