Many people have the wrong notion that bookkeeping is just another fancy word for accounting. Both of these tasks are entirely different. Now, what is bookkeeping? In a nutshell, it is nothing but a recording of financial activities and transactions that you do every day or daily.
If you desire to build a financially stable business, there are a host of activities that you must do, which falls under the segment bookkeeping. Bookkeeping, therefore, is a subset of accounting.
Bookkeeping for Dummies
Here are some of the crucial activities or tasks that fall under it:
1. Record or track the financial transactions
2. Posting credits and debits
3. Creating invoices
4. Maintain or balance general ledgers, historical and current accounts
5. Completing the payroll
Managing of maintaining general ledgers is one of the crucial elements of bookkeeping. Now, the bookkeepers use this particular document to record their financial activities, receipts, and expenses.
When you record anything on the ledger, you can call it a ledger posting. There is a ledger posting each time you spend the money or make a sale. Previously people were using pen and paper to do these things.
But, with the advent of technology, people are using various software that is available to help them with this task. Some companies are ready to customize the software as per your requirement. A company can customize the software depending on their usage, their preferences, and demand.
Some companies get thousands of orders in a day. These firms might need complex and robust software. Luckily, there are so many companies that are creating these kinds of software in the world today.
Bookkeeping Is Crucial?
When you do proper bookkeeping, you will know how you are doing as a business. It will help you determine if you are performing well or if you should modify some ways on how you want to operate your business.
If you do not keep track of your expenses and the money that is coming inside, you might get into confusion as you will not have any control over your income. A company that has no control over its finances will fail in the long run.
Now, this is one of the key reasons why you must invest in financial software or hire a professional to handle these things. When you outsource this task to the best financial firm, you can relax and focus on other crucial aspects of your business.
When you have total control over your companies finances, you can make proper assessments and decisions to scale up your businesses.
Making strategic decisions with clarity is possible only when you have everything in black and white. When you take care of your finances, other external parties like investors, lenders, and government authorities will know the real picture of how your company is doing.
These are the key reasons why bookkeeping is crucial for any business that wants to perform well. Now that you understand what is bookkeeping, you should plan to get a professional financial firm to help you with this task.