Whether we like it or not, quality bookkeeping is a key ingredient for a successful business. If a business does not put proper bookkeeping practices into place, they could have business on a downward spiral and not even know it.
It is truly scary the number of businesses that do not have any bookkeeping methods or have nominal bookkeeping practices. What’s even scarier is that these are the same businesses that can’t, don’t or won’t file taxes because they have no clue what their business did for the year. Or worse yet, miss out on tax savings because their books are not organized in such a way that their accountant can help them maneuver them thru the labyrinth of tax laws.
Many business owners can and will do their own bookkeeping. Others invest in professional bookkeepers which can help prevent making very costly financial mistakes and allows the business owner the ability to have financial statements at their fingertips.
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There is a very big difference between accountants and professional bookkeepers. So let’s start with definitions. What is the difference between accounting and bookkeeping?
According to Dictionary.com, accounting is defined as:
1. the theory and system of setting up, maintaining, and auditing the books of a firm; art of analyzing the financial position and operating results of a business house from a study of its sales, purchases, overhead, etc.
2. a detailed report of the financial state or transactions of a person or entity: an accounting of the estate.
3. The rendering or submission of such a report.
Bookkeeping is defined as:
The work or skill of keeping account books or systematic records of money transactions.
BusinessDictionary.com defines accounting as:
Practice and body of knowledge concerned primarily with methods for recording transactions, keeping financial records, performing internal audits, reporting and analyzing financial information to the management, and advising on taxation matters.
Bookkeeping is defined as:
Systematic recording of financial aspects of business transactions in appropriate books of account.
So what does that mean to a business owner? Short answer…You NEED both to be successful. As the owner of BOS’ Optimal Solutions, LLC which provides professional bookkeeping services, I tell all of my clients a professional bookkeeper provides meticulous records identifying earnings, receipts, and payments in a manner that makes their accountants’ lives easier and gives them the building blocks to provide business owners with proper analysis of their financial situation.
Advantages of Using a Professional Bookkeeper
One of the biggest advantages of having a professional bookkeeper handle your bookkeeping is that it allows you as the business owner easy access to important information you need to guide you in making financial decisions.
For example, you make widget “X”. Do you know how much you have in the production and sale of that particular product? If you can’t answer an emphatic “yes” to this question, how can you know what to price it at or if you are marketing it correctly?
The second biggest advantage of having a professional bookkeeper is if a business owner determines they need some form of financial assistance. ALL financial institutions require a business owner to prove to them that they are a viable business and worthy of taking a risk on.
This means they want to see financial statements, cash flows, budgets and other financial data. Trust me when I say, this is not something that a business owner wants to have to pull together last minute. And when you are scrambling to collect or obtain information, I guarantee something will be forgotten.
CONCLUSION
By keeping up with your bookkeeping on a regular basis, you are able to track your data. You will have a better handle on how to continue making your business grow. Avoiding the bookkeeping of your business will cause you to end up with an avoidable financial disaster.
Nice and informative article. No doubt that bookkeeping is very important from a business perspective. For a small business owner is it necessary to hire a bookkeeper or online bookkeeping service is enough. What’s your opinion regarding this?
You’re definitely right, good bookkeeping is so much more than getting your business ready for tax season, it can help you to identify negative financial trends quicker, or spot solutions to cutting costs. Many business owners aren’t aware just what they are spending or how much money they are losing, it doesn’t take too much time to keep on top of your bookkeeping each week.
Oliver Neely would love you to read ..Balanced Books by Joe – Your Trusted CT Bookkeeping Service
Hi Oliver,
Thank you for your thoughts. You are spot on regarding many business owners not realizing exactly where their money is going. They know they make it and they know there’s never enough but they usually cannot tell you why that is. By staying on top of your bookkeeping and understanding how to read financial statements a business owner a business owners will be able to modify their practices and start reaching their goals of profitability.
Great information, I love reading this point of view about bookkeeping services. Nevertheless, I will definitely follow these accounting strategies and apply to my business soon. Thank you, CeCelia!
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Hi Mary,
I am glad this information is helpful and if you need any assistance, please do not hesitate to contact me @ imthe1bos@gmail.com.
CeCelia
Your comments about bookkeeping and taxes make sense. Those who neglect finances in the middle of the year are up for a challenge by the time it comes to complete their taxes.
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Having a professional book keeping is always beneficial for us.We become safe from any financial disaster.Accounting is as important as book keeping.Thanks for sharing!
Thank you for your comment. You are correct that professional bookkeepers help provide information necessary to keep from experiencing disasters. As long as you take there advice that is. 🙂
Bookkeeping and accounting both are useful processes for business.If your business is large then you must hire a professional bookkeeper for better results.Very informative and interesting article.
Thanks for sharing!
You are correct that professional bookkeepers provide better results for a business. One of the great things is when your professional bookkeeper works closely with your accountant. It is a wonderful streamlined process that benefits the client ten-fold. Thank you for sharing your comments.
Bookkeeping is one of the most essential tasks of any business. Without proper bookkeeping, your business could very quickly and easily crash into a wall. Small business owners can do their bookkeeping on their own, but many invest in a bookkeeping service that will save them not just precious time but the risk of making very costly financial mistakes.If you don’t have an accurate handle on your business income and expenses, how do you know if you\’re actually making money? Monitoring cash in and cash out can help you make better decisions — before it’s too late.Besides, when it comes time to sell your business or secure capital to grow your business, being able to thoroughly document your past performance will help your company\’s valuation.
You are very correct! If more small businesses invested in professional bookkeepers, their lives would be so much easier. Thank you for sharing your thoughts.
Truer words were never spoken CeCelia!
And without doubt, this is another major area of business, lots of aspiring entrepreneurs, tend to bury their heads or otherwise drop the ball!
Thanks for bringing to light, a very important issue!
Mark would love you to read ..How A Lot Of Smart Entrepreneurs Don’t Properly Leverage The Internet!
Thank you for your comment. It is sad when people bury their head when it comes their bookkeeping. If more would ask for help, the better they will be.
I totally agree with you. Having a professional to handle bookkeeping will definitely save you a lot of stress and will leave you feeling more assured. Nicely said! Thanks for the advice!
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Thank you for the wonderful comment. You are very correct and with less stress you can then focus on what you are truly good at and enjoy when comes to running your business.
Hi,
your article about book keeping is useful for every one to store old important information for future use. bookkeeping will reduce time to search old data
thanks for sharing information
Thank you! You are very correct. Using past bookkeeping for job costing purposes or tracking how you handled a particular project is very useful indeed.
Book keeping is most valuable procedure to maintain business well.Maintaining balance sheet,journal is few as i know. Thanks
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Thank you. Cash flow and budgets are big ones to keep track of as well. If you set your budgets and track your cash flow, you will be significantly ahead of the game.