profitjets logo

Importance of Bookkeeping for a Growing Business

Importance of Bookkeeping for a Growing Business
Read Time: 5 min

Starting a business presents a unique set of difficulties. Getting a business off the ground and profitable can take a lot of time, work, and energy. Finances are a crucial issue for many business owners. These are just a few of the reasons why employing a bookkeeper needs to be one of your top concerns, from having little funding to being unable to manage the accounts. 

Daily bookkeeping can make or break it when assessing and understanding your business. A developing business might benefit from bookkeeping by getting funding, managing cash flow, being tax compliant, and organizing operations. Although it may not be carried out the same way across all industries, bookkeeping is an essential component of each business and is unquestionably critical to its success and operation.

What Functions Does Bookkeeping Serve?

Functions Does Bookkeeping Serve
Functions Does Bookkeeping Serve

For legal and financial management reasons, bookkeeping is crucial for your company. Maintaining proper records allows your company to see its health through financial statements, such as income statements, balance sheets, cash flow statements, and more. Accounting professionals arrange and analyze this economic data, frequently making recommendations to assure accuracy and improve spending, whereas bookkeeping ideas involve recording this information.

The value of bookkeeping goes beyond simply maintaining order. You can plan for the future by meticulously documenting all incoming and living expenses. Using proper bookkeeping procedures also enables you to answer questions from the IRS and prepare for audits.

So, a few essential pointers show the importance of bookkeeping for growing small businesses are as follows: 

1. Obtaining funding through bookkeeping:

When your books are six months behind schedule, and you already have a tonne of work to accomplish, you realize you need additional funding. The worst, yes? Maintaining your books weekly or monthly might spare you the agony of having to complete several months’ worth of housekeeping all at once, which typically yields mistakes and potentially inaccurate data. 

Investors will be impressed by a tiny business that can track every dollar it receives or spends. The first few years of operation are typically when small enterprises exhibit a feature known as ignorance of accurate record keeping.

2. Control of cash flow:

How do you keep track of your money if you don’t check your bank balance daily? By regularly tracking your bank transactions, you can precisely track your cash flow and determine crucial metrics like burn and run rates, allowing you to determine how much cash is required to get through this week, month, or year.

3. Determine Effectiveness:

Are you only paying attention to your top-line revenue? You will be able to identify areas of your company that could be more or less profitable or that could be optimized by reviewing well-organized books. If you examine your books closely, you can discover that a particular area of your solutions or items has a more significant profit margin. 

Based on financial analysis, your company can adjust and invest in specific areas to become more optimized. Maintaining clean records as a foundation for your company’s success can help you not to miss any opportunities.

4. Measuring Profitability and other Key Performance Indicators (KPIs):

Avoid being that person at dinner when your business-owning pals discuss their KPIs, and you find yourself blanking. Consequently, you are aware of both the cost of production and the price at which you sell your goods or service. Have you given labor costs any thought? 

Have you considered indirect expenditures like facility prices and credit card fees? Your estimate of profitability could be affected if you don’t keep track of your transactions and maintain accurate books.

You cannot adequately measure any aspect of your organization without knowing how much money has been spent on each expense category. Without seeing a complete set of financials, a trusted advisor will struggle to help you make business decisions.

5. Keeping to tax laws:

Recently received a tax notification in the mail? You weren’t even sure you paid the tax bill a month ago, but you can’t remember yesterday. All of us have been there. You would know for sure if that payment was made and when it was made if your bookkeeping was current and you were keeping track of transactions. 

The IRS can impose hefty fines and penalties for noncompliance, not to mention they give you a headache. If your books are up to date, you can compute any taxes owed precisely and track when payments are made.

6. Accounting assurance:

You can be sure that you are ready to send over financial information and records if your company receives notification that it is being audited. The pressure of the audit process will be reduced by having correct and current books. 

The average audit procedure costs an additional 60+ hours of your bookkeeper’s labor. Investing in accurate financials will pay off if the financials are not well-kept. Save yourself the tension and begin your finances accurately.

7. Business operations organization:

How is the business? This is the dreaded question you attempt to answer even if you are unsure of how your finances stand. When this question arises, you’ll feel assured and be able to respond by keeping correct books and records. 

You will be able to see how performance is progressing and whether your firm is expanding. Making proactive decisions to get back on track as changes occur is made possible by having a solid understanding of basic bookkeeping. This information is essential to know your organization.

8. Buyout Possibility:

Is a potential investor or interested party interested in purchasing your company? You can determine the worth of your company in your sector by having precise financials. They’ll also reassure the investors who made you a firm offer, giving them peace of mind. 

It will provide guarantees to enable both parties to feel confident about finishing the buyout procedure. Your ability to determine an accurate firm’s value will be hampered, and you risk losing your buyer’s trust if your books are inaccurate.

Professional bookkeepers are not required to work full-time. When possible, these functions should be outsourced to companies with plans to assist small- to medium-sized businesses in doing what they do best: offering customer services and solutions. 

It is ineffective for a business owner to concentrate on expanding their company while managing the bookkeeping and accounting. Business owners frequently tend to disregard the reality that when a company grows, correct bookkeeping and tax preparation become considerably more challenging.

More than ever, bookkeepers and accountants are assuming financial advisors roles. Bookkeepers and the teams who work with them are examining your data firsthand and will be the ones to provide suggestions or voice concerns.

How to Implement Accounting and Bookkeeping in Your Business?

Implement Accounting and Bookkeeping in Your Business
Implement Accounting and Bookkeeping in Your Business

It’s critical to move if you want to give bookkeeping in your company top priority. There are two different kinds of bookkeeping, but one offers a distinct advantage.

You can tick the box by hiring an internal bookkeeper, but it might not be the most economical action. You’ll be responsible for paying other hiring expenses besides the employee’s salary, hourly wage, and insurance.

Using third-party online bookkeeping software can benefit from bookkeeping without incurring high fees. Keeping track of spending will help you ensure accuracy while minimizing errors. It’s easy to access cash flow information using a desktop or mobile site whenever you have questions.

You may track your funds accurately and centrally with the help of professional bookkeeping services offered by  Profit Jets. Unlike Quickbooks, we handle every aspect of documenting and assisting you in analyzing your finances, including 24/7 support.

By requesting online bookkeeping services immediately, you can start saving time for what’s important—growing your business.