Why Understanding Your Business Finances Is So Important for Your Company
Understanding your business finances is essential for the smooth unfolding of your business operations and for the healthy growth of your company.
I came to understand the importance of keeping tabs on my business finances during my time as a manager of Archway Books, a chain of bookshops scattered across the north of the country. Every day I spent a few minutes cashing up and filling in a spreadsheet to calculate the totals.
While this wasn’t a big deal, it allowed me to track the sales value generated by all my bookshops. Furthermore, I was able to compare this figure with values from the previous week, month, or year. This helped me to optimise my cash flow and eventually grow my business in a healthy and steady manner. By keeping track of these records, I was also able to send my invoices on time and check the situation of all incoming payments before shipping out new orders. Together with timely bank reconciliation, these records helped me run my business in an effective and efficient way.
Fortunately, I’ve always been good with numbers. This is why doing my own bookkeeping was rather a pleasure than a chore. Nevertheless, I can totally understand that some people hate dealing with numbers. Most business owners have no idea about bookkeeping by the time they start their companies. They don’t make keeping accurate track of their numbers a top priority, even though they should. In fact, most of them outsource this task to a specialist bookkeeper. There’s nothing wrong with this choice. If you’re interested, you may want to check out the bookkeeping services of Bould Bookkeeping.
What Makes Bookkeeping Such an Important Task?
Just like any other part of running a business, accurate and timely bookkeeping is essential to growing a successful business. Furthermore, bookkeeping is one of the major pillars to rely on for the further expansion of your business in the future.
You can always learn the basics of bookkeeping. However, this would take you quite a lot of time, which you may not necessarily have to spare. In order to save all this time and to put it to better use, you may want to outsource your bookkeeping to experts.
When seeking for the best solutions to outsource your bookkeeping, you should always assess the added value of such a service to your business, rather than going for the cheapest service available. By hiring an experienced professional to manage the finances of your company, you can free up your time and put it to better use – to cater to your customers.
Thanks to technological progress, bookkeeping benefits from automation, and it is therefore now much easier to handle. It also offers a wider array of reports, in order for you to gain a much better understanding of your financial situation. Make sure you understand your profit and loss statement, as well as the balance sheet of your company. Watch over the asset depreciation as well. Even though bookkeeping seems daunting, once you become familiar with the financial terms everything will become much easier to understand and to track.
Bookkeeping is also important because it helps you avoid penalties triggered by delays in your accounting submissions. It also helps you manage your cash flow better. I find it to be well worth learning the ropes of bookkeeping.
Many business owners only hire a specialist to complete their accounts once a year, during the tax season. This is a big mistake. In my view, business owners should check their company finances way more often than that. They should closely monitor various elements such as net and gross profit margins, year over year growth and yearly turnover among many others.