Bookkeeping is important because having a seamless system of organization in place for recording all of the inflows and outflows of capital in a business is essential to keeping that business successful.
This system needs to be efficient in keeping a record of all transactions, when they happened, and for what reason.
Bookkeeping is also important for certain accounting functions. For example, good bookkeeping helps prepare for tax season, get external funding, in decision-making, with auditing, and much more.
When tax season arrives, a business with an efficient bookkeeping process will usually be less stressed and pay fewer taxes. This is because business owners won’t need to scramble to look for old receipts that the IRS needs to prove their previous expenses.
Also, if a business needs a small loan, banks will want to see its financial statements to know whether they should approve one. Having your books in order will ensure the bank managers that you are an organized professional and someone they can trust with their money.
Lastly, bookkeeping allows managers of the business sufficient data to discern where resources should or should not be allocated. Budgeting helps managers make informed decisions so that funds are distributed to the correct places with the highest return on investment.
Basic Steps Involved in Bookkeeping Services
Bookkeeping is a lot of tedious data entry, but it is essential to running any business successfully. Bookkeeping is the process of recording and organizing all of the financial transactions that occur in a business on a daily basis. Each transaction needs to be categorized and noted in the corresponding journal. These journals are then used to create the General Ledger. The General Ledger is used to prepare the trial balance, which is used to produce the financial statements. Financial Statements are very important to decision making. This is because they illustrate what is going on in your business,
including where money is being earned, where it is being spent, and where there may be areas to improve on. If you cannot see that one particular area of your business is costing way more than any other, you cannot potentially make adjustments to fix it.
The first step in effective bookkeeping is setting up systems to help you track all your business’s financial information. This can be as simple as signing up for a QuickBooks Online account and linking your accounts to it. Every financial transaction should be recorded with information including when it happened, who was involved, and how much money was exchanged. This will make it easier to follow how your money is moving through your company.