The Importance of Knowing and Understanding Your Business Finances

Understanding your business finances is very important as it will help you run your business smoothly and grow your business. I came to learn the importance of keeping on top of business finances while running a chain of bookshops that serves communities across the north of England. Cashing up and adding the totals to spreadsheets used to take me just a few minutes every day because I knew I could rely on the services of Bould Bookkeeping to do the heavier lifting when it came to tracking my shop’s finances.

These few minutes were beneficial as what I did enabled me to track the sales generated by my chain of bookshops. This helped me do a comparison of the sales figures with previous weeks, months or years. Eventually, it enabled me to track my business’s cash flow and helped my business grow. The records helped me chase late payment before supplying more books or I sent invoices on time. Together with accurate bank reconciliation, the records were an important part of my business operations.

I enjoy working with numbers and doing bookkeeping was not a daunting task for me. However, not everyone is like me. Some people don’t enjoy dealing with numbers. Many business owners don’t think about bookkeeping when starting their businesses. Therefore, keeping an accurate record is not among the most important things for such business owners. In such a situation, outsourcing to a specialist bookkeeper can be something worth considering.

Why Is Bookkeeping Important?

When it comes to running a business, effective and efficient bookkeeping is as important as other aspects of running a business like marketing, technology and customer relations. It is even more important when you would like to expand your business in the long run.

Even though a business owner can learn all elements that go into effective and efficient bookkeeping, learning these elements requires a lot of time. However, most of these business owners don’t have time to spare. If you are in such a situation, it is good to consider outsourcing bookkeeping to experienced and skilled professionals who specialise in bookkeeping.

Before outsourcing the bookkeeping part of your business, prioritise the value the service adds to your business instead of focusing only on the cost. For example, you will have peace of mind when a professional will keep a keen eye on the financial activities of your business hence helping you save time. You will therefore be able to focus on your core business – serving your clients or customers.

Technological advancements have significantly improved automated bookkeeping and now the choice of reports is extensive and varied. All these will enable you to understand the financial position of your business better. It is good to take advantage of these reports. You need to check the profit and loss reports instead of focusing on the Statement of Financial Position. You should also understand the balance sheet that shows the financial position of your business. Also, ensure that you check asset depreciation. The many financial terms involved in bookkeeping may make bookkeeping seem like a daunting task.

As a business owner, you need to remember that bookkeeping is an important part of running a business. It will help you avoid penalties for late accounting submissions and also help your cash flow by accessing and knowing up-to-date account information.

Most businesses often neglect their accounts and wait for professional accountants to complete them once a year during the tax season. However, company finances need to be checked and kept in order from time to time. Keeping a keen eye on the finances of your company enables you to closely monitor many key indicators for your business. These elements include net and gross profit margins and the expected turnover, all of which improve your cash flow.