The importance of bookkeeping

Bookkeeping has become a lucrative career because every business no matter how small or big is going to need to have a bookkeeper to make sure everything is in order with their finances. Poor bookkeeping is bad for any business, which is why it is important for bookkeepers to have a qualification from the International Association of Bookkeepers (IAB). With this qualification, you are going to be a very appealing candidate to businesses needing the services of a bookkeeper. Below are reasons why bookkeeping is important for businesses. If you are in the York area I would recommend you see bookkeeping in York.

Fulfilling tax obligations

Bookkeeping is going to make sure all the financial documents, outgoings and incomes have been properly recorded to make sure the required corporate tax has been paid. If proper bookkeeping is not done during the year, it is going to be hard to file accurate tax returns. If the returns are incorrect, the business might end up overpaying, which puts pressure on the cash flow or underpay then get charged the payments with interest. Businesses that are registered under VAT have to submit VAT returns every couple of months that details VAT paid and charged; you need bookkeeping to keep up with the requirements.

Fulfilling legal obligations

It is not enough for businesses to file their tax and VAT returns; they also need to keep business records because HMRC can decide to audit the business at any time. This is usually done to make sure the business is paying the required tax, National Insurance contributions, and wages. The bookkeeper is tasked with keeping the records up to date. Important transactions have to be recorded to make sure there are no discrepancies with previously submitted returns.

Better management and analysis of business finances

Bookkeeping is more than just maintaining the financial records of the business; it also involves analysing them. Businesses have to maintain a healthy cash flow to make sure suppliers and staff are paid. It is hard for businesses to function as normal when they don’t have a healthy cash flow. It can lead to cash flow problems and even result in the liquidation of the company. Your job as the bookkeeper is going to involve analysis of the business finances to ensure healthy cash flow.

Helps in planning business strategies

When the bookkeeper analyses the business finances, it helps in guiding the overall business strategy, which is good for business owners. Plans to invest, expand and budget will be determined by the current financial situation of the business. The bookkeeper can be asked for recommendations regularly. It is important to look at the financial records when making business plans, making bookkeeping a key part of business expansion.

Reporting to Investors

Most businesses will turn to investors when they want to grow and become successful. Before investing in the business, many investors will want to know the financial situation of the business. Bookkeeping provides investors with detailed reports about the finances of the company. This is going to make them confident as they invest in the business. When looking for new investors, the financial status of the company is going to play a key role. Businesses can secure new investors through good bookkeeping.