The term bookkeeping is pretty foreign to most of us, except if you have a degree in finance and/or accounting. For most of us, this term is synonymous with movie villains and back-alley deals. The schooling system in America doesn’t prepare us for the real world but rather feed us information that we regurgitate for test and exams and forget about immediately after. So, most of us don’t know what taxes, mortgages or even what bookkeeping means, but we sure know what PEMDAS/BODMAS or a soliloquy means. So come along with us and learn more about bookkeeping and why it is important, especially if you own a business.
What is bookkeeping?
It is the regular record of a company’s financial transactions, and it keeps a company on track and provides them with all accounting information under one single file/document. It is key for all financing, operating and investing decisions that a company makes. Bookkeepers are the ones who manage a company’s financial information, and without them, a company won’t stay afloat. Bookkeeping is very important not only for the company itself but also for external users like the government, investors and other financial institutions. In other words, any respected company, be it small or large, depends on accurate and reliable bookkeeping to say afloat. This is why you should always hire professionals to do the bookkeeping for your company; it is one of the foremost things that will help you have a successful company and not waste money unnecessarily.
Why is it important?
It provides a reliable measure for a company’s success and can suggest potential strategies that make the company more profitable or gain more investors. Most investors won’t invest in a company with bad and unkempt bookkeeping, and this is why you need a regularly updated one to stand a chance in this increasingly competitive market. It can also give your company a benchmark for your potential revenue and income. You should spend money on a bookkeeper as it will pay itself in the long run as they will help your company flourish.
Accounting 101
1. Liabilities
This is everything that the business owes to others, such as a company’s account payable balances as well as any loans the company has to repay.
2. Assets
Anything of value to the business like equipment and machinery is considered as the company’s assets. It also includes inventory, computers, cash in your/the company’s bank account, money that others owe you and even the furniture.
3. Revenue
This is also known as income and is simply the money the company receives for its goods and services.
4. Expenses
These are all the bills that the company has to pay like loans, electricity bills, wifi, employees’ salary and everything that the company spends money on.
5. Equity
This is the amount that remains when you subtract the business’s liabilities from its assets, reflecting the company’s financial interest.
Why you should invest in a professional?
Most of us aren’t trained in bookkeeping, and this can easily overwhelm us; even though there are softwares out there that can keep track of your accounts, it’s not as reliable as a well-trained individual. Machines haven’t beat us on this one yet, but you can always invest in a bookkeeping software as there are many serviceable ones out there. Whether you are doing the bookkeeping yourself or hiring a professional, you should always find the right method or person for your business as that will help you be one step ahead of the game. Running a successful business isn’t a walk in the park, and you need to surround yourself with people who will help you develop your company.
For all your professional accounting and bookkeeping needs, contact ProfessionalBookkkeepers.ca now. With over 30 years of experience and certified professional bookkeepers, they will organize and declutter all your problems especially when it comes to accounting and administrations. Contact them now and let them help your business prosper.