Accounting practises and bookkeeping may just seem like obligatory tasks that simply need to be ticked off the to-do list, however, there are genuine benefits that arise from properly carrying out these responsibilities.
Monitor changes and trends
Bookkeeping periodically will help you to stay on track with your accounts and allow you to access an overview of the transactions coming in and out of your business. It is often best to bookkeeping on a monthly basis in order to allow for a more detailed analysis of any changes and trends that your business is experiencing. A monthly reflection on your business’s strengths and weaknesses is often an overlooked task that can be very powerful. This is because, whilst remaining consistent with your bookkeeping schedule is important, being consistent with your business strategy may often be ineffective. Analysing the trends in your business and determining which aspects are popular amongst customers can help you find where to divert your resources and whether you need to find other services to offer. However, accessing a concise and clear overview of your business’ performance can only be retrieved from quality bookkeeping. As a result, it is essential that you bookkeep in order to be able to analyse how your business performed in the previous month and to determine what resources are being effectively utilised.
Creating a new monthly budget
Reflecting on previous performance is important, however, it is also critical to plan for the future and make some estimations for your business. Budgeting can often be pushed to the side or ‘done’ mentally with a quick guess of expected performance. However, this is not sufficient and it is often most effective to sit down and designate a time to really consider the small details of your business in the near future.
Having long-term goals are great for a business and by breaking them down into smaller steps that are achieved periodically, it is more likely that you will be able to make the necessary changes in an appropriate time-frame to reach these aspirations. Therefore, a monthly budget is a great place to start as a month is not too long of a period but enough to make substantial change. By accurately bookkeeping, you will be able to see how your business spends on certain projects and what type of transactions are being made. This will allow you to get a clearer overview of your business’ financial position which will help you to more accurately plan for a new monthly budget. In this budget you can set out some short-term goals that you want to achieve in the next 30 days and better estimate what type of expenses you will come across. Furthermore, over time you will be able to track out the overall trend of expenditure and income across the year, allowing you to predict which months you are likely to generate more revenue and which months may be a bit quieter.
Keep tabs on your cash flow
Maintaining records for your transactions can get messy. Loose receipts and partial payments can quickly build up and begin to not make any more sense. Dedicating time to ensure that your invoices are accounted for is the best way to prevent major stress during the tax season. Additionally, staying informed on all of your transactions will also help to sift out any suspicious activity. As technology advances, there are growing amounts of cybersecurity breaches such as fraudulent credit card charges. Not keeping a close eye on these charges can lead to an accumulation of counterfeit withdrawals of thousands of dollars. This can be detrimental to your business and this is why bookkeeping is a beneficial task that can help to ensure none of these charges pass by you.
How to bookkeep
While reading all of the benefits of bookkeeping can inspire you to start, actually carrying out this task may take some time. Accounting and bookkeeping is a skill that you can learn and with more and more online software available, bookkeeping is becoming more accessible to a larger range of people. You can find out more about the online accounting software Xero here and also read our breakdown of exactly what this program is here.
Finding out more about the Essentials for effective bookkeeping can also help you start, but if you’re not about numbers and accounting, it may be helpful for you to outsource a bookkeeper. This will allow you to reap all of the benefits from bookkeeping without having to do all of the hard work and you can book a consultation to speak to us about your accounting needs right here.
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