Bookkeeping is one of the most important aspects of running a business, yet it’s often overlooked.
Whether you’re completing bookkeeping in-house or working with a professional, keeping accurate and up-to-date records can help you track your income and expenses, understand your financial situation, and make informed decisions about your business.
Below, we’ll take a closer look at some of the benefits of keeping up-to-date bookkeeping.
The Benefits of Up-to-Date Bookkeeping
Whether you run a startup, small business, or multi-national corporation, bookkeeping can provide many benefits, which we’ll explore below.
1. Helps with Budgeting
Whether you’re running a large enterprise or a small business, budgeting is essential for better financial performance and growth. A budget acts as a financial roadmap for your business, helping you plan your next move.
If you fail to update your books, you’ll have to make a budget based on guesswork or incomplete information, resulting in an inaccurate view of your finances. This brings us to our next point…
2. Ensures Accurate Financial Records
Having to figure out the reason for a loss in revenue or unknown expenditure can cause immense stress. Not to mention the hassle of looking for financial statements at the last moment for tax preparation, which can lead to missed deadlines and other consequences. Keeping your books up-to-date allows you to access the information you need in no time.
3. Helps With Expense Management
One of the most challenging parts of running a business is managing expenses. The more you minimize these expenses, the more you can increase your profits. And the key to finding areas to lower your expenses is to track everything through accurate, up-to-date bookkeeping.
Let’s look at an example: suppose you spend $60 on a new keyboard, and on the same day, you earn a profit of $300 by selling your product. Without any records, you might believe that you profited $300 on that day when you actually profited $240. Bookkeeping means that you have accurate information regarding your company’s day-to-day expenses.
4. Offers a Revenue Forecast
A revenue forecast helps you understand how quickly your business can expect a return on investments and increases in revenue. Predicting the revenue your business can generate helps you make plans and move forward accordingly.
The simplest way to obtain an accurate forecast is to analyze your financial statements, which requires your expenses, income, and other financial components to be accurately tracked and updated.
5. Provides an Overview of Business Financial Health
A bookkeeping system records every type of financial detail, like what you gained or lost in a definite period. This can help you identify any concerning (or promising) trends. This insight is essential in developing an accurate financial picture, which is necessary for making sound business decisions.
6. Reduces the Stress of Tax Preparation
Tax season is a stressful time for business owners. Filing your taxes can be complicated and time-consuming, especially if you don’t have all the necessary documentation. Up-to-date bookkeeping reduces the stress of tax preparation by ensuring that you have all the information you need, organized and at your fingertips.
7. Makes Borrowing Money Easier
If you’re ever in a position where you need to borrow money for your business, lenders will want to see financial records to understand your business’s ability to repay the loan. Up-to-date bookkeeping records can make this process much less stressful and increase your business’s chances of getting approved.
8. Prevents the Need to Keep Financial Statements
Keeping paper copies of each and every receipt or financial statement might work during your first few years of business, but as time goes on and paperwork piles up, this will likely become more and more challenging.
By having everything tracked and up to date in bookkeeping software, you won’t have to dig for receipts to find out what you spent during a given time.
9. Makes Reporting Easy For Investors and Partners
When you have updated bookkeeping, it’s easy to pull reports for your investors or business partners. This gives them the information they need to make informed decisions about their involvement in your company.
Updated bookkeeping also shows that you’re organized and on top of your finances, which can instill confidence in your partners and investors.
10. Peace of Mind
One of the most important benefits of keeping your bookkeeping up to date is the peace of mind that comes with it. When you have a handle on your finances and everything is organized, you can feel confident in your business decisions and know that you’re making the best choices for your company.
From reducing stress to gaining the confidence of investors, maintaining accurate and up-to-date bookkeeping is essential for the success of your business. By keeping track of your expenses, income, and liabilities, you can make better decisions about where to allocate your resources and identify potential areas of financial stress.
If you could use some help getting your bookkeeping in order, LedgersOnline can help. When you work with us, you can focus on your business goals while we manage the numbers. Contact us today to learn more.