You probably sense a great market opportunity and want to exploit it. Being an enthusiastic entrepreneur, you decide to start your own firm. If that is you, then it is recommended that along with all the other things that you work on, try to incorporate good bookkeeping principles early in your company’s culture. This can have several benefits in the long run.
For one, good bookkeeping helps you arrange your financial information properly which aids in simpler tax calculation and hence timely filing. You pay the optimum tax and avoid delayed payment fines. It can also help you identify areas where you can claim tax breaks early allowing you to plan your expenses and investments well in advance. Bookkeeping can also identify the profits from various segments of your business and the major expenditures. These can be used to tighten the belt on outflows early where ever possible giving you a better financial foundation for greater success.
Good bookkeeping practice begins with keeping proper record of all your expenses and incomes. Remember that taxes that you pay are based on the profit (or loss) that your business makes in that financial year. This depends on your total sales and your expenses. For any small or medium sized business or even a sole trading firm, the total number of transactions over a period of a financial year can be very large. Trying to get these organized at the last moment is a tough task – more importantly doing it yourself at that time can affect your core business. If you hire a professional accountant to clean up the mess of bills and invoices, then you must be prepared to pay a fortune for the hours spent on the job. If you want to avoid such situations, maintain proper records, inculcate a good bookkeeping culture and you would be much better placed around the deadline for filing taxes. You can save lots on your accountant fees too.
So now you know that good bookkeeping is important. How, then, do you follow this process? Bookkeeping is mainly an account of your daily transactions, so try to maintain a record of all your transactions in a proper orderly fashion. The important things that you must record are:
1. Your sales bills and invoices,
2. Bank and credit card statements,
3. Check book records,
4. Relevant documents on any income from other sources like interests, salaries, etc.
5. Employee pay slips, if you employ others
In short, each and every proof of your financial transactions is a must. It is also recommended that you maintain a day-to-day cash flow statement that would help in tallying the records. Also note that with the advent of the Internet, some or most of your records may be available in soft copies and not on paper. Ensure that you keep a record of these too.
So that’s what you need for your bookkeeping purpose. A more important thing besides collecting these records is to keep them in an organized fashion. This helps you analyze and study your company financial under various heads separately and also makes it easy to prepare your tax returns. These can accrue huge savings in accountant costs later. Given that tracking your financial records diligently and meticulously can be quite a distraction, if you were to do it yourself; many startups look to outsource this job to professional bookkeepers. They can maintain all your records in proper fashion, use the best industry practices to optimize your records and provide you professional advice from time to time. All this helps in improving the efficiency of your core business and also allows you to prepare and file your taxes punctually.
Thus, practicing a good bookkeeping culture is important for any startup. It is up to you whether you want to do it yourself or employ professional bookkeepers for this job. Depending on your situation and business model, choose what suits you the most – but maintain good bookkeeping discipline.