Bookkeeping is the process of recording business transactions whenever they occur. The process includes recording your income when earned and expenses when incurred.
This makes bookkeeping the foundation of determining the performance of any business. Poor bookkeeping is one of the reasons small businesses.
Let’s get down to why bookkeeping is king
- Business Analysis
Bookkeeping helps to generate information for analysing a business performance over a time period. As mentioned earlier bookkeeping is the foundation of determining the performance of any business, very importantly it is the bedrock for preparing financial statements. These financial statements which include the profit statement, statement of financial position and Cash flow statement can be analysed to determine the profitability of the business and also give you a fair outlook on the future growth prospects of the business.
- Tax Compliance
As you already know every registered business is required by the Tax laws to file returns every year. Filing of a business returns to the appropriate tax authority can be done seamlessly and more efficiently if there is a proper bookkeeping system in place.
- Better Business Decision Making
The chance of making informed business decision is highly certain when the accurate financial information about a business is available and easily accessible.
- Reporting to Current & Potential Investors
Investors are mostly interested in the financial performance of the business, which is then used to estimate the value of the company. This would not be possible if there are no financial statements the investors both current potential will not be able to evaluate the value of the company which result in not being able to make informed decisions.
- Effective Budgeting
When business transactions are properly recorded and categorized, it is easier to prepare and track a Budget.
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