Why Bookkeeping Is an Essential Part of Any Business

The success of any business depends on a lot of factors, and a significant factor among many lies in the way money is used and circulated in the organization. Since businesses function in a tight and competitive commercial industry, the manner in which money flows in and out should be well accounted for. Bookkeeping services, therefore, is a non-negotiable aspect of any small or large business.

Bookkeeping is different from accounting. Bookkeeping falls under accounting, thus making bookkeeping just one aspect of accounting. Traditionally, bookkeeping involves organizing income and expenditures. The amounts are handwritten in journals, ledgers and daybooks where every single dollar and cent that goes in and out during the circulation of the business is recorded. However, given the fact that businesses are complex no matter how small or large it is, organizations today rely on accounting and bookkeeping software to ensure that the bookkeeping process is efficient, accurate and fool-proof as much as possible. Although the possibility for human errors is present in both manual and automated bookkeeping, there is a less chance for discrepancies when bookkeeping is done using a specialized computer program.

With bookkeeping, businesses can manage their flow of cash a lot better. Since amounts and figures are accurately documented, it provides a helpful and general overview of how much money is gained and even lost during transactions. With this kind of financial overview, it allows business owners and managers to track and strategize a plan that will ensure profits are steadily increasing and financial challenges are managed. Further, with bookkeeping, cash flow trends and financial performance can be monitored and projected as well.

Also, with accurate and efficient bookkeeping, it is no longer a challenge to come up with investor reports. In any company, investors would want to have details on the financial status of their investment. With a book of account where you can easily retrieve tabs, charts and even graphs to illustrate the flow of cash in your business, your investors are always updated with real-time account information that matters to them.

Further, when bookkeeping is managed seriously, tax obligations to the IRS are easily fulfilled. You do not need to stress over documenting huge piles of bills and filling in gaps in financial reports that do not add up well. With a bookkeeping process that is religiously observed in your organization, you do not have to prepare your tax reports at the last minute. With organized balance sheets and documents that itemize your profits and losses for the fiscal year, your tax auditor does not need to correct entries in your financial statements anymore. Time dedicated in verifying your statements can be used in giving you sound advice regarding your taxes instead. More importantly, an organized bookkeeping practice allows you to stay in compliance with the IRS, and your reputation to them is protected as well.

Recognizing the importance of bookkeeping in your organization can positively influence the way you do business. It can definitely inspire your business operations and in the way you make long term financial decisions.

By Wendy W James----->Article Source: http://EzineArticles.com/7982604