For a small business owner, handling accounting and bookkeeping can become a real headache sometimes. And this is one aspect where they can’t lack or err in any way keeping in mind the financial health of the business. But, as bookkeeping can be time-consuming, getting stuck in it will leave no time for other core functions of your business.
This is where a professional bookkeeper can be the real support to keep up with your financial records, pay taxes on time, focus on your business activities clearly. And a bookkeeper is one who has expertise, knowledge and professional aptitude to carry out the bookkeeping tasks efficiently, which a business owner usually won’t have.
While you may be pondering over bookkeeping, its role for your business and how it differs than accounting, here are 7 interesting facts about bookkeeping that will help you get a deep understanding about the process:
1. What Exactly is Bookkeeping?
Bookkeeping refers to storing, maintaining, recording and retrieving all the data and information of financial transactions of a business, a non-profit organization or even an individual.
2. Bookkeeping Tasks
• Maintaining accounts receivable
• Recording financial receipts
• Verify and then record all the invoices
• Billing record maintenance for all the provided goods and services to customers and clients
• Payment records done to suppliers
• Cash transactions made
• Inventory financial record maintenance
• Accounts and loans payable
• Payroll expense
• Earnings that are retained
• Equity of owners
• Depreciation recordings
• Processing financial reports
It relates to the recording and maintenance of all credit and debits of business, with basic knowledge of accounting pertaining to income statement and balance sheet.
3. Bookkeeping is Different to Accounting
While some may relate these two as same, but in practicality both are different. While accounting is all about analysing and interpreting financial data with summarizing and reporting of information, bookkeeping deals with recording of financial transactions and maintaining that record. In other terms, we can say that bookkeeping is all about recording the accounting process.
4. Bookkeeping Systems – 2 Types
Bookkeeping system consists of two types:
• Single-entry – Suitable for organizations having uncomplicated and few transactions, and is related to cash sales, with a sale and disbursem*nt journal and bank statement.
• Double-entry – For businesses having complex transactions, including all types of capital transactions along with accounts payable and receivable.
5. Bookkeeping Helps Keep Track of Tax Payments
The organized and maintained your records and books are, the better clarity you will have over your finances, income and expenses. This will help you know about taxes you have to pay, when to pay and how much.
6. Bookkeeping is Important for Accountants
For your accountants to work on and get the work done they need all the financial information at their disposal. It is important to note that the accountants rely on knowledge and information handed to them, so make sure to keep the files up-to-date, and without any errors.
7. Bookkeeping Needs to be Maintained Regularly
No matter what you are doing, you have to schedule a regular update of your bookkeeping. Have a clear and detailed discussion with your bookkeeper to schedule daily, weekly, monthly and annual tasks defined.
A bookkeeper is one who is as important as anyone else for your business’s financial health, and they are the ones handling the task of writing the daybooks. Ensuring complete and transparent passage of information between you both is extremely important. They provide the financial intelligence that your business needs and provide insightful information and assistance in taking future decisions.
