Relevance of Bookkeeping
Bookkeeping is a fundamental tool for forecasting and planning. Accurate records help businesses chart their financial course, identify opportunities for growth, and mitigate risks.
As a business owner, you’ve got a lot of things to agonize about. One minute you’re helping the marketing team formulate new strategies, the next you’re busy with sales and monitoring of products for shipment. Most likely, bookkeeping is the last thing that would come to your mind. For a starting business owner, you can’t fully grasp the threat of its absence, but for a hotly pursued experienced businessperson, that word alone can send him goose bumps up and down his spine.
But what is exactly bookkeeping and why is it important in a business?
Bookkeeping is a service activity. It involves analyzing, classifying, recording, and summarizing of the quantitative information of a business primarily financial in nature. It helps you budget accurately. When income and expenses are properly recorded and organized, it makes it easier to review financial resources and expenses. Since budget serves as a financial roadmap for your business you can forecast and plan future expenditures and projects with the corresponding anticipated resources it needs to materialize in the future. Generally the objective of business is to grow and become successful and bookkeeping plays a huge role for future business development.
Financial statements are a product of bookkeeping. Its purpose is for business owners to understand where the business stands financially. It helps with the decision making process where you analyze the strengths and weaknesses of the business to know what to capitalize on or what to improve. With these reports being available, stakeholders are able to know the sustainability of your business. Since bookkeeping is also the organization of financial information keeping your financial records organized makes it easier to locate and provide to appropriate parties (IRS, employees, customers, investors, and lenders) to continue your dream of growing your business.
Bookkeeping is a vital function of having a legitimate business. In order for a business to flourish and create value bookkeeping shouldn’t be eliminated. It may not be the most invigorating part but it is the most important.