Why is Bookkeeping Important for a Small Business?Numbers Pro
Bookkeeping is an integral process for any small business.
Business owners can choose to hire bookkeepers, outsource the work to them or do it themselves depending on their bookkeeping knowledge.
Whatever they choose, bookkeeping ensures the following benefits to each and every small business.
Ensures Proper Budgeting
With thorough bookkeeping records, it’s easier to stick to a budget. Remember, small businesses have smaller resources so wasting these resources can hurt.
If the income and expense are organised accordingly, you will have a clear snapshot of where your business is at so you can see whether or not you’re on budget.
For Tax Preparation
Any small business owner is required to remit their taxes to ATO and as such, this information should be accurate and presented professionally.
This mean the business owner can accurately report their profits and losses so the amount of tax payable can be determined easily.
There can be some serious repercussions from the ATO such as heavy penalties and fines resulting from not having your tax prepared appropriately.
Proper bookkeeping keeps all the tax records properly organised and helps you to avoid any surprise visits from the tax man.
Well Organised Record Keeping
At any one time, a business owner should be able to find any relevant business information they may require.
Besides the ATO, there are other parties interested in your business records such as the employees, potential or current investors, creditors and much more.
Failure to present such information whenever required might lead to heavy penalties and fines or halting of the cash flow and a loss of business confidence.
Disorganised books can result in terrible relationships with all these stakeholders, and is something that can be easily corrected with proper bookkeeping.
To Ascertain Profitability And Growth
With proper bookkeeping, the business owner is able to assess whether the business is making profits or not.
A lot of business owners often ignore this part but it’s crucial to the success of a small business.
With properly organised records, it’s easier to assess the growth and progress at any point in time.
As such, the business owner can use this information to determine where some expenses need to be trimmed or where to inject more profits.
Improved Decision Making
Various types of business analysis can be carried out with up to date bookkeeping records. With proper analysis, there is improved decision making.
However, these two elements can only be acted upon with organised books and proper bookkeeping.
Any business owner looking to make profitable decisions about the company needs the necessary financial information to back everything up.
For Planning Purposes
Bookkeeping is able to demonstrate the past financial performance of the company to allow the business owners and stakeholders to plan for the future.
Understanding how the business has been working, the strong points and the weaknesses goes a long way in helping to prepare for the future.
Improving The Cash Flow
Bookkeeping is the key to improving the cash flow of any small business.
Here, the revenues, liabilities, payables and receivables are recorded allowing the business owner to track when supplier and customer invoices are paid.
It’s important to ensure that all your customer invoices and supplier invoices are paid on time to avoid incurring late fees.
With good management, if you are able to reduce the amount of time it takes for your customers to pay you, and you pay your suppliers on time, or even a little late (if there are no lates fees), your cash flow will improve significantly.
Ignoring bookkeeping for a small business can be disastrous. As seen above, it is critical for small businesses to have a handle on revenue, expenses and taxes.
This can be used to determine the future direction of the business as well as appeasing all the current stakeholders.
If you are looking for a blend of truly personal service and expertise, please call us today on 03 9510 2120 or contact us through our website https://numberspro.com.au/contact-us/