Importance of Bookkeeping and Money Management
Bookkeeping also refers to the activity or occupation of keeping records of the financial affairs of a business. Bookkeeping mainly records transactions involving purchases, sales, receipts, and payments by a person or an organization or corporation. Single-entry bookkeeping system and the double-entry bookkeeping system are the most commonly used types of bookkeeping. A bookkeeper mostly records daily transactions of business.
The importance of bookkeeping cannot be emphasized enough, but here are top reasons why this is vital to the health and life of your business. When a company keeps a record of its financial transactions, and it becomes easy to keep track of its finances as opposed to the one that does not. Through financial management, a business can keep track of the transactions and the payments for their suppliers. When a business properly manages its finances and records all of its financial transactions; it becomes easier for it to keep track of the receipts and other documents which will be later use in the computation of taxes. Furthermore, tax returns become easier to compute especially when expressed in balance sheet, profit, and loss account as well as cash flow. Bookkeeping helps businesses to keep records of their financial transactions which makes it easier for them to report to respective investors on crucial information of the business. Balance sheet and profit and loss account helps a business to plan its strategies easily and also keep proper records of the business.
For an individual, money management provides security of being in the know of the resources that one have to counter unforeseen expenses including being fired from work, car breaking down and other unexpected expenses. Also, efficient money management helps in reducing stress and conflict. Furthermore, money management helps in generating more money since as a person’s incomes grow, their financial planning will not just involve budgeting so that all the expenses are covered each month, but also determining how to invest the surplus that accumulates above what they spend. In addition, proper money management helps an individual to achieve long-term goals like buying a house and starting a family as well as saving for all the things they hope to do someday. People who properly manage their money are in a better position to meet their needs, for instance, one can pay the school fees of their children as well as meeting the medical bills.
If you want to check your finances, it is advisable to follow the following bookkeeping tips. It is vital to learn how to use the accounting soft wares such as QuickBooks since it contains relative information on how to create financial report, reconcile bank and other financial computation. Another alternative to learning how to use the QuickBooks is to hire a local bookkeeper to provide the services you need, and turn the books over to your certified public accountant for planning and tax preparation at the end of the year. Separating business and personal bank accounts will make bookkeeping much easier and help maintain your corporate veil if you have a formal entity.