Purpose of Bookkeeping
Bookkeeping is the recording of financial transactions and activities that take place within a company. Bookkeeping can be simple or more involved, however if done properly and systematically it can increase the likelihood of your business success. Here is why:
- Accurate record-keeping will help you monitor performance and progress; more specifically you’ll be able to assess your company’s strengths and weaknesses and where improvements should be made. This is a critical function, especially for a start-up company.
- Easily prepare financial statements. These reports condense much of the bookkeeping into a summary of your company’s financial activities within a specific period and help you and the management assess your company’s performance. They are also needed by the banks and creditors in case you need a loan.
- Keep track of sources of income and deductible expenses.If you contribute money into the company or pay for business expenses out of pocket, it’s imperative that these are categorized properly and as they occur. If you forget to do that, you may omit deductible expenses or overstate your income, both resulting in higher taxes.
- Keep supporting documents. Your business must keep records available at all times in case IRS or your state wants to examine them.
A new business can increase its chances of survival and success by practicing good bookkeeping. The easiest way to do it is with software like QuickBooks.
QuickBooks software is very user-friendly and doesn’t require you to understand the bookkeeping process. It basically guides you, so you can complete your bookkeeping without much hassle. The best way to learn QuickBooks is to get training from a professional QuickBooks instructor. QuickBooks users who are self-taught frequently do it incorrectly. Their mistakes create a mess of their bookkeeping and end up costing more to fix than the cost of a good and thorough training course. My number one suggestion to a new business owner is to invest in the QuickBooks software before operations begin and get QuickBooks training, so their bookkeeping will be accurately done from the start.
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