Why Getting Your Bookkeeping Done Matters
Everyone tells you to get your books done. Here is what bookkeeping is, and the reason I think matters most.
Bank managers, accountants and bookkeepers like me are always telling you to get your bookkeeping done.
Why?
And what is bookkeeping really?
What bookkeeping is
Bookkeeping is the process of recording financial transactions and keeping the financial records that support a company's financial statements. It is only one small part of accounting, which is the overall examination of a company's financial results.
The word comes from two words. "Book" means a set of blank or ruled sheets for the entry of accounts. "Keep" means to make regular entries in, or maintain a continuous record of transactions. Of old, bookkeeping was done on paper.
So why do you need it done?
Bookkeeping provides two kinds of information: the current value of an enterprise, and the change in value, profit or loss, over a given period of time.
Managers need that to interpret results, control costs, budget for the future and make financial policy decisions. Investors need it to make decisions about buying, holding and selling. And credit grantors need it to decide whether to grant a loan.
But there is another, more important reason to keep your bookkeeping up to date. It is this:
CONTROL EQUALS INCOME
What does that mean?
It means the more you have things under control in your business, the more income you will get. That includes having your finances in order.
What gets in the way
Some people see bookkeeping as an admin exercise they cannot be bothered with. Or "I will do it at the end of the year". Or "I will do it when I get a minute", and then somehow it never gets done. Some think it is only done to appease the tax-man.
In all those cases, the real purpose of bookkeeping has not been understood.
How can you make good decisions about your business if you do not even know whether you are making a profit or a loss? And you will not know that until your bookkeeping has been done!
One more reason
There is no faster way to lose a customer than to have incorrect accounting of what they owe you.
So, make sure your bookkeeping is done, and kept up to date at regular intervals.
As always, keep it simple and... Flourish and Prosper
Lisa
I learnt the management technology I use in my business at the Hubbard College of Administration.
P.S. If you would like to know whether your books are right, ask me for my free Diagnostic Review, because I take a read-only look at your QuickBooks and give you a plain-English report, and I would rather you knew where you stand.
