Is bookkeeping the unsung hero of your business? It might not be the most exciting topic for a business owner, but proper bookkeeping is crucial to the success of any company. After all, how can you make informed decisions if you don’t have a clear understanding of your financials?
In this blog, we’ll demystify bookkeeping and break down what it is, why it matters, and who should manage your books. Get ready to take your financial management to the next level!
Definition of Bookkeeping
Bookkeeping is the process of recording and organizing financial transactions and activities of a business or organization. It involves maintaining accurate and up-to-date records of financial transactions, such as sales, purchases, expenses, and payments, in a structured manner. The primary goal of bookkeeping is to provide a clear and reliable record of a company’s financial activities, which is essential for financial reporting, analysis, and decision-making.
To ensure everything runs smoothly in your business, it’s important to have a solid understanding of what bookkeeping entails—and why it’s so important!
Why Is Bookkeeping Important?
Bookkeeping is important because it enables you to budget by organizing your business’s financial activities. It also allows you to analyze your financials, which can help you understand business performance and plan for the future.
Budgeting & Organization
Bookkeeping is an essential part of budgeting and organization. It’s the process of tracking financial transactions and making sure that the money you make is used for the correct purposes. It’s also a way to see how well your business is doing financially.
Bookkeeping lets you stay on top of your finances to make informed decisions about your company’s future.
Analysis and Planning
Bookkeeping also provides valuable information about your business’s performance over time. If you have been keeping detailed records, it should be easy to analyze past data and predict future revenue and expenses based on past trends.
This analysis can help you make important decisions about improving your business operations or expanding into new markets.
What Is the Difference Between Bookkeeping and Accounting?
Bookkeeping is the recording of financial transactions. Accounting is the analysis of financial transactions.
- Bookkeepers perform bookkeeping tasks; they may or may not have any formal training in accounting, but they know how to record financial data and keep it organized so that the accountants can analyze it later.
- Accountants use their knowledge of accounting principles and practices to analyze financial data for companies or individuals who need help making sense of their business finances.
What Is a Bookkeeper?
A bookkeeper is responsible for ensuring all of your financial information is recorded and organized, so you can use it to make decisions about your business.
They handle all the day-to-day bookkeeping tasks—from entering receipts into an accounting program to reconciling bank statements.
Who Should Manage Your Bookkeeping?
Here are the main ways to manage your bookkeeping.
- DIY Bookkeeping
Bookkeeping is one of those jobs you can try to do yourself, but it will take you much longer than hiring an expert or using an automated system like QuickBooks Online.
Not only that but there’s a good chance you’ll make mistakes along the way—mistakes that could cost you money down the road when it comes time to file taxes or run your business more efficiently by tracking sales trends over time.
- Accounting Software
Accounting software can help make the bookkeeping process easier by allowing you to input all transactions into one place where they can be analyzed easily.
These programs will also allow you to generate reports that can be used for analyzing profits and losses and help with tax preparation by providing reports based on specific criteria such as dates or amounts owed.
- Third-Party Service
If you’re not interested in learning how to do your bookkeeping or using an automated system but want to save money on hiring someone full-time, outsourcing your bookkeeping might be a good option.
You can hire someone either remotely or locally who works with QuickBooks Online and has experience with online accounting software so they know what they’re doing when it comes to entering data into your system correctly.
- Full-Time Staff
A full-time bookkeeper can be a great asset for your business. A dedicated bookkeeper can give you their undivided attention and focus on your books. You won’t have to worry about them being distracted by other work. They can also perform more administrative tasks if needed.
It is common for small businesses to hire a full-time bookkeeper and push them to do much more than bookkeeping. This can be a good opportunity when the bookkeeper is ready for the challenge. Still, it can also create some stress on the business if the bookkeeper needs to be qualified for the additional responsibilities.
In reality, many startups and small businesses don’t have the budget to hire a full-time staff.
At Mighty Startup, we aim to help clients succeed to the point where they outgrow our service and bring in-house accounting and finance functions.
Let Mighty Startup Handle Your Bookkeeping
We hope that you have a better understanding of bookkeeping and its importance. Bookkeeping is more complex than it seems and requires great attention to detail.
Letting the professionals at Mighty Startup handle your books is a good step toward setting yourself up for success if you’re ready to outsource your bookkeeping schedule a call with us.
