Bookkeeping is the process of maintaining an accurate record of a company’s business transactions. Business reports are generated using bookkeeping numbers and used to help maintain profitability. Before determining whether you want to invest in a bookkeeping service or try doing the bookkeeping yourself, you need to understand the many advantages of accurate bookkeeping.

Administration

Accurate bookkeeping provides up-to-date figures a business owner or manager can access at any time to decide on whether to make an investment or plan a capital purchase. It also helps deliver a complete package to the ATO when reporting taxes, lowers the possibility of an error that could trigger an audit and eliminates the expense of in fees and penalties from having to file an amended corporate tax return.

Hybrid Accounting

Comprehensive bookkeeping often involves the blending of two accounting systems to get a comprehensive financial picture of the organization. For example, cash accounting is recording transactions when the funds are received by the company, and accrual accounting enters the transaction when the money is earned but not yet received. Both are valid methods of bookkeeping, but a combination of the two will give the business a more comprehensive understanding of its financial position. Accurate bookkeeping is required to keep a hybrid style of books that can help the business owner save money on spending and budget more accurately for future projects.

Money Trail

Following the trail of money as it comes in and out of your business is one of the advantages of accurate bookkeeping. For example, company that employs the double-entry bookkeeping system can see where its money goes and where it came from. When a company purchases an item, it shows up as an expense on one side of the books and an asset on the other side. Creating this detailed money trail allows business owners to know exactly how they are spending money and the value their purchases bring.

Process

Collecting expense receipts, gathering payroll data, getting payments to vendors and tracking outstanding invoices are all part of accurate bookkeeping. Without the use of accurate bookkeeping, much of this information would get lost or be improperly filed. Accurate bookkeeping streamlines the process of running a company and lowers the cost of doing business by centralizing the important functions of the accounting department. It also makes the process of generating useful financial reports simple by being a central depository for important company financial information.