Bookkeeping simply means recording and keeping of track of business transactions on a regular basis and a bookkeeper is defined as a keeper of books who performs these tasks. In today’s world, businesses have become very competitive due to increased customer awareness of the products and services offered, and the price and quality has become a key criterion to make buying decisions.
For businesses to be successful, a strong system must be in place to guide them with accurate pricing structure, value offered and the real time financial position. This is where bookkeeping comes into play and if properly maintained can become a stepping stone to guide entrepreneurs/business owners for developing business plans and strategies for growth and development.
On the other hand, if bookkeeping completely ignored can be the major reason for a business failure.
When you operate your own business, you can either hire a professional bookkeeper from outside or perform your own bookkeeping. This decision merely depends upon the size and growth of business and time and cost savings. Please see below a simple list of bookkeeper duties which can be performed by yourself or by a professional bookkeeper:
These days, bank reconciliations have become much easier due to the advanced feature of bank feeds. You must reconcile and allocate bank entries on a daily or weekly basis and try not to keep piling up. Without bank reconciliations, you will be able to produce real time numbers for the business.
Check Cash Flow Position
We must have heard of these terminologies that the CASH IS KING or CASH IS THE FUEL OF BUSINESS. These theories are very true in their respect as without having enough working capital, your business can fail or declared as a bankrupt.
You can use an accounting software or a simple excel sheet for cash flows projections. It involves knowing how much money you have on hand, how much you expect to receive within a week or month and how much money and what is expected to pay.
Recording of Business Transactions
This process become easier using bank feeds where we only allocate the transaction processed via bank accounts. However, you might have some cash transactions which are not on the bank or you need to enter bills to be paid in the future date which should be recorded on a regular basis.
Manage your Sales Invoicing and Accounts Receivables
You must check if the work completed or the work in progress (in some cases) has been invoiced to your customers. You cannot expect to get paid without sending invoices. Using accounting software, you can utilise the Sales modules and automatically email or fax or mail the invoices to your customers.
It is also very essential to know how much money is owed by your customers. You can run multiple customer ageing reports, closely monitor slow paying customers and send reminders to make the payment. These steps are very crucial as it will help you to improve the cash flow position. Remember, getting paid earlier means more cash to utilise for the business.
80% of the business work on a credit basis and have the flexibility to pay for materials and supplies or other purchases on a future date. To maintain accounts payables efficiently, the first step is to record the bill with the supplier name and due date and then you can run multiple reports to know your liabilities within 30, 60 or 90 days. Accurately maintaining your accounts payables gives more analysis of when you pay your suppliers and you can negotiate your payment terms to be longer. It eventually helps you with improving cash flows.
Review Business Financials
This is one of the main reasons to accurately record and maintain books. You can run and view reports like Profit & Loss to check the profitability of your business and know the exact and itemised income and expenses summary. This can help your business to reduce costs, increase profits and focus on real value added products or services. The other crucial report to look at is the Balance Sheet which summaries the financial position of your business. It gives you a true picture of your business assets, liabilities and equity position.
Keep Track of Inventory
If you are in trading business which is mainly buying and selling products, it is compulsory to know the stock held by the business and the profitability of every different type of product sold. Keeping track of inventory helps you keep the inventory at optimum levels and know the direct gross margin made on every type of product.