The Importance of Good Bookkeeping

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Paperwork in general and bookkeeping, in particular, are probably some of the least favorite business-related activities. Having a clear financial picture and projection is the only way you can know whether you should start a business. It will also tell you how well your business is doing once you start it, and how much room you have for growth.

It is required by law

In addition to many benefits that follow on this list, bookkeeping is required by law. Everyone dreads a prospect of an audit, but you can take a load off your chest by hiring professional services. As a business owner, you may find it difficult to stay on top of everything so outsourcing, or delegating this duty is very helpful. It will also prove to be crucial.

Tracking expenses

No matter how much work you do, you will never know how successful you are unless you get to the bottom line. You can only do this if you are aware of your expenses. Knowing your expenses can often help you save. Perhaps you are spending too much on certain items which could cost you less. Your profit increases as your expenses decrease. Another important role of tracking expense is for the sake of tax deduction. Certain business expenses are exempt from your annual taxes and your business can also save through those.

Tracking cash flow

Cash flow is the essence of your business. Apart from the wages and expenses that rely on it, you also need it to move your business further. A good insight into your cash flow will allow you to keep track of any outstanding accounts receivables and ensure timely payments. Any halts in cash flow can also cause halts in the chain of supply. This is a vicious circle you want to avoid at all costs.

All About the Cash Flow

Analyzing and planning made easy

With everything laid out in front of you, you will get a better chance at financial analysis. You can get an understanding of how certain business moves you took impacted your overall finance. It will also allow you to plan your future ventures. Someone with good financial acumen and clear books can easily determine what type of actions or a campaign you need to run next in order to maximize your capital.

Keeping investors informed

If other people or businesses have invested into your business, they will want to know how well their investment is doing. The role of accounting and bookkeeping is to organize and keep records of your finances. With well-kept records, you can easily produce reports for your investors to see. You can prepare them periodically as agreed, or on demand. It does not really make a difference when your books are up to scratch.


Taxes are a buzz word for about four months before they are due, and perhaps even a couple of months after. There is a reason why there is so much talk about them. They can be very scary and painful, especially if you haven't kept proper records the entire year. With proper bookkeeping in place, there is less to worry about. Another perk is that whoever did your bookkeeping, can also prepare your taxes.

Bookkeeping will help you stay organized and free of any potential penalties. Without bookkeeping it would be like playing a game without keeping score. You would be playing for the fun of it, without knowing how well or bad you are doing. The difference is that running a business is not a game, you are not primarily doing it for fun, and a lot more is at stake.

Guest Author

Steven Clarke

Steven Clark is a business consultant, marketing specialist and a regular contributor to several reputable websites. He likes to write about digital and traditional marketing, web design, social networks and everything new and innovative in the business world. When not working on new projects, he likes to spend time with his daughter in the great outdoors.