Unit 2 - Introduction to Bookkeeping
Bookkeeping is the process of keeping track of every financial transaction that occurs within a business. Whenever a sale, purchase, income, or payment occurs, bookkeepers must make certain that all transactions are recorded within the correct section of the daybook (i.e. the suppliers ledger, customers ledger and the general ledger).
As you can imagine, a bookkeeper's role can be very time consuming, and as such, most small business owners pay for a bookkeeping service. On the other hand, large businesses may consider hiring a full-time bookkeeper, or even several. Nowadays, however, it's more common (particularly for small businesses) to use the internet rather than visiting a bookkeeper firm, as there are online forms to submit all your financial information.
Why is bookkeeping essential for a business?
The importance of maintaining accurate financial records cannot be stressed enough. Having said that, here are three reasons why tracking a business' finance is critical to the health, or even life, of a business.
1. Firstly, as a large chunk of your business' revenue goes towards paying taxes, it absolutely essential that bookkeepers maintain accurate record at all times. If you do not, you may incur unnecessary fees.
2. Secondly, having accurate financial records is crucial in helping to prepare your business for the long term. Knowing exactly how much money you have left to invest in some inventory or even more staff will obviously help your business greatly.
3. And lastly, if a business (especially a small business) is struggling to make ends meet, looking though your financial records to determine where to cut back expenses, may actually keep your business from closing.
The importance of a competent bookkeeper cannot be overstated. Having one can mean the difference between a successful, thriving business and one that ultimately fails before it even starts.