Bookkeeping is the process of maintaining records of various transactions of a business. The records include total revenue, gain, loss, expenses, dates of transactions, and many other details. Bookkeeping is the basis of accounting process and it is very important, no matter what business you are in.
There are several advantages of maintaining proper bookkeeping for small businesses. Basically, bookkeeping is legally required for every business. It helps business owners know the exact position of their business anytime they want. Details like gain or loss, the amount due to creditors, dates of transactions, and the amount due from debtors are critical in assessing financial position and bookkeeping helps a great deal in these things. Small businesses have to maintain bookkeeping to be legally and financially sound.
Regular bookkeeping with details regarding transactions, turn over, and profit and loss generations helps small business owners a great deal in obtaining loans from various public and private financial sources. It is always important to have professionals to maintain books. You can have full-charge bookkeepers who take care of the entire transaction process of the company and / or accounting clerks who can handle specific accounts.
Regularity is one thing which is essential when it comes to bookkeeping. Regular updating is essential in bookkeeping. Maintenance and updating of books should be done on a regular basis – daily or once a week. If updating is not done regularly, one will never know the business' true status. Bank statements which indicate the flow of funds are essential for small businesses.
For many small businesses, transactions are done through invoices and receipt and payments are received or paid through checks or card payments. Bookkeeping can be done manually or can be computerized, depending on the size of the business and transaction volumes. This is usually done by maintaining a monthly spreadsheet of the expenses incurred daily and another to show the sales, purchase, gross, and net profit.
In cash businesses, it is important to keep track of the earnings and expenses for tax purposes. Proper and regular maintenance of books helps the business to a great extent and saves the owner many unwanted problems.