Bookkeeping is an essential act of maintaining and recording any financial transaction of our businesses. There are many ways business perform their bookkeeping tasks, but we could simplify them into two approaches, automated and manual. Manual techniques are ideal for smaller businesses that don’t process large amount of data in daily transactions. On the other hand, bigger companies should choose automated methods, because they may compute significantly larger amount of data.
It is generally challenging to process larger amount of data with only manual techniques, especially when we use only books, pen and calculators. There are benefits and drawbacks in choosing manual and automated techniques.
Here are reasons you should add bookkeeping as one of the most important tasks in your business operations:
1. It helps you process data:
By having reliable bookkeeping system, it is possible to keep enough data to allow us make a series of effective, informed decisions. From such data, we could know whether our businesses are stagnant, retrogressing or progressing. Based on the overall outlook of our business, we should know whether we need to fire or hire more employees. Financial data could also allow us to decide whether taking loans from local lending agencies are necessary.
The data can help us convince any credit organization that we deserve to get some amount of loans. Large loan can help us to allocate more investment on crucial areas of our business. This can help us boost sales and most likely increase our profitability. Any increase in sales and profitability is a good indication that our business are progressing forward.
2. It’s required by law:
No companies are allowed to operate without existent bookkeeping operations. Bookkeeping activities are necessary to help tax agents to gauge the financial performance of our companies. By meeting our legal obligation, we are participating in achieving sound business operations that are required by lawmakers. Worldwide, companies are allocating efforts and time to track their income and expenses. Government penalties could be incurred if we fail to provide reliable data on our bottom line.
3. Better transparency:
With proper bookkeeping operations, we could create transparency in business operations. Business partners can access the bookkeeping data to know how the entire company is performing. Potential investors could also see whether our companies are in perfect condition. Bookkeeping could make it easier to detect financial crimes, which could happen when bad employees perform something with wrong intentions.
There are clearly drawbacks of bookkeeping operations. It can be time consuming. Both manual and automated methods require plenty of time to set up. In the end, each transaction must be finalized and this single task can be overwhelmingly tedious.
It could happen when people in the financial department need to deal with errors and ledged discrepancies. Bookkeeping can be costly especially if it involves expensive software and dedicated computing platforms. But despite these drawbacks, bookkeeping is generally essential and can provide us with immense benefits.