5 REASONS WHY YOU CAN’T IGNORE BOOKKEEPING

In one of our previous posts, we discussed creativity; which isn’t much of a worry, because I personally don’t think the success of a business is based on its creation (but more on its implementation-basically how the product is sold to the market); secondly because a lot of small business owners and startup entrepreneurs are masters at creating great products and services, building awesome teams and winning over customers. Many of them, however, would probably flunk basic bookkeeping. I know this has been one of my biggest weaknesses.

But if you, the business owner, don’t understand the importance of bookkeeping, measuring the success (or failure) of your efforts will be almost impossible.

So, why is bookkeeping so important, anyway?

1. Keep a Clear Picture of your Company’s Financial Health: If you don’t have an accurate handle on your income and expenses, how do you know if you’re actually making money? Being skillful at making the best custom suits (because I love suits), isn’t enough if you don’t have a clear financial picture of your business; chances are you think you are breaking even, whereas you are just circulating money and end up running headlong into deeper cash flow problems.
2. Fulfill your tax obligations on time: Bookkeeping can help you keep a track on all the information and documents required to accomplish your annual taxes. When the time for tax comes, you will no longer need to rush everywhere to hunt for your bills or try to remember your expenses. I am still praying for the grace of a deeper understanding of taxation (will blog about it soon).
3. Make informed business plans: the secret to bookkeeping is documentation of your income (money coming in) and expenditure (money going out); and obviously if the difference is negative (loss), then you might need to review your costs and where to minimize them, and/or make future plans of what to do.
4. Better chances of investment: whenever an existing business seeks funding or investment, be it from CEDA, YDF or any other financier, emphasis is on viability of the project, which is measured by the numbers you reveal in your proposal, but if you don’t know how much you are making in a month, how do you qualify for more capital? But if you produce records of the company’s financial history, you stand better chances of financial assistance.
5. Make sure you are not missing any fraudulent deductions: I am not saying the people you work with are fraudulent, but if you don’t keep your accounts in check, chances are you will lose money not knowingly; ever come across minor deductions on your bank statement and wonder where they are coming from? Now imagine losing P1 with every transaction you make; that is, if you transact once a day, that’s 5 times a week, 20 times a month, and in a year that is P240; times are tough, you can’t afford to be losing even a single thebe.

 

Finance is not really my cup of tea; it’s a weakness for a lot of upcoming entrepreneurs I know. Most of us keep our files in the backseats of our cars, and sometimes take a while to reconcile our expenses and file accordingly; but I believe these few reasons we cannot ignore will help you change your mind about bookkeeping.

STAY GRINDING…