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 one. 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 ev