8 Reasons Why You Can’t Be Bad At Bookkeeping

• Reading Time: 5 Minutes
• Published: August 9, 2021
• Last Updated: January 14, 2025

Bookkeeping helps you save money and execute a sound business strategy by following well-defined procedures. It is more than just a way to keep track of profits and expenses; it is an integral part of the business’s growth. In fact, it protects the company from dishonest workers who engage in tax avoidance and accounting fraud. That’s why managing your books should not be done as a strategy to save taxes. Poor bookkeeping can cause plenty of issues that can potentially bring your business to a halt. Here are some of the major reasons why you can’t be bad at bookkeeping.

1. Taking Business Decisions:

If you don’t recognize the company’s overall financial condition, you won’t be able to make accurate investment decisions. You need a precise and informative view of your company’s financial status while making difficult choices about recruiting or dismissing staff, marketing, and business growth. This data is important because it allows you to run vital financial analyses and make educated decisions based on the latest economic conditions that your business is facing. It also helps you in managing your account better- let’s see how.

2. Account Management:

The importance of bookkeeping in account management cannot be overstated. The aim of bookkeeping is to determine the performance of a certain accounts receivable or payable. It can reveal past due balances as well as overpayments. Not only the bookkeeping data help in day-to-day account management, but it helps in the funding process as well as when a new member or shareholder joins the business. Having correct account balances is crucial in such situations.

3. Cash Flow Management:

What if it is the month-end and you don’t have enough funds in your company bank account to pay your staff or manage any other business expenses? Bear in mind that such expenses will inevitably arise each month, and you must be prepared to deal with them. If you don’t keep track of your cash inflow and outflow, you might find yourself in an uncomfortable position where you might not have enough money to pay your bills. Proper bookkeeping will help you escape complications like this.

4. Avoiding Payroll Errors:

Your workers are your company’s first safeguard. You would not be able to run without them, and they deserve to be rewarded first and on time. Your workers’ salary benefits can be tracked and allocated correctly per cycle, thanks to good bookkeeping. Good bookkeeping also leads to managing reconciliation properly. Payroll mistakes might have an effect on the relationship you have with your team. If you fail to pay the correct payroll taxes to the government, you are most likely to face penalties and even imprisonment.

5. Managing Inaccurate Reconciliation:

Monthly reconciliation of balance sheet accounts is necessary. It takes a lot of effort at the end of each year to go through twelve months to discover a double posting or a cash account that hasn’t been reconciled. Tax estimates will be thrown off if any mistake in entries is made.

Any record with a beginning and closing balance on the statement can be reconciled. This applies to checking accounts, credit cards, deposits, and lines of credit, among other things. Often companies refuse to reconcile not just any of their accounts but also the most important ones, such as the general checking account.

The best way to make sure you have paid for all of your business activity is to reconcile your records. It will also assist you in determining whether you have overstated or understated your income or expenditures or when you have to borrow money from a bank. Accurate financial statements are essential to the company’s potential growth.

6. Taking Credit From Banks:

You may need to borrow money from a bank at some stage, whether it’s for a one-time loan or a line of credit. Banks, on the other hand, would not believe you if you do not have a clear track record. Banks depend on your own documents to decide whether or not to extend credit to you. If you don’t have proper documentation or evidence, the bank is unable to make a decision and also assumes that you are bad with money. If you apply for loans right away without good evidence to prove you will be able to pay them back, banks will not grant you any loan. Your interest rate and payments would be higher than you deserve. Furthermore, if the bookkeeping is not updated, you are more likely to make late or missed payments.

You may not use credit, but you may need to hire an investor at some point. Raising money is a difficult task. Before making a decision, the investor would like to see all of your financial records going back years. They won’t spend until you can show them well-managed books. You have to show them correct records to allow them to see the future of your business.

7. Foreseeing Future Opportunities:

Accounts that are up to date will aid in determining the performance of each department, product line, and delivery channel. The balance sheets, benefit and loss accounts, tax refunds, cash flow, and receivables are all documents that help in spotting prospects for further development and expansion. It provides the company owner with a good view of the money that is required for potential expansion, which also keeps his mind at rest.

8. Stress Management:

Bookkeeping for new business can seem to be a little inconvenient, needless and even a waste of money and time. But managing your new business along with taking responsibility for disorganized bookkeeping will create a lot of stress and that is something you can’t afford.

Encourage Outsourced Bookkeeping

In any company, big or small, bad bookkeeping is unacceptable. It takes away the opportunity of the company owner to keep track of accounts, obtain loans, maintain banking relationships, relieve uncertainty, compare to industry expectations, and make sound decisions. If you are unable to do your own bookkeeping, it is preferable to hire others to do so for you. Hiring professional bookkeeping services can help you avoid the issues listed above and ensures a high commercial credit record, which is essential to make a name for yourself in your business. If you have a good online bookkeeping service provider, you can use the power of good financial reporting to make smart decisions to shield yourself against future contingencies.

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