Bookkeeping is one of the most lucrative careers because every business needs accurate records no matter how big or small it is. Bad bookkeeping practices can cause a lot of problems in a business which is why it is crucial for every business to have a skilled bookkeeper (see bookkeeping courses London). The following are 5 of the most important reason why bookkeeping is important to your business;
1. Fulfill Tax Obligations
One of the key benefits of bookkeeping is that it ensures all your important financial documents and all incoming and outgoing financials are adequately recorded to make it easier to pay corporate tax. Without it, financial documents would be in disarray make it very difficult to file an accurate tax return which could lead to business overpays or underpays both of which can mess with your cash flows and payment in different but damaging ways. Bookkeeping becomes even more crucial if your business is VAT-registered. Without it, submitting a VAT return would be problematic.
2. Fulfill Legal Obligations
A business should also be able to maintain business records to make it easier for HMRC to audit their finances whenever they want. The HMRC does this inspection to ensure that the business is paying adequate tax and wages and national insurance contributions. A bookkeeper ensures that all the records are updated and every transaction is properly appropriately recorded.
3. For Better Analysis and Management of Business Finances
Bookkeeping is more than just maintaining financial records; it is also about analyzing them. A healthy business maintains a healthy cash flow and pays employees and suppliers on time and bookkeeping helps. This is because one of the main tasks of a bookkeeper is to analyze a business’s finances are healthy and when there is a problem detect and report it inadequate time to do something about it.
4. To Help Plan Business Strategies
Speaking of finding problems that can be fixed inadequate time, a bookkeeper’s analysis of business finances can help overcome these problems. But it is a process that can be very helpful in planning and executing business strategy. Keep in mind that a business is only as healthy as its finances and bookkeeping can help you implement strategies to grow the business when you know exactly where you stand financially. Your business’s financial health tells you when you need to invest more money in a particular area of the business or what is not doing so well.
5. Reporting to Investors
Many businesses rely on shareholders to maintain and grow the business and financial reports tell the shareholders how well the business is doing. These financial reports including Profit and Loss statements and Balance Sheet can only be created with good bookkeeping. These financial reports have one more additional role; they help you attract potential investors who can be crucial in helping you grow your business. For this reason alone, bookkeeping is one of the most important aspects of any business. it often means the difference between profitability or not which can also mean the difference between growth or not.
