Six reasons why maintaining regular bookkeeping is important
If you’re a fan of the TV series Dragon’s Den, you may have found yourself on the edge of your seat watching the entrepreneurs pitching, only to see them falter when the financial questions hit. It’s that heart-sinking moment that highlights a universal truth in business; knowing your numbers is a non-negotiable. Understanding your financials is crucial for any business, big or small, and having a solid bookkeeping system in place is the key to simplifying the process. Whether you’re stepping into the Den or simply trying to steer your business towards success, robust bookkeeping is your secret weapon and here are six reasons why …
1. It provides you with real-time information
Having access to real-time figures and information will help you stay up to date with the performance of your business and make informed decisions. Trying to plan for the future by using outdated figures and information can be a real sticking point and hold your business back from achieving its financial goals in the long term.
2. It enables you to debt track
If you don’t know what your business is owed, it’s easy to let outstanding payments slip through the net, which is harmful financially. If you’re regularly maintaining and updating your accounts, you’ll have an accurate overview of everything you’re owed and late payments can be dealt with swiftly and effectively. As a small business owner, it can be all too easy to get caught up in the day-to day running of your business and forget what money you are owed.
3. It helps you keep tabs on your payables
Just as debt tracking is important for your business, keeping tabs on your what you owe is equally important. If you’re monitoring your payables efficiently, you’ll be able to avoid missed payments, you won’t run the risk of incurring late fees and penalties, potential interest costs and even damage to your credit score.
By keeping a close eye on income and expenses, you’ll be able to track the performance of your business in real time and know whether you need to make any immediate changes to ensure you’re turning a profit.
4. You can monitor sales effectively
Monitoring sales performance is essential for driving growth in your business. If you’re not staying on top of your sales data, how will you ever be able to make informed decisions going forward and analyse performance? If you’re not keeping a close eye on your sales figures, you may miss significant deadlines and thresholds in your business. If you’ve hit the VAT threshold when your turnover reaches £85,000, it’s time to get on and register! Without maintaining regular bookkeeping, your business could be at risk of incurring penalties.
5. It helps you establish routines
It’s worth remembering that your bookkeeping system doesn’t have to be expensive or fancy to be effective. Often keeping things simple is the best way to stay on top of your financials and tackling things by using a ‘little and often’ approach can help to prevent overwhelm and stop procrastination kicking in. Make keeping accurate records part of your everyday business routine and you’ll soon find that it becomes a habit rather than a chore.
My top tip here would be to do what suits you and your business. There’s currently no requirement to use accounting software in your business as the Government’s Making Tax Digital (MTD) initiative has not yet been rolled out, so using a cashbook or spreadsheet will absolutely suffice if that best suits your way of working. Even once MTD is live, your accountant will be able to convert your records into the correct format to be submitted to HMRC, so there’s no need to ditch your cashbook or spreadsheet!
6. It improves your investment readiness!
As your business starts to grow you may want to seek investment from outside sources to help you succeed and having up-to-date figures will make this a whole lot easier. Before potential investors consider parting with their cash, they’ll want to review your financial data including your profits to date, expenses and financial projections. Having this information readily available will make the process of seeking investments go much more smoothly.
If you need some support getting to grips with bookkeeping for your business, get in touch today to see how I can help. I offer a free, no-obligation discovery call to help point you in the right direction.