DO SMALL BUSINESSES NEED BOOKKEEPING?
- Danish Khanna
- Nov 29, 2023
- 3 min read
Updated: Jul 24, 2024
Even if small businesses don't have many daily transactions, it's important for them to handle their money carefully, especially when dealing with big projects or buying new equipment. Keeping accurate records, making sure the bank accounts match up, planning for taxes, and getting financial advice are really important for doing well. Small and big businesses both need bookkeepers to control their money and investments. So, hiring bookkeepers is a must for businesses of all sizes, helping them keep an eye on and handle their money well. Here are some other reasons why bookkeeping is essential for small businesses.
1. RECEIVING PAYMENTS
Bookkeepers handle invoicing and make sure customers pay on time. Without this system, business owners would need to check with each customer for payments, which can be hard with many other tasks to do. As the number of customers grows, the work gets even busier. If payments aren't tracked well, it's tough to get all the money on time. Late payments can hurt cash flow and cause money problems. That's why it's important to have professionals, like bookkeepers, to manage these tasks.
2. ORGANISING FINANCES
The most important part of bookkeeping is keeping records. Professionals make sure to accurately write down every transaction that happens in the organization. This helps in knowing how much money was spent and how much came in. When the books are organized without mistakes and in order by date, it ensures that no transactions are missed, and all financial statements are prepared correctly. The business owner can check the records anytime to see details about any cash payments.
3. PREPARING A BUDGET
For new businesses, it's crucial to focus on expenses and available funds. Bookkeepers help by creating a realistic budget that matches their goals. This budget helps entrepreneurs understand spending limits to keep operations running well, use capital wisely when needed, and predict profits. The budget serves as a financial plan, guiding effective money management. Without clear spending and saving direction, there's a risk of chaos, debts, and even bankruptcy.
4. AVOID A HIGH TAX PAYMENT
Lots of small business owners end up paying a lot in taxes because they forget to claim deductions or don't keep good records of their expenses. It's crucial to know about every business expense when filing tax returns. Bookkeepers plan for tax season right from the start of the financial year.
5. STOP ACCOUNTING ERRORS
Bookkeepers keep books without mistakes, and they do this through bank reconciliation. This means checking the company accounts against the bank statements to find any differences. Reconciliation helps catch frauds and mistakes in financial statements. Bookkeepers do this regularly to make sure the business balance matches the bank statement.
6. PAYROLL PROCESSING
In small businesses, there aren't separate departments for different tasks. Bookkeepers handle many money-related matters in these setups, including managing payroll. They process salary payments and handle payroll taxes for businesses if needed. Bookkeepers play a crucial role in performing various valuable activities for small businesses, making them an essential part of the system.
7. SECURING FINANCING
Most small businesses need funding in the initial years to grow and expand. Professional bookkeeping and up to date financial statements help them to convince investors and lenders about the financial health of the organisation and its future financial projections. With all the records like balance sheets and cash flow statements in place, getting funding becomes a cakewalk for business owners.
8. IMPROVING PROFITS
Every business aims to make a good income, and a bookkeeper's help is crucial for achieving this. Bookkeepers provide seasoned financial advice by analyzing documents to understand the business's financial status, strengths, weaknesses, and manage aspects like stock and suppliers. They advise entrepreneurs on ways to increase earnings, improve cash flow, and invest in profitable projects. Bookkeepers also implement cost-cutting measures, ensuring bills are paid on time to avoid penalties and late fees. Their guidance is essential for a business's financial success.
To summarize, bookkeepers possess the knowledge, tools, and expertise needed to maintain accurate financial records. They act as catalysts for creating successful businesses by employing proper bookkeeping methods and ensuring error-free calculations. With their assistance, small business owners can effectively analyze, record, and manage their finances.
Book a free consultation with Money Molar to see how we can help you with your books!
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