If you own a business, you know the importance of bookkeeping in your day-to-day operations. But what is bookkeeping, and why is it so important? In this blog article, we’ll address those questions and more. We’ll also discuss the benefits of bookkeeping for businesses. So keep reading to learn more about this critical business function!
What is bookkeeping?
Bookkeeping is the process of recording financial transactions. This includes everything from sales and purchases to payments and receipts. In short, the purpose of bookkeeping is to track your business’s finances over time.
In business, “books” simply refer to records that contain all of the company’s financial data, primarily credits and debits. Transactions can be recorded manually in a journal or electronically on your computer system in a Microsoft Excel spreadsheet. However, almost every business today prefers the latter to organise their financial histories for a variety of reasons.
One of them is to avoid any latency between the recording of a financial transaction and its posting to the appropriate account. Accounting and bookkeeping software such as Zoho Books, Quickbooks, Microsoft Dynamics GP, and others are available on the market to make the jobs of bookkeepers and business owners as simple and efficient as possible.
Keeping your books of accounts up to date is advantageous and beneficial to you and every other entity associated with your business. Not only does bookkeeping assist you in effectively managing cash flows, but it also assists you in planning for the future.
Because it provides an in-depth look at your expenses and revenue, the practice also keeps you well informed about your business, allowing you to make big and small decisions that will help you successfully run the organisation and take it to the next level soon. Be aware that your bookkeeping must comply with the requirements of federal and local tax agencies.
Definition of a bookkeeper
A bookkeeper is another word for an accountant. The bookkeepers are the people who keep track of the financial records for a business. A bookkeeper accountant is someone who manages the financial books for a company.
The work of a bookkeeper includes keeping track of income and expenses, preparing financial statements, and reconciling bank statements.
All about bookkeeping
Bookkeeping can be done in either of two methods: single-entry or double-entry to log financial activities. There is only one entry per transaction in the single-entry bookkeeping style, and you report profits and expenses for all cash register expenditures.
The double-entry bookkeeping system, on the other hand, begins with a journal, followed by a ledger, a trial balance, and financial statements, and involves two entries per transaction, which means that every entry is recorded in at least two accounts as a debit or credit (expense or income). So, whether you’re a small business or a large corporation, choose a method that provides the most accurate and organised data.
Bookkeepers log business activities using proof of transactions such as bills, receipts, invoices, purchase orders, or other financial reports in accordance with the company’s accounting principles. To adequately log all business-related financial transactions, bookkeepers generally require a robust catalogue of all transactions and associated costs.
The transactions are typically classified as goods or services, wages, taxes, or other general business operations. When it comes time to audit all reported financial transactions, bookkeepers produce reports that provide an accurate picture of how the company delegated its capital. The balance sheet and income statement are the two most important reports provided by bookkeepers. Both reports should be simple to read so that all readers can understand how well the firm is performing.
States of bookkeeping survey
It is interesting to see how bookkeeping practices are geographically distributed across the world. It also informed that there appears to be some variation in what types of services accountants offer based on their location, with more remote locations tending not to have access or rarely use formalised records management systems like invoices, which can make it difficult to draw up reports later down the line.
According to a survey conducted by “accounting today”, the geographical reach of bookkeeping is expanding, and small businesses are purchasing a variety of accountant services.
What is Bookkeeping Services
Bookkeeping is keeping track of all financial transactions made by a business. It includes recording, storing, and retrieving financial data. An external firm or an in-house bookkeeper can provide bookkeeping services.
Auditing and bookkeeping services go hand in hand. Auditing is the process of reviewing the accuracy of financial records. Bookkeepers must keep accurate records in bookkeeping services to help businesses keep track of their finances and ensure that they are compliant with all the relevant regulations. Companies can choose from many different bookkeeping services, so it is important to find a bookkeeper that is a good fit for your business.
Why bookkeeping is important for your business?
- It helps you stay organised and on top of your finances.
- It allows you to track your spending and income over time. This information is essential for making sound financial decisions about your business.
- Bookkeeping provides a clear paper trail of your business’s finances, which can come in handy if you ever need to file taxes or apply for loans.
There are many benefits to effective bookkeeping, but these are just a few of the most important. Now that you know what bookkeeping is and why it’s so essential, you can start implementing some best practices in your own business. If you’re unsure where to start, we suggest working with a professional bookkeeper or accountant. They can help you set up an effective bookkeeping system that meets your unique business needs.
Whether you do it yourself or work with professional, effective bookkeeping is essential for any business. Now that you know what it is and why it’s so important, you can start reaping the benefits in your own business today!
What is the purpose of bookkeeping?
Today, just numbers and spreadsheets don’t define bookkeeping; it’s the painstaking art of documenting in words of one syllable the story of every single financial transaction in the sphere of business. Well-maintained books of accounts empower you to transform your business into a money-maker.
The foremost objective of bookkeeping is to gauge the financial effects of transactions happening in the industry by keeping a complete record of them in a systematic, orderly, logical manner with 100% accuracy.
Why should I do bookkeeping?
With tons of things to do in business, bookkeeping can easily slip to the last priority on the list in a wink. Not knowing the objectives or benefits of bookkeeping can leave one shrugging their shoulders as if to say, “Why should I bother about bookkeeping?” The answer is as clear as day:
- To truthfully record all financial transactions that result from business activities, best practices
- To determine and study the economic outcomes of business activities.
Advantages to bookkeeping
With accurate and complete bookkeeping, you:
- Get a detailed recording at your fingertips.
- Always remain compliant with the law.
- Can plan easily.
- Can get instant reporting.
- Have better relations with banks and investors.
- Can make better tax predictions.
- Enjoy faster business response time
- Achieve faster financial analysis
Bookkeeping ensures you budget precisely
It all begins with a budget and a financial roadmap for your business. Businesspersons have to budget now and then to plan for future expenses and the anticipated resources to cover those expenses.
Reviewing your financial resources and costs is required to achieve the same, which is only possible if you have accurate and up-to-date books. And it’s bookkeeping that simplifies the process of budgeting by organising the business’ income and expenses rightly.
Bookkeeping makes you tax-ready
Tax return filing is inevitable, and businesses must file one every year. However, suppose you don’t want to scramble through your desk to find missing receipts or invoices or all the related paperwork at the eleventh hour like a million other business persons.
In that case, you have to have an efficient bookkeeping system in your organisation. You can approach a professional accountant or bookkeeper, however. The corporate tax filing process and bookkeeping are also necessary for filing your tax return.
As a business owner, you must be aware of your income and that only books of your accounts can tell you. With a hale and hearty bookkeeping system in your company, you can have all your financial information handy for tax time.
Bookkeeping helps in decision-making
Financial reports and accounting information may seem time-consuming or confusing. But that data is the mainstay of your business, especially when you need to make big decisions. The relationship between financial information and business decision-making is a two-way street. If not for the necessary accounting information logged through bookkeeping, you (or someone else) cannot make decisions.
Whether to develop a new product or subcomponent in-house or employ a third-party production company to deliver the unit to us when we need one? Do I require a loan? Can I afford to hike the salaries of my employees this time? Should I purchase new equipment? All of these questions can be answered by looking at your financial reports. Accounting can help you make decisions based on the cost-effectiveness of each option.
Now that you know, a business stands on strategic, tactical, or operational decisions. And to be able to make the right decision at the right time, you have to analyse the financial elements that can affect your business operations, goals, and future activities. We don’t have to reiterate that bookkeeping provides the information you need to analyse before making important decisions for your business.
Why do I need a bookkeeper and the benefits of hiring a bookkeeper?
A bookkeeper can help you stay organised and on top of your finances. They can help you keep track of your income and expenses, reconcile your bank statements, and prepare financial reports.
Hiring a bookkeeper can help you save both time and money. A bookkeeper can help you avoid late fees by keeping track of your bills and payments. They can also help you find ways to save money by tracking your spending and identifying areas where you can cut back.
When you hire a bookkeeper, you can focus on running your business and leave the financial tracking to someone else. It can free up your time to focus on growing your business and generating new revenue.
Ready to hire a bookkeeper? Our team can help! Contact us today, and we’ll match you with the perfect bookkeeper for your business.
Is bookkeeping and accounting the same?
Accounting is a subjective look at what that data means for your firm, whereas bookkeeping is a direct record of your business’s transactions and sales. Therefore, a bookkeeper can be considered an accountant, but a bookkeeper without sufficient certification cannot be termed an accountant.
Will bookkeeping be automated?
Automated accounting refers to computers to complete bookkeeping chores. Automated bookkeeping in finance software solutions replicates human data entry utilising artificial intelligence (AI) and machine learning (ML) technology.
What is a virtual bookkeeper?
Virtual bookkeeping or cloud accounting refers to when a bookkeeper or accountant works with a client remotely. This is made possible by accounting software that allows you and your bookkeeper to share an account.
How can Adam Global Dubai help?
Overall, bookkeeping is just one aspect of doing business and keeping good financial records. Your company can closely gauge its financial capabilities and journey toward boosted profits, breakthrough growth, and merited success with well-managed bookkeeping. Whether you’re a Jonny come lately entrepreneur in Dubai, a small business owner with a brilliant vision, or a seasoned business person rocking your industry, you’ll need to implement basic bookkeeping techniques. How you organise and document your finances is up to you. You can outsource the work to one of the most professional bookkeepers or best accountants in Dubai, UAE, or do it all by yourself. However you decide, note that you must keep adequate records of business transactions. Contact us for your bookkeeping and accounting needs in Dubai, UAE, from assistance in determining the best accounting system for your business to professionally preparing the books of accounts for taxation purposes.