Importance of Bookkeeping and Money Management
Alternatively, it refers to the technique of recording an organization’s financial accounts. Bookkeeping mainly records transactions involving purchases, sales, receipts, and payments by a person or an organization or corporation. Single-entry bookkeeping system and the double-entry bookkeeping system are the most commonly used types of bookkeeping. A bookkeeper mostly does the recoding of the day to day financial transactions of a business.
Financial advisors do recommend businesses owner to keep record of their financial transactions due to the following reasons. When a company keeps a record of its financial transactions, and it becomes easy to keep track of its finances as opposed to the one that does not. Besides, it provides systematic up to date follow-ups and on time payments of goods and services provided by the suppliers. Also, the process enables a business to keep track of the receipts and other transaction documents for purposes of computing taxes. Furthermore, tax returns become easier to compute especially when expressed in balance sheet, profit, and loss account as well as cash flow. Suppose a business wants to provide crucial information to its investors, then it becomes easy since the information on the financial transactions is well recorded through bookkeeping. Balance sheet and profit and loss account helps a business to plan its strategies easily and also keep proper records of the business.
For an individual, money management provides security of being in the know of the resources that one have to counter unforeseen expenses including being fired from work, car breaking down and other unexpected expenses. Also, efficient money management helps in reducing stress and conflict. As an individual’s income grows, his or her financial planning will not just involve budgeting so that all the expenses are covered each month, but also determining how to invest the surplus that accumulates above what they spend. In addition, proper money management helps an individual to achieve long-term goals like buying a house and starting a family as well as saving for all the things they hope to do someday. Likewise, properly managing your money enables you to pay them off and ease your dependency on them, in addition, those school loans will seem less of a burden once you factor them into a budget that you can comfortably adhere to.
For effective money management and bookkeeping, it is essential to follow the following guides. It is vital to learn how to use the accounting soft wares such as QuickBooks since it contains relative information on how to create financial report, reconcile bank and other financial computation. Another alternative to learning how to use the QuickBooks is to hire a local bookkeeper to provide the services you need, and turn the books over to your certified public accountant for planning and tax preparation at the end of the year. Separating business and personal bank accounts will make bookkeeping much easier and help maintain your corporate veil if you have a formal entity.