Business owners would agree that a proper bookkeeping system is not only essential, but it’s also the foundation that will secure your company’s financial future.
Running a business means more than just keeping your clients happy; it requires proper systems that are in place to secure your company’s future, whether this is looking after your employees, providing top-notch customer service, or maintaining a decent set of books. Bookkeeping is one of the most important aspects of managing an organization and failing to look after this important part of your office can ultimately lead to a financial disaster.
The Basics of Bookkeeping
The main purpose of bookkeeping is to keep an accurate record of a company’s financial transactions. This can be done in-house, but you may also find a bookkeeper from an external source to handle your company’s books. The person does not necessarily need to be qualified, but he or she should be very knowledgeable regarding the functions of a bookkeeper and the specific guidelines and State laws that your company should adhere to.
Bookkeeping also entails proper record keeping of the company’s various spending and income activities; such as supplier payments, customer payments, employee salaries and advertising costs. These items should be categorized and properly filed, in a way that the records are easy to find. Financial statements are also an important aspect of every company’s books, and they give you an accurate overview of your performance, and they are reliable measuring tools when comparing your performance against those of your competitors.
Budgeting is equally important and allows you to set sustainable financial goals and constantly guard against overspending. Comparing your budgets against your actual spending also gives business owners a good indication of the goals accomplished, and the areas that can be improved. If you are looking to hire an individual that can accurately prepare budgets on you company’s behalf, try to find a bookkeeper that has significant experience and sufficient knowledge to assist you.
Complying with tax laws is also an area that every business needs to focus on. Filing tax returns is very important and if your financial system is in order, it will make this task so much easier. Your tax returns need to accurately reflect your company’s profit, turnover and spending. This is best done by a professional and it is advisable that you hire such a person to oversee these activities.
The Importance of Record Keeping
Document retention is something that every business should adhere to, and it can help a company with litigation and to ensure that all State laws and regulations are met. Here are the basics that every business owner should be aware of:
- Records can refer to both hard- and soft copy documents; for example a physical receipt for goods purchased, or an email from a customer.
- The length that you keep these records will differ, for example sales receipts are only valid up to the time the limitations expire. Important documents such as cancelled checks, duplicate bank deposits and employment records should be kept for a few years.
- Documents are kept to avoid the burden of proof in the future. Documentation would need to be provided in case any issues or claims arise a few years from now.
Anthony Azevedo, CPA is the managing member of EZCFO, an accounting and bookkeeping company specialized in payroll, human resource and employer solutions.