What is bookkeeping, you ask? The bookkeeping process is where you record your company's financial transactions on paper or accounting software. Through this process, you can know the status of spending and income. This information gives you an idea of the tax deductions you can claim.
Today, bookkeeping and accounting occupy a prominent role in the business world. According to Maryville University, the projected increase in accountant and auditor employment from 2016 to 2026 is expected to rise by 10%, as estimated by the US Bureau of Labor Statistics (BLS).
But let’s first consider the difference between bookkeeping and accounting.
The roles of a bookkeeper and an accountant are very well-defined and distinct from each other. A bookkeeper will give you a snapshot of the status of your financial transactions. An accountant, however, analyzes your financial data and produces financial models for your company.
Bookkeepers record daily transactions, whereas accountants use the information to evaluate the financial situation. An accountant cannot proceed without the information provided and stored by a bookkeeper.
Once the bookkeeper’s work is done, the accountant interprets the data to tell you how to file your taxes for the best results with maximum refunds and rebates.
If you don’t have your books up-to-date, you cannot calculate your net profit for filing your tax returns. You can only know your total income and expenses with the help of proper bookkeeping. If your books are kept accurately by a bookkeeper, you can keep track of your tax deductions.
To record all your transactions in an organized way, you need to correct errors shortly after they occur. If you don’t have a competent person to record your data, errors will likely go unnoticed. To get the best out of your transactional dealings, you need to correct errors promptly before they impact your business.
Even a single error in a spreadsheet can incur huge losses. A TransAlta spreadsheet's cut-paste error caused the Canadian company to buy more US power transmission hedging contracts at high prices. It resulted in a loss of $24 million to the company.
Unless you get your books updated regularly, you will be unable to gauge your establishment's financial health. You need to get an idea of cash flow, sales, and other entities that involve cash. For instance, are high shipping costs eating into your profit? Efficient bookkeeping can answer these questions.
Most companies cannot operate on the cash they generate alone. Many businesses start with funds borrowed from lenders. If you need a loan for your small business, you need to start a line of credit from a bank or get seed money from an investor.
Neither a bank nor a private lender will be ready to part with their money without proof that you are a sound investment. Proof of your financial stability can only come from your books. A lender will look at things like your balance sheet, income statement, and cash flow, all of which come from the information recorded by your bookkeeper.
A competent bookkeeping service empowers you to make better budgeting decisions. Your books will always be in order for the tax season, and your documentation will be ready for audit at any time. Best of all, you spend less time recording financial details and more time running your small business.
If you have a good bookkeeper, you spend less time recording financial details and more time running your small business. You can keep your finger on the pulse of your business concerning revenue, costs, and profitability.
You can trust a bookkeeping service like Fincent with your sensitive data, which will process it responsibly and accurately. That way, you can put more time and effort into growing your business instead of getting stuck with keying in data.