Even the smallest of businesses always handle some aspects of finance on a day-to-day basis. Startups and family-owned companies could use the services of accountants to track expenses, income, and taxes. Proper bookkeeping overall helps a business to reach its full potential. However, not all business owners realize the value of keeping their books in order until they are behind on a couple of payments or facing tax issues.
Depending on the way a business operates it might prove beneficial to update account books on a daily, weekly, fortnightly, or monthly basis. The reality is that no company that can exist without the proper administration of business funds, and the only way to figure out if this is happening is by recording these transactions as frequently as possible. Day to day bookkeeping for the small businesses is a key business need.
What Is The Role Of Bookkeeping For A Small Business?
Bookkeeping essentially refers to handling the financial data of business with aspects of accounting and record keeping functions. More prominent corporations often have dedicated finance and account departments to manage these aspects, but for the mid-sized to small business sometimes it is impractical to have a full-time accountant onboard. It has given rise to the rise in outsourced bookkeeping with most companies getting these services from offshore firms.
While most small businesses start off with handling their finances internally, they soon realize that they need a professional to manage certain elements. Some of the other reasons why the small business should consider getting outsourced bookkeeping include:
Freeing Up Employee Time
When there is no dedicated accounts department or a full-time accountant to deal with business finance, the task often falls on non-accountant employees. They usually have to split time between balancing the books as well as performing their regular work duties. Often, these employees do not have sufficient bookkeeping skills and it also usually leads to workload fatigue.
However, outsourcing the services of a bookkeeping firm or hiring a financial manager on a need basis takes the load off employee time.
- Uphold Transparency
Every business must have up to date account books. They often detail correct entries detailing payables, receivables, tax information, and every other financial aspect. Making account entries might seem like a straightforward task, but a foresight on a missed entry can create a myriad of issues for business.
That is why it is essential to make sure that a business hires a licensed Certified Professional Accountant to manage their finances. Hiring an expert in the field means that they are well versed with ensuring accuracy when bookkeeping and can catch on to any discrepancies early enough. Transparent bookkeeping, in the long run, can save a business from litigations arising from tax issues and in the worst case scenario closures.
- Keep Up With Tax Laws
Keeping account books goes beyond giving a business insight into their finances. It is also a way to make sure that the company operates within the stipulated tax laws. These laws keep changing frequently, and for anyone who is not a dedicated accountant, it becomes difficult keeping track of them mainly in the case of a business that experiences exponential growth.
A finance manager can make sure that the business stays tax compliant and keeps up with the changing regulations. They can also make suggestions about elements that need changes related to financial legislation.
Meeting Financial Obligations
Businesses always have expenses and payments that they need to meet from time to time. It can become overwhelming for a startup who often have to wait a considerable time to receive payments from clients. Accounting firms can handle the process, and they are able to prioritize as well as schedule payments appropriately.
Tasking the professionals with the payment process also limits the likelihood of making costly payment mistakes.
When any business comes under the scrutiny of the law, it is always related to their bookkeeping. When contracting accounting firms, most often guarantee their work by accepting liability in the case of discrepancies that might arise.
While it does take a bit of the liability off of the business, such instances can end up tying the company’s capital for lengthy periods. Therefore, it is vital to carry out some due diligence before settling on any accounting firm.
- Financial Forecasts
A good financial expert can quickly pick up on every aspect of a company’s economic image. That means that they can work on upcoming budgets to project the performance of the business. Making these financial analyses can keep a business on track and also enables the planning of future expansions.
Proper forecasting also enables a company always to have appropriate inventory as well as have enough funds to cover payroll, taxes, and other financial obligations.
The smaller business might not have huge expenses like the big corporations which need to have an in-house dedicated accounts department. That gives the startup the liberty to get financial services on a need basis. However, it still raises the question about the frequency of bookkeeping and whether a weekly, fortnightly or monthly schedule works best.
To reiterate, it all depends on the business operations and the nature of the market the company serves. For instance, a small business that sells products on a daily basis would need to make daily entries detailing the sales, payments owed to suppliers, and other expenses. These are aspects that employees can enter on an automated system but it would still take the services of a financial manager to balance the business books on a weekly or fortnightly schedule.
The business that does not have daily expenses might find it more convenient to update their books on a weekly or fortnightly basis. A sole proprietor who perhaps sells wares they make off of a home-based workshop might need the services of an accountant on a monthly basis to help with tax issues.
To sum it up, bookkeeping is an essential aspect of every business regardless of size. Working with a finance manager goes beyond simple bookkeeping, and they can offer valuable business advice on how to handle financial activities. When working with an accounting firm, a business can always reach out to them for professional guidance when the need arises.