Book keeping

Bookkeeping involves the recording, on a daily basis, of a company’s financial transactions. With proper bookkeeping, companies are able to track all information on its books to make key operating, investing, and financing decisions. Accurate bookkeeping is also crucial to external users, which includes investors, auditors, financial institutions, or the government.

Just like your car needs regular maintenance to run well, your bookkeeping needs regular updates to keep your business purring! Falling behind on your bookkeeping means you constantly have to be ready for a breakdown.

Up-to-date bookkeeping means knowing how much you have spent, and how much you have earned. That is important information for the day-to-day operations of your business.

With up-to-date books;

You can manage expenses. Every time you incur a business expense, it needs to be accounted for. Whether the expense is paperclips for your office or the purchase of a printer.  Big or small, it needs to be entered in your books. Typically, expenses are recorded in the general ledger.

You can stick to a business budget. Staying on top of your expenses is great. Making a plan for every shilling you earn next year is even better. But you cannot make a budget without having a realistic idea of what you spent last year. That is your baseline. Then, you plot out what you hope to spend this year.

You can forecast revenue. Forecasting revenue is one of the things that feels like an academic exercise. But there are certain times when you absolutely need an accurate forecast, and the best way to get an accurate forecast is by looking at your past financial statements. For instance, if you are making quarterly estimated tax payments, you will need to forecast revenue for the year, so you can estimate how much tax to pay.

How will you know you can afford to cover wages unless you can anticipate the amount of money you will have coming into your business during the period. Looking back over your books for the past periods, you will be able to do the math.

You can skip the tax-season stress. When your books are up to date, you can glide into tax season and the new year with an easy mind. Having all your business transactions recorded up to the end of your accounting period means you have got everything you need so an accountant can prepare your tax return for you.  When you reach the end of the year with out-of-date books, you will find yourself scrambling.

You can get a loan or take on investors. You need money for your operations but before the bank is willing to extend your line of credit, they want proof that your business is making money. After all, they would like it if you eventually paid off the money they are letting you borrow.

For that, you will need to present up to date financial statements. The three key financial statements are the income statement, the balance sheet, and the cash flow statement. These three statements let you know, respectively, how much money you are earning, how your expenses affect your revenue, and how money is moving throughout parts of your business. An accountant can generate reliable financial records for you so long as you provide them with up to date books. Then, a lender can use your financial statements to figure out whether or not your business is healthy, and whether they should lend you money.

You can prepare for emergencies. When you run your own business, it is smart to expect the unexpected.  When you are facing a sudden spike in expenses or a decline in revenue, you need to be able to make up the difference. That could mean drawing on backup reserves. An emergency fund can help absorb the impact of unforeseen costs. Just by putting away a fraction of your business income every month, you may be surprised to see how quickly your savings add up. But it is nearly impossible to save for emergencies when your bookkeeping is out of date.

Current books tell you how much you have saved. They will also let you know when you can start withholding more from your income, or when you need to divert some of that emergency fund savings to cover more immediate costs.

Reap the benefits of up to date books, without letting spreadsheets or accounting software eat up hours of your time. When you let the bookkeeping team at bench handle it for you, your bookkeeping is always current and ready for tax season.

Kemigisha Shiba

(Accounts Assistant)