A successful business owner must know and understand the finances for the enterprise to run efficiently and grow exponentially. Availability of updated and accurate financial records forms the basis for rational decision-making for the business.
I have been lucky to master record-keeping and its importance in directing business operations from running my chain of bookshops, Archway Books located across Northern England. At work, I freed a few minutes every day to cash up, calculate and record totals for various performance indicators on a spreadsheet. Simplistic as it may seem, I realised many benefits to my expansion path; I always knew how revenues were racking up in all of my stores.
Additionally, I could use these financial records from Bould Bookkeeping to compare my business’s performance from one week, month or year to another, helping project future sales. Understanding your business’s financial numbers is the first step in expansion plans, addressing the loss of funds and boosting revenues.
For instance, late payments are one of the main hindrances to exponential growth for most business organisations. I relied on my records to ensure prompt payment of invoices and tracking down pending payments for sales in my book business. Additionally, financial records helped me conduct bank reconciliations which are key in managing operations and detecting losses.
I like working with numbers which made bookkeeping enjoyable and relatively easy for me. But, I understand not everyone may find it easy to generate or interpret financial reports.
To most people setting up startups, bookkeeping and data recording is not always a high priority, with greater emphasis directed to marketing, staffing and boosting sales and other departments. Nonetheless, understanding the limits, e.g. timing for income levels in your business, is just as important as the sales your business is making.
Why is record-keeping important?
Good bookkeeping should never be underrated; like other departments, e.g. sales and marketing, ICT support and customer relations etc., bookkeeping is integral for proper management of business strategies for profit maximising businesses.
Fortunately, you can always learn and master good bookkeeping practices to stay on top of your business records.
However, mastering bookkeeping can be quite time-consuming, but successful training for bookkeeping is a worthwhile investment for you and your business.
Alternatively, you could consider outsourcing bookkeeping duties to a professional like an accountant. For such as solution, you must weigh the benefits of outsourcing the bookkeeping services to the business against the physical cost of hiring a certified bookkeeper. The cost of outsourcing bookkeeping services will influence the profitability of your business.
Many business owners prefer outsourcing bookkeeping to free up time and focus on core business operations and other tasks. Also, outsourcing gives peace of mind to an entrepreneur who sleeps soundly, knowing a professional keeps track of all business obligations and financial performance.
Over the last few years, the bookkeeping industry has undergone tremendous modifications as operators demand continually innovative and efficient bookkeeping support services. For instance, many bookkeeping processes are now automated, and different types of financial reports have emerged to describe a business’s financial position comprehensively.
Whether you opt to conduct bookkeeping for your business or outsource, what is undeniable is that you need to know how to read and interpret financial reports. To understand and explain your business’s financial position, you need to be familiar with the structure and content of financial reports such as a Profit and Loss report, a Statement of Financial Position, or a Balance Sheet.
You need to understand further the implication of the metrics itemised in the report on the business assets and operations. For instance, depreciation accounts for the loss in value of business assets, e.g. a building over time, probably from wear and tear. Financial reports’ list of considerations is rather lengthy, making bookkeeping quite a daunting task to many businesses.
However intimidating learning bookkeeping may seem, a good record of transactions will help you avoid penalties for late accounting submissions, keep you up-to-date with your finances and maintain a steady cash flow growth.
How Often Should I Complete Records?
I feel it is important for business owners to know how often they should complete their accounts.
In my experience, I established that most business organizations account for transactions only once a year with an accountant’s help. One time in a year is too few a time; ideally, business finances should be checked and updated more than once in a year by the business owner or through a hired accountant. The more we can account for our business’s transactions, the better we understand the business.
Keeping track of the business accounts means the business owner monitors several key indicators such as profit margin, gross and net revenues during cash flow projection, or business capital utilization.