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Why is bookkeeping so important?

Bookkeeping is one of the most essential tasks in any business. Without accurate and effective bookkeeping your business could very quickly come crashing down. Business owners can manage their own accounts, but many wisely invest in a bookkeeping service that will not only save them precious time but also eliminate the risk (and consequences) of making very costly financial mistakes.

Bookkeeping is the process of recording all the financial transactions and events that occur in your business. Purchases, sales, earnings, receipts, and payments are all meticulously recorded so that all the money that flows in and out of your business is accounted for. Bookkeepers organise and track receipts and payments, and document purchases as soon as they are made. They record all the data chronologically into designated books, or on bookkeeping software. This form of careful record keeping may seem laborious, but it is critical to the health and success of a business. Bookkeeping is only one important aspect of financial planning and organisation.

Bookkeeping allows you to see whether your earnings are sufficient to cover your expenses and gives you crucial information to guide your financial decisions. If your income does not cover your expenses and still reap enough profit, for example, then based on the details in your records, you can decide where to increase earnings or cut costs. Maybe you could charge a little more for some of your products and services, or, conversely, find a cheaper alternative to a recurring monthly expense.

Bookkeeping also assists with daily business management. By recording day-to-day financial details you can keep track of data, such as which customers owe you money and how much. Professional bookkeeping enables you to make all your financial decisions with clarity and perspective. It is the foundation for effective and efficient business accounting. Avoiding bookkeeping can and will eventually result in unpleasant financial consequences.

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