Why is bookkeeping important? Bookkeeping is one of those jobs that gets a bad reputation – unfairly, we think. If it’s not being denounced as a boring, fiddly task that distracts from the exciting parts of running a business, then it’s so basic and easy that you might as well hand it over to a computer.
Accountants are guilty of this too. We often talk about bookkeeping as the mundane part of accounting – something to be outsourced or automated away, a relic of the times before cloud accounting.
But anyone who thinks about it this way is overlooking the real value of bookkeeping, and the real skills involved in doing it properly.
Software helps with bookkeeping, but it doesn’t do everything
Let’s start with the automation argument. We’re big believers in the power of cloud accounting software to collect financial information accurately and efficiently.
Freedom in Numbers is, after all, a 100% cloud-based firm, and as early adopters of this type of software we saw from the start how much sense it made to pull data directly from bank feeds, receipts and invoices, and store it on servers where business owners and accountants alike could access it at the same time.
Compared to entering all that data manually into a spreadsheet, or managing it on desktop software, the risk of lost, corrupted or incorrect data is far lower. That goes a long way towards achieving the result that’s always been at the core of good bookkeeping – that’s up-to-date, accurate financial data.
But it doesn’t replace the need for human intervention altogether. You’ll no doubt be hearing adverts on the radio or on TV about software that ‘files taxes for you’. This is not the case, as there still needs to be a human to check and press the submit button, otherwise you can get yourself into hot water with the HMRC!
Not every piece of information can be pulled into accounting software without any manual input at all. And once the data is in the system, you still need to know how to organise it, how it should look and where it needs to go.
If you’re not familiar with financial data and record-keeping processes, mistakes can still creep in. A qualified and experienced bookkeeper will be able to use accounting software as a tool to complete their work more efficiently, but ultimately, they’re still going to be the one making sure everything is arranged as it should be.
Why is bookkeeping important for your business decisions?
Here’s another reason you should care about bookkeeping – it forms the foundation for basically everything you do in your business. The data recorded through bookkeeping feeds into all your reports and forecasts, meaning you can track progress and see if your business is hitting or even smashing the goals you set at the start of the year.
It also allows you to track and chase up on any payments owed to you, as well as ensuring you don’t miss any of your own bills.
It should also inform all the key decisions you make, from knowing when to tweak things to save money or bring in more customers, to investing in new products, services, equipment or staff.
Without that information on a daily basis, it’s almost impossible to know whether you’re actually making any money, not to mention whether you’re moving closer to your business goals.
A good accountant and bookkeeper will be able to explain all of this – where you stand financially at any given moment, where any areas of weakness lie, and what you can do to get where you want to be.
Do you hate bookkeeping, or you simply need some support to get back on track? We’re here to help! We offer a monthly fixed-fee accountancy and bookkeeping service that’s accurate, efficient, and designed to fit around your business needs.