You hear a lot about keeping your books and making sure you’re on-budget. But what is bookkeeping, anyway? And what does it entail, when it comes to your business?
The official definition of bookkeeping, according to Google, is the activity or occupation of keeping records of the financial affairs of a business.
Okay, great. But that still doesn’t really tell anyone what, exactly, is included in bookkeeping.
In general, quality bookkeeping gives business owners a financial picture of a business during a specific time period. It’s the day-to-day recording of income and expenses; the details of your finances. And it allows the business owner and her accountant to see the big picture of what’s going into (and coming out of) the business.
Bookkeeping includes your invoicing, payments, purchases and categorizing each transaction so you can see what you’ve spent (and earned) in different areas of your business.
If you’re not keeping track of your books—either on your own or with the help of a bookkeeper—you’re doing a disservice to yourself, your team and your customers. You may know how much is in your bank account at any given point, but you likely can’t project where you’ll be a month from now. And that puts you in a position where you could run out of cash or you could be investing back in your business but don’t because you don’t think you can afford to.
When you have a good handle on your books, you have more power over your business. You can look at the numbers and make changes, before a financial emergency occurs. If you’re consistently earning more than you budgeted, you can easily see what part of your business is growing—and plot out ways to keep the growth moving. If you find that your dollars aren’t stretching as far as you expected, you can look at where your books are off and adjust your spending accordingly.
Whether you’re doing your bookkeeping yourself or you hire a professional bookkeeper, these are just a few things that you need to be doing on a regular basis in your business:
- Tracking your revenue and income streams
- Reconciling and categorizing transactions
- Reviewing payroll and compensation of team members
- Adjusting your budget to meet your business’s needs
- Analyzing your expenses to ensure you’re not paying for anything you don’t need or use
- Setting aside about 25 percent of your incoming revenue for taxes
First quarter of 2017 is long gone and we’re several weeks into second quarter. If you haven’t taken a moment to review your books, the time is now.
