Bookkeeping is essential to any business whether it is big or small. Unfortunately, this practice is neglected most of the time which in return negatively affects businesses. According to CPA Australia, there are businesses that fail because of bad management of their finances while others have poor or no accounting records. Apart from accounting or financial records being a necessity for businesses, they are also compulsory by law.
Australian legislation requires that businesses must have financial records that are up to date to make sure that they are able to pay all required levies and taxes. Accurate records should be kept for at least five years from the point when the documents were set or for a period of seven years for some records such as payroll.
To show the importance of bookkeeping, below are some reasons why it is essential to the growth and development of any business.
ABILITY TO FULFIL TAX OBLIGATIONS
Businesses are able to have information and documents needed to meet their tax obligations annually thanks to proper bookkeeping. When tax time approaches, there is no need to rush to looking for bills or try to remember various expenses as you have them in the records.
IMPROVED MANAGEMENT AND FINANCIAL ANALYSIS
Even though you are busy and hardly have enough time, it is important you focus on managing the cash flow of the business. In a situation where invoices are delayed, customers are allowed to delay payments because if there is no follow-up then the business could fail. With bookkeeping, all these can be taken care of as it helps to create an organised system that can easily be followed and ensures that the business runs smoothly.
PLANNING FOR THE BUSINESS BECOMES EASIER
With proper bookkeeping, you are able to know how much progress the business has made over time. This goes a long way in making it much easier to plan for the future of the business. You can compare previous years to the current year of the business, know the areas of the business that are making profit and decide on areas to cut back on as well as help you make informed decisions especially when it comes to the finances of the business.
PROPER AND EASIER REPORTING TO INVESTORS
When you have a good bookkeeping system in place, giving reports to investors on the financial growth and development of the business becomes much easier. All information and data such as graphs and charts are obtained from the records of bookkeeping which are broken down to explain how the business is progressing.
Generally, a proper bookkeeping system is vital to businesses so that they can be managed better ensuring they achieve growth and success.