Bookkeeping is defined in the dictionary as being “the work or skill of keeping account books or systematic records of money transactions.” One of the first things we learn when starting a business is to keep accurate records of everything that comes in or out. We hoard receipts, make sure to send invoices when asking for money, and add large expenses as fixed assets on the books. But why is this important? Why does this matter?
Other than protecting us come tax-time, systematic record-keeping can help a business owner run their business successfully. Let’s look at accounts receivable, or your money coming in. It’s very important for businesses to have good cash flow and in order to do that, we need to make sure we get paid on time. By making sure to send invoices and reminders for paying overdue invoices, we can make sure the income continues to enter our banks. This all stars with submitting an invoice and recording the income.
What about A/P or the dreaded bills? Late fees can rack up pretty quickly if we’re not careful about paying our bills. There is also the potential to double pay an expense if we didn’t record the payment in the first place. This can all be avoided with on time payments and recording that payment in the books.
Once we have a good system down and our books reflect what’s going on in the business, we can use this knowledge to scale our business. We can focus on the services or products that give us the most revenue or eliminate unnecessary expenses. Simple things like this can grow our business effectively, all from good bookkeeping.
Tell me in the comments what else you are able to do in your business when you keep up with your books.
