Bookkeeping refers to the constant and consistent recording of an organization’s complete financial transactions. This includes purchases, sales, receipts, and payments. Bookkeepers should create an organization’s record before they begin creating transactions, so that each one can be properly recorded.
But is bookkeeping that important? What benefits does it offer an organization? Here are four reasons why bookkeeping is essential for all corporations.
Organized Record Keeping
Sometimes having unorganized records feels worse than not having any records at all. The chaos of going through your files, especially under a deadline, can add an unnecessary amount of stress to workload. Doing your books often and keeping all of your records in one place cuts out a lot of work and stress for everyone in your team, letting you find what you need in no time. This is especially applicable if you do your bookkeeping digitally, as everything can be stored in one file and searched in less than a few seconds.
Budgeting and Forecasting
Creating and adhering to a budget is one of the key ways to make your organization succeed. Bookkeeping can help your budgeting in two different ways. Firstly, consistent bookkeeping will tell you how much you spend and gain in a given time, which can help if you’re trying to create a new budget within the organization’s limits. Secondly, bookkeeping keeps track of where your money comes and goes. Having such a clear visual can help you see if you’re adhering to your budget or not, and if you’re going overboard with your expenditures.
Audit Readiness
Your company must always meet the government’s rules, policies, and procedures in order to keep running legally. To ensure this, you’re required to submit a financial audit once a year. Seeing as that’s a whole year of activities, it may be challenging to retrieve those documents as the deadline approaches. Bookkeeping, whoever, records all financial transactions from the beginning of your organization’s life till the end. Having a bookkeeper means you have easy access to your records, meaning you’re fully prepared at all times for the day of your financial audit.
Risk Management
A company that doesn’t keep records of its transactions is seriously prone to data theft, financial discrepancies, and financial fraud. You may not know that you’re a victim of such crimes until it’s too late. Bookkeeping lowers these risks significantly by keeping close track of all of the organization’s legitimate transactions. Any discrepancies would be immediately found out, lowering the risk and probability of this crime ever occurring to you.