What’s the importance of bookkeeping to a small business? Why do entrepreneurs need accounting skills? What is the importance of accounting to a small business?
Well, I advice you read on to get the answers you seek.
Bookkeeping may look like a great time waster to most small business owners but it is a silent factor that can either make or break your business.
If you really want to grow from a small business owner to a big business owner, then you better start taking bookkeeping very serious. It is the life wire of your business.
What is bookkeeping?
Bookkeeping is just a small part of accounting or financial management in general, but it is a great place to start especially for small business owners who desire sustained business growth. Bookkeeping is all about keeping and maintaining financial books. These financial books are very crucial to both small and big business survival. If you are poised for growth and success, some of the books and records you should be keeping are:
- Cash Book
- Inventory / Stock book
- Assets Record
- Profit and Loss accounts
- Payroll records
- Sales invoice
- Cash receipt
- Credit purchases / Debit book
- Cash payment vouchers
- Bank transactions
Having explained the various books every small business owner should keep; below are six reasons why bookkeeping accounting is important for your small business.
1. Bookkeeping helps you plan ahead for your business.
You can call it budgeting; it is all the same. Forecasting your business needs ahead and planning for purchases and other business miscellaneous will become easier with bookkeeping.
2. Bookkeeping helps your small business meet deadlines and help you make timely payments of loans, rents, bills, taxes and so on.
3. Cash flow management is never be possible without proper bookkeeping and no business can stand the test of time without effective cash flow management.
4. Bookkeeping helps you evaluate the performance of your small business to know if your small business is stagnant, depreciating or growing. When you know the performance level of your business, you can strategise and make certain adjustments on your business.
5. Bookkeeping helps you forecast the future of your small business, set projections and goals for the business.
6. Bookkeeping helps you know when it’s time to bring in extra hand or increase your employee base. Bookkeeping will help you know if your business can foot the extra expenses incurred by bringing in new employees.
As a final note, proper bookkeeping will help you compare your present financial status to previous year records at any point in time. This will in turn help you analyze your growth rate.
If you are growing at a rate of 25% or 100%, it will be determined by the financial records. So I hereby advice you to start bookkeeping for your small business today and you will see an improved positive cash flow in your business.