Bookkeeping is the area of accounting that is concerned with keeping records of financial transactions and specifically, involves activities like; recording payments received from customers or paid to suppliers, inputting voucher details into an ERP system, processing your payroll among others. On the other hand, accounting is an all-encompassing activity that involves classifying, recording, interpreting and summarizing financial information. It includes activities such as; preparing financial statements such as profit and loss statements, balance sheets, accounts receivable, income statements and others.
Bookkeeping is concerned primarily with keeping proper financial records and providing the information that accountants will use to prepare financial statements and make decisions
Book Keeping has many advantages for businesses of all sizes including, but not limited to, the following;
- Having records on hand for perusal by accountants, internal auditors, investors, and other stakeholders.
- Providing accountants with information that helps them analyze whether organizational processes are working efficiently.
- Helping with budgeting by allowing decision-makers to determine which activities and cost centers need greater capital injection and which ones need to have their funds reduced.
- Providing the information needed for tax planning to accountants and managers. Bookkeeping ensures that accountants have access to records that will help them categorize expenses, find out which ones are deductible and, take steps to reduce the organization’s tax liability.
- Facilitating proper financial management by allowing you to see what you are spending money on, letting you know how much you owe and providing the records you need to manage business finances wisely.
Bookkeeping is the first step in maintaining proper records for your firm, and it also helps with managing customer and supplier relationships and ensuring functions like payroll processing are carried out efficiently.
- Freeing up time to concentrate on revenue-generating activities such as marketing, prospecting for customers, meeting with clients and others. In addition, hiring a bookkeeper or outsourcing the work to a bookkeeping service will leave you with more time to put into the day to day activities of your business which will result in greater efficiency overall.
- Access to expert services: Bookkeeping firms have several qualified accountants, administrators, tax experts, and other professionals on staff to assist clients with financial management. By hiring a bookkeeping service, you can be sure that you are getting access to people with the expertise you need to maintain accurate financial records.
- Advisory services: Many bookkeeping firms also provide advisory services to help you make better financial decisions. For instance, your bookkeeper can help you with the budgeting process, carry out forecasting and provide other advisory services that help your business grow and succeed.
- Better problem solving: External bookkeepers have experience in various industries and are therefore familiar with problems that arise in specific areas. As a result, they are able to provide solutions to similar problems when they encounter them during the bookkeeping process.
- Cost savings: Hiring a bookkeeping service can help you save money in the long run. This is because you can choose to use bookkeeping service a few times a year e.g. quarterly and therefore you do not have to incur the expense of having a fulltime bookkeeper on staff.
- Using computer software such as Quickbooks and others to manage your sales and expenses, bill your customers, pay your bills and generate mini-reports.
- Recording all financial transactions.
- Recording monies received from customers.
- Verifying and recording invoices from your suppliers and paying them as and when they fall due.
- Managing your payroll and ensuring that employees are paid on time and that statutory deductions are remitted to the relevant bodies.
- Managing accounts payable and receivable.
- Bank reconciliations.
- Liaising with accountants to prepare financial statements.
Bookkeeping is an integral part of your organization’s financial management systems and as such, should be treated with the utmost seriousness in order to avoid problems such as legal issues from suppliers suing you for nonpayment, poor cashflows since you will be unable to track how much money is going out or coming in and, poor decision making due to the lack of sufficient information to guide a decision.
At Bon and Drew, we are committed to helping you keep track of your transactions and ensure that every coin you spend is accounted for. Keeping proper records will help you plan effectively, ensure that you control your costs and generally ensure the overall efficiency of your financial management system.