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Reasons why you should focus on keeping your bookkeeping effective

We all know that for the successful running of a business, keeping records of all the daily transactions is really important. But still, there are many businesses that do not truly understand the value of bookkeeping. Sometimes, they consider it as too much work and ask, why they should focus on bookkeeping? Well, to answer this question once and for all, we would say that bookkeeping is very important and necessary for every business irrespective of their size or industry to achieve transparency in the business results. Imagine running your business for a year and at the year-end realizing your accounts depict results that are far from reality. That is why you should focus on timely and accurate bookkeeping. Want to know how exactly effective bookkeeping helps business? Let's see!

For everyone’s sake, before moving to the importance of bookkeeping, let us reiterate what bookkeeping means? Bookkeeping in layman terms is the record of all the financial transactions that take place in the business regularly. A transaction may include purchase, sale, receipts, payments, etc. There are different softwares used by businesses for bookkeeping. Since efficient bookkeeping updates the business owners about the accurate financial health of a business, it would not be incorrect if we call it the essence of a successful business. But let us find answers to our main question now “Why should you focus on keeping your bookkeeping effective?”


: Importance of Effective Bookkeeping

1. Helps you stay law compliant:-

    Bookkeeping is required by law because every business, no matter the size, earns some income, on which they would need to pay tax and lodge the tax return. For accurate lodgement of tax returns, it is important that business transactions are recorded accurately on a daily basis and no deviations are made. Therefore, you should involve some good professionals for business bookkeeping so that you remain ATO compliant and avoid any tax notices. 

2. Enables you to make important decisions:-

    When your business records are accurately recorded, you would be in a better position to gain a fair idea as to where your business is headed. You will know how much the expenses and revenues are during the period. Such accurate records will also help you understand which area of the business is underperforming and you can devise strategies to revive such a business area. All in all, efficient bookkeeping helps business owners and companies to make strategic decisions, set out objectives for the future, and create plans for achieving those objectives.

3. Ease in tracking the profit and growth:- 

     When you have accurate accounting records in front of you, it becomes easier to track the profitability and growth of your business. Bookkeeping, when done effectively, helps you in analyzing the sources of revenues and expenses. This further helps you in understanding how profitable your business is based on which you can take steps to increase the sources of revenues and optimize the cost levels. Basically, you are able to create a growth path for your business when your bookkeeping processes are appropriate. 

4. Lets you detect and prevent financial frauds

   Bookkeeping helps in identifying financial fraud because accurate bookkeeping lets the accountant spot any error or abnormal transaction easily. Additionally, bookkeepers can also spot errors or fraud during the reconciliation process; it helps them in classifying transactions as legitimate transactions and abnormal ones. So, you must take steps to make your bookkeeping processes efficient, after all, your finances are at stake!

5. Preparation of financial statements

   Bookkeeping is an initial step towards the preparation of the financial statements of the business. Profit and loss statements are prepared on the basis of the bookkeeping. With the help of efficient bookkeeping, accountants can categorize the transactions accurately which makes it easier in the generation of the financial statements that represent the true and fair view of the financial health of your business.

We are sure that by now even you would also agree that bookkeeping is the backbone or foundation of a successful business. Running a business without efficient bookkeeping is like walking with closed eyes and expecting to reach the correct destination without falling or even staggering.


















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Comments

Digit | Bookkeepers & Business Advisors said…
Very well done. Absolutely brilliant information. I'm in love with this blog. You always provide such a great information about Bookkeeping in Perth.
March 5, 2021 at 6:23 PM
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