The act of bookkeeping is one aspect that a lot of businesses have failed at and like a business expert once said: A business without a record, is not one that has come to stay. A lot of small businesses do not think book keeping is important, they believe they are the ones in charge of their business and there is no need to waste book items.
I went to a little grocery store just close to my house, it was owned by a pretty young lady and I think her computer was faulty that day so she attended to people in her usual friendly manner and just before she forgets what she sold, she quickly pens it down in a book apologizing to the next customer for the delay, I watched her from a distance and I heard one of the customers confronted her, he asked her for the reason why she was wasting her time writing down what she sold since she owned the business, she smiled and simply told him it was necessary, with this action, I became a regular customer in her store.
A business owner who wants to be interested in the happenings of his business, must certainly be interested in book keeping. Book keeping helps in understanding where revenues are been generated, the expenses that takes the cash, the tax being paid and the liabilities that takes the cash flow.
The Importance of Book Keeping.
Bok keeping helps you detect unnecessary tax deductions, there are certain task being paid by business owners that are uncalled for, book keeping will help in understanding the tax that could be eliminated.
Book keeping is required whenever there is a need to get a loan for your business, the truth is no investor will want to invest in a business that has no proper financial record, and so if you are ever planning of getting a loan, you have to start keeping records.
There may be mistakes and the only way to track those mistakes is by record keeping.
How Book Keeping Works.
In order for the concept of book keeping to work, personal funds has to be clearly differentiated from business funds, If these two funds are still inter-related, it will be very difficult to have proper book keeping.
Create a clear format either on your note pad or on your system (as the case may be), and in a tabular format differentiate a debit account from a credit account. The credit account will display everything you have coming into the business while the debit side will be for everything you have going out of the business.
Learn how to categorize every money spent, you need to differentiate between the money spent on office supplies from the money spent on salaries and even separating it from the money spent on meals and entertainment.
Learn to keep every record even after you feel it may no longer be necessary, every receipt every paper work should be stored properly in a good folder or file.