For every successful business, the main goal is to maximize profits, minimize any loss and at the same time maintain its position as a responsible entity within the society. One of the basic ways to achieve this goal is through maintaining an accurate bookkeeping system. Bookkeeping is the systematic process of recording, analyzing and interpreting financial transaction of a business. The importance of bookkeeping is often times overlooked, but one cannot disregard the fact that it greatly affects business operation that sometimes not having an accurate bookkeeping system could also cause business failure. A business that maintains an organized documentation – legal, financial or other pertinent business documents – is more likely to prosper compared to a business entity that has no systematic way of recording.
The advantage of having an accurate bookkeeping system is self-evident. Basically, bookkeeping system facilitates a convenient way of managing cash flow which is crucial to any business. It is essential for a business to properly manage bank accounts, cash and debts to monitor its financial status. An organized updated record could provide early warning signs of financial difficulties or can even predict impending bankruptcy. An accurate bookkeeping system also helps an entrepreneur in making profitable business decisions while reflecting how close or far the business is to its financial goal. Moreover, an accurate bookkeeping system helps in the fulfillment of tax obligations. Legislative law and tax authorities requires all business entities to prepare pertinent book of accounts periodically, and this can only be done when basic supporting financial records are properly managed. When audit time comes, Sydney bookkeepers together with the accountants, financial and tax advisors should be able to produce an organized, relevant and accurate financial records that would reflect the business overall financial activities. In addition, maintaining a good bookkeeping system aids in business reporting and in business planning since it provides a well documented financial records that reflects true financial activities of a business.
Considering the many benefits of having a bookkeeping system, it has two minor drawbacks. First is its cost and the other is its implementation. If an entrepreneur is not well versed with the bookkeeping system or has no time to do it, the option is to hire professional services of bookkeepers together with the accounting firm. Most bookkeepers earn hourly wages and their salary means additional expense. Another disadvantage of bookkeeping system is when it is not properly maintained or if the system being used is not appropriate to the business operation. Inaccurate bookkeeping system could lead to a false financial report.
Bookkeeping may seem to be a mere record keeping of financial transactions but these records are clearly critical to the future success of a business. Its cost may be negligible compared to the assurance of an accurate financial management of a business. Without an accurate bookkeeping system entrepreneurs would not be able to know the true worth of their business.