All You Need To Know About Bookkeeping

5 May 2021
 Categories: Business, Blog

Bookkeeping helps maintain the financial health of a business. It is possible to track and monitor every transaction in a company through bookkeeping. As a transaction recording procedure, bookkeeping assists in financial reconciliation. The process sounds simple but requires professional attention. Preferably, a business should utilize an in-house or outsourced bookkeeping services provider. So what benefits and services do bookkeepers provide to a firm?

What Is Bookkeeping?

Bookkeeping is the business finance process that entails organizing and recording all financial transactions and documents for accounting purposes. More so, bookkeeping involves preparing financial statements like balance sheets and income statements that indicate the financial status. 

A bookkeeper should organize and keep the following types of financials:

  • Account receivables and payables
  • Cash flow statements
  • Expenses
  • Payroll and bank statements
  • Profit and loss statements
  • Sales and purchases records

Benefits of Bookkeeping

Bookkeeping enhances financial management and analysis. One major challenge facing businesses is a negative working capital gap. Bookkeepers create detailed invoice reports to enhance the cash flow analysis. It, therefore, becomes easy to track pending invoices and remind customers to pay up their debts.

Bookkeeping enables accounting and audit functions in business. Primarily, bookkeeper's records like net profit, income, and expenses help in financial accounting. Thus, the documents assist accountants in filing tax returns. Besides, financial records assist in an audit process.

Bookkeeping facilitates business financial planning processes. Broadly, financial recording acts as a reference for decision-making in the business. For instance, maintaining a record for accounts receivables helps to plan for debt collection. More so, a record of account payables can assist the company in managing credit repayment obligations. Furthermore, profit and loss statements are essential for budgeting processes. The statements help a business to project sales, control costs, and reduce losses.

Types of Bookkeeping Services

Single-entry system: In this system, there is one entry for every business transaction in the accounting records. A typical single-entry system shows cash disbursement and receipts in the business. 

Double-entry system: This system is ideal for businesses with complex financial transactions that require recording debits and credits. Typically, the double-entry system balances the sum of all debits with the sum of all credits.

Bookkeeping software: This is a bookkeeping technology-based solution ideal for businesses that want to manage the cost of bookkeepers. Essentially, such software are available for free or on sale and performs bookkeeping-related tasks. 

Virtual bookkeeping: The system supports a businessperson to assess automated bookkeeping software and virtual assistance from a bookkeeper. Thus, this service combines the benefits of accounting software and a real bookkeeper. 

Ultimately, bookkeeping helps to monitor and regulate financial transactions in a business. Business owners have the option of outsourcing bookkeeping services to professional firms or build in-house capacity. If you decide to outsource, ensure the bookkeeper is qualified, experienced, and helpful.  

For more information, contact a company like Tax Specialists Of Northern Colorado LLC.