Good bookkeeping is essential for every business to manage its cash flow, monitor the progress of the business, and ensure compliance with all the financial laws and regulations.
However, one mistake that small businesses usually make is handling the bookkeeping function themselves, which proves to be overwhelming in the long run, given that they have limited time on their hands and multiple tasks to attend to daily.
When it comes to bookkeeping, minor mistakes can affect your profitability and financial projections, which is why good bookkeeping is essential for your business.
But, before we look at the importance of bookkeeping, let us take a minute to understand more about bookkeeping.
What is Bookkeeping?
Bookkeeping is used to record every financial transaction made by the company and includes sales, purchases, payroll, etc. To be up-to-date with the company's financial position, you need bookkeepers who diligently maintain all the financial records.
Bookkeepers also cross-check and maintain all financial records so they can be easily accessed when needed.
To understand the bookkeeping process, let us dive deeper into the two types of bookkeeping, Single-entry and double-entry bookkeeping.
In single-entry bookkeeping, the bookkeeper follows a simple procedure of recording the daily or weekly transactions made by the company to monitor the cash flow. Then, at the end of the day or week, the final available balance is calculated depending on the period you choose to update the sheet.
Here are some of the primary entries made in a single-entry system:
- Date: The date on which the transaction took place.
- Details: Essential details of the transaction are captured in this column.
- Transaction value: The value of the transaction is either credited or debited.
- Balance- This column makes it easier for you to understand how much money is left after recording the expenses. It is also termed Cash in Hand.
Small businesses generally prefer this form of bookkeeping as their transactions are minimal.
In this format, a two-side accounting entry system is practiced. The advantage of double-entry is that it displays both the credit and debit side-by-side, which makes it easier for businesses to understand the transaction. This type of bookkeeping is better for large firms as it is more accurate.
The standard terms used in this bookkeeping format are
Asset: Refers to the money and physical/tangible goods owned by the company or business.
Liability: Everything that the business owes to others, i.e., vendors, etc.
Owner's equity: The investment made by the owner in the company
Expenses: The money that the company spends to keep the business running on a day-to-day basis or for purchases.
A complete equation must balance the two sides, and the same applies in the double-entry format of bookkeeping, where the total credit and debit must be equal. This method helps in having more accurate data to cross-check and avoid fraud.
Now that you know a bit more about bookkeeping, let's discuss why bookkeeping is essential for all businesses.
Why is Bookkeeping important?
Regular bookkeeping is an excellent way for a business to measure its performance and draft plans accordingly.
Unfortunately, small companies can not afford to hire full-time employees to manage their bookkeeping and accounts because of the high cost involved.
An excellent alternative solution in such scenarios is hiring virtual assistants proficient in bookkeeping to manage it on your behalf.
Hire a bookkeeper helps small businesses save time and money while their in-office employees can concentrate on other essential tasks.
Some of the other reasons bookkeeping is important are:
- Track Profit and Growth of your business
To take your business to the next level, you need to understand clearly the present financial position of your business. Accurate bookkeeping can help you get a clear picture of your business and plant the company's growth accordingly.
The data acquired through bookkeeping helps monitor the business's growth over time. With the insights into your business's data, you can better understand how your company has been performing and how the decisions you make bring positive or negative changes.
- Easier to reach targets
Every business aims at growth over time, but to set business goals, you need to have precise data on your company, including the profit, loss, and even the growth patterns in each stage. Without accurate data about your business, it isn't easy to draft targets or achieve them.
However, not all businesses have the budget to hire a good employee for bookkeeping. As a result, many small businesses spread across the US have started outsourcing to virtual assistant companies to save their cost of hiring and saving time. Though several bookkeeping tools are available online, learning how to use them requires investing time and money.
The best solution is to hire from virtual bookkeeping services specialized in using bookkeeping tools to understand your business's financial growth and get placed higher than your competitors.
- Attract investors
Every small business needs funding to expand and grow in the right direction. To convince investors that your business is growing at a steady rate and has potential, you need to show them your accounts. Accounting records are essential for any investor to see potential in your company and invest their money.
Apart from this, investors who own a share in your company must be assured that your company is moving in the right direction, through your financials.
- It keeps you prepared for taxes
Every business has to file its tax returns every year, which can be time-consuming and hectic if your records are not maintained properly. With a bookkeeping assistant on your team, you can be sure of having all your financial records appropriately maintained, helping you file your taxes faster and more efficiently.
- No negative publicity
Not having your financial statements and information regarding your purchases or the money coming in can also be a violation of the law. They could lead to huge fines and even litigations. The media also tends to highlight such instances for public awareness. As a growing business, any negative media attention can affect your business sales as well as active investors.
The best way to grow and do it the right way is by hiring a bookkeeper and, in the case of small businesses, a bookkeeping virtual assistant to keep your company out of trouble and have a clean chit.
- Maintaining accurate records
Staying updated with documenting even the most minor purchase can help avoid errors or last-minute stress when looking for an important invoice. Bookkeeping will not only help you stay updated with the financial condition but will also be very helpful in keeping proof of transactions.
- Planning strategy for growth
For any business, big or small, the financial budget creates a clear roadmap to work and plan out strategies to grow while staying within budget. However, without accurate data on your company's financial transactions, a lot of planning and strategy will be based on pure guesswork, which may not be accurate.
Not all businesses are lucky enough to land with big investors, so the only option available to grow your business is to apply for grants and loans. To apply for grants and loans, you need to share your financial statement, which needs to be accurate.
With regular bookkeeping and a detailed report of your company's financial records, you can easily apply for loans and grants to grow your business.
- No stress
Not having accurate information about your financial records can cause stress due to the uncertainties involved in your company’s accounts.
Hiring a bookkeeping assistant can ensure timely and accurate recording of your company’s accounts, leaving you stressed and worry-free to plan the future of your business.
Also read our blog: Why a Bookkeeping Assistant is the Best Choice for Startups
How Wishup’s Virtual Assistants can help you grow your business?
Small businesses can benefit immensely by hiring virtual assistants specializing in bookkeeping for their business. Some of the other benefits you can enjoy by hiring virtual assistants from Wishup are:
Save Time: Since virtual assistants work from the comfort of their homes, their geographical location can be anywhere on the map. You can utilize the time difference between you and your virtual assistant by assigning them the task before you go to bed. This way, your books will be updated and ready to look at when you start your day.
Cost Efficiency: Hiring a full-time employee to maintain your books can be pretty expensive, considering the other overheads involved in hiring a full-time office-based employee. But with a virtual assistant, you only have to pay them for the hours they put into working for you. Besides, you will not have to pay for their travel allowance, provide a desktop, or even pay for the expenses associated with a full-time employee.
Accessibility to global talent: Without geographical constraints, you can hire the best talent for your business from across the globe. Their international experience and network can also be beneficial to you in growing your business.
Moreover, Wishup hires only the top 1% of talent, which means that you get to work with the best resources.
Extensive work experience: The Virtual Assistants at Wishup are trained in 200+ skills and have prior experience working with other companies. You can use this experience to your advantage and follow the strategies that worked for other companies to grow faster.
More organized: Virtual assistants usually work with more than one client, which makes them highly efficient and organized in managing your tasks, be it bookkeeping or just managing your inbox.
Bookkeeping is the heart of every business, and our virtual assistants keep it running!
Accurate bookkeeping is essential for all businesses, irrespective of their size, as it provides a clear picture of your company’s financials. It helps you comply with local laws, understands your business's cash flow, plan on scaling and growing your business, hire more talent, etc.
If you wish to know more about bookkeeping virtual assistants or hire a virtual assistant to manage your bookkeeping tasks, you can check out our website www.wishup.co or write to us at [email protected] for a free consultation.
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