Why Bookkeeping?

People like bank managers, accountants, and bookkeepers like myself are always telling you to get your bookkeeping done. Why?

 

And what is bookkeeping really?

 

Per Websters Dictionary it is defined as: “The process of recording financial transactions and maintaining the financial records to support a company’s financial statements. Bookkeeping is only one small part of accounting, which is the overall examination of a company’s financial results”. The word is coined by two words: “book”, defined as: “a set of blank or ruled sheets for the entry of accounts”; and “keep”, defined as: “to make regular entries in; maintain a continuous record of transactions”. And of old, bookkeeping used to be done on paper.

 

So why do you need it done?

 

Per the Encyclopaedia Britannica: “Essentially, bookkeeping provides two kinds of information: (1) the current value, of an enterprise and (2) the change in value—profit or loss—taking place in the enterprise over a given period of time. Management officials, investors, and credit grantors all require such information: management in order to interpret the results of operations, to control costs, to budget for the future, and to make financial policy decisions; investors in order to interpret the results of business operations and make decisions about buying, holding, and selling securities; and credit grantors in order to analyse the financial statements of an enterprise in deciding whether to grant a loan.”

 

There is another, more important, reason to ensure your bookkeeping is kept up to date and that is the following datum:

 

CONTROL EQUALS INCOME

 

What does that mean?

 

It means that the more you have things under control in your business, the more income you will be getting; and that includes having your finances in order.

 

Some people seem to regard bookkeeping as simply an administrative exercise that they can’t be bothered with, or “I’ll do it at the end of the year”, or, “I’ll do it when I get a minute” and then somehow it just never gets done. Some people seem to think it’s only done to appease the tax-man. In all those cases, the real purpose of the bookkeeping has not been understood, as above. How can you make good decisions about your business if you don’t even know if you’re making a profit or a loss? And you won’t know that until your bookkeeping has been done!

 

One more reason: there is no faster way to lose a customer than to have incorrect accounting of what they owe you!

 

So, make sure your bookkeeping is done and kept up to date at regular intervals.

 

As always, keep it simple and… Flourish and Prosper 🙂

Lisa

 

For courses available on these topics and from which I learnt the management technology I use in my business, please contact the Hubbard College of Administration at http://www.hubbardcollege.org

Copyright ©2016, by Lisa de Haas MICB CB.Dip. All rights reserved

Speak Your Mind

*

×

Get 20 FREE tips on organising your Business Finances Click here.