Importance of Accurate Bookkeeping
The importance of accurate bookkeeping cannot be underestimated. It touches so many aspects of the business.
Accounting and bookkeeping are critical components to managing your business properly, along with keeping these records for tax purposes. Maintaining accurate and up-to-date financial records for your operations will tip you off to cash flow and tax issues. Most important of all though, is accurate bookkeeping will determine your ability to successfully sell your business when you decide to make that decision.
Accurate bookkeeping is not only critical to any potential buyer, but also any lender that a buyer asks to approve a loan.
With these reasons in mind, here are a few basic definitions that should be a part of your company’s standard accounting practices.
Revenue and Expenses: Each transaction must be recorded, as it’s critical to the business to know what funds are coming in and what’s going out, and from where it’s coming and going.
Cash: Record the amounts of cash your business spends annual to determine accurate expenses. You can examine the reimbursable checks written and keep a detailed petty cash record to accurately document cash expenditures.
Inventory: Inventory records are critical. Many businesses let this slide—when they do, they lose track of one source of revenue. Without this tally, the record-keeping for each month and year will be off. You may be making decisions on inaccurate data!
These records will also help with your forecasts for the coming year by tracking trends, prevent stealing, and misplacing merchandise, which can help keep inventory holdings to a minimum. Track the dates when inventory was purchased, stock numbers, purchase prices, dates when it was sold, and sale prices.
Accounts Receivable and Payable: Show me the money! You must know what your customers owe you and the amount of debt you owe to others. All of the data you have is important to record: invoice dates, invoice numbers, sale amounts, contract terms, dates and amounts paid or due, account balances, and updated client information.
Employees: If you have even one individual on your staff, you have a responsibility to file and pay forms and payroll taxes to your state and the federal government. Employers are responsible for maintaining employee forms such as the W-4 and the I-9. You must keep records on withholding, employer matching, unemployment, and worker’s compensation.
If you are going to tackle your own bookkeeping, you should consult with an expert, particularly at the start to make certain that you are doing things correctly. As the business expands, you decide to hire a bookkeeper and perhaps use more sophisticated accounting software programs.
If you’d like to talk about bookkeeping, especially if you are considering selling or buying a business, buying a franchise or a related service such as valuing a business, please visit our website Services and choose from the drop down menu the information you would like.
For more immediate help, you are welcome to send an email to Andrew Rogerson or give me a call on 916 570-2674.