Most of us know what bookkeeping is – the process of keeping track of the financial operations and transactions of a business enterprise. But why is it really important, not just for big companies, but for small businesses as well? If you are starting out small, you might be thinking that bookkeeping is an unnecessary expense, with no palpable benefits to speak of, and should be postponed until the company grows. Let me assure you – you could not be more wrong.
In this article, we will dispel several commonplace myths about bookkeeping, especially with regards to small businesses, to help you understand the importance of accounting for your start-up or micro-enterprise:
- Myth: If my business is small, with very few financial transactions, I do not need bookkeeping yet.
- Reality: Frankly, there is no other way to put this – your business needs proper bookkeeping from day early project phases discovery. It will ensure your peace of mind and help you avoid unnecessary anxiety, by giving you a clear financial picture of your entrepreneurial endeavors. To draw an example – even if you have a low personal income, that does not mean that you don’t need a bank account and wallet. The same goes for businesses and bookkeeping – it is not an option, but rather a mandatory tool.
- Myth: Bookkeeping is only necessary for taxation purposes.
- Reality: Bookkeeping does a lot more than that. Firstly, it allows you to track and measure your company’s performance over any given period of time, thus helping you understand the real situation. Secondly, it enables you to make forecasts for the future months or even years, enabling you to create budgets and to know what to expect. And last, but definitely not least, it gives you the confidence to plan ahead for future expenses and long-term investment, which is what any sensible manager or owner must do.
- Myth: Bookkeeping for a small business is simple, I think I can handle it by myself.
- Reality: This is actually true in part, but only if you have the relevant experience. However, if you have no experience at bookkeeping, you will be putting both your business and personal welfare at risk, with the questionable benefit of saving some money, if not time. As with any highly specialized service, financial or otherwise, it is best to let a professional handle it, especially considering the vast number of opportunities for you to outsource it. There are literally tens of thousands of serious, reliable companies and professionals who will help you for a fair price. Just make sure that you check their portfolios and the feedback from other clients, before striking a deal. This brings us to the next myth.
- Myth: Outsourcing bookkeeping services are expensive.
- Reality: In the era of online outsourcing and SAAS (Software As A Service), nothing can be farther from the truth. As a few simple Google searches will show you, there are some surprisingly affordable offers of bookkeeping services out there. Some of them will charge you depending on the number of financial transactions, which is quite advantageous for a small firm. Others will let you fill most of the blanks by yourself while offering just enough guidance and mentoring so that you do not make any mistakes.
- Myth: Bookkeeping is just a necessary expense and nothing more.
- Reality: In fact, your bookkeeper can do much more for you, rather than just keep track of your income and spending. A serious bookkeeper or accounting company can facilitate your relationships with taxation authorities, banks, and even potential investors. If your company has its books set in order, it is more likely to attract bank loans and direct investment. While this might not seem extremely important in the beginning, your business will eventually reach a stage where it will need additional capital to grow and develop. You will then congratulate yourself for doing things the right way from the very start.
- Myth: Bookkeeping is boring and just something that needs to be done, as quickly and painlessly as possible.
- Reality: As an entrepreneur, you will find that your interactions with bookkeepers will be both informative and enlightening. They will most definitely open up new opportunities for you, by advising on the best ways to reduce spending, plan investments and optimize taxation. A talented bookkeeper has the potential to enable a true financial turnaround for your business.
- Myth: Bookkeeping is all about dull, cumbersome paperwork.
- Reality: Like any other sector of today’s economy, bookkeeping has developed to a great extent, thanks to technology. Reports, spreadsheets, documents, invoicing – everything happens in the cloud and is accessible from any authorized device. Thanks to this new reality, bookkeeping services are a lot simpler, more transparent, and user-friendly than you would expect.
To summarize, you should not look for any viable ways around bookkeeping, as there aren’t any. The soundest strategy is to hire a professional or a company to do it for you, for a cost that will not be too burdensome for your small business. You will realize in time, that this was one of the smartest investments you have ever made.
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