No one enjoys doing their accounting. But they must either do it themselves or hire someone to do it for them. When a small or medium businesses is in its natal stages, it’s easier to keep track of the accounts without much ado. But thereafter the trouble begins, and simple records and Excel calculations don’t suffice. At this stage, it becomes all the more imperative to be tracking and maintaining the accounts lest you should find yourself in a (pungent) pickle.
Why? Here are 5 reasons to explain.
- Know your business: It is very unwise not to know how a particular department in your business is functioning or what is going on. At the very least you should be aware of the outstanding payments and available money, and have proper records to bank on later.
- Make informed decisions: If your records are imprecise or shoddily maintained, you will have an inaccurate understanding of financial facts resulting from the accounting which in turn might lead to you making bad misinformed decisions.
- Prevent fraudulence or carelessness: If you aren’t sensitive to your accounts and what’s happening with them, there is a distinct possibility that you might end up paying the price for a dodgy accountant or vendor, or worse, even overlook wasteful and avoidable mistakes.
- Monitor cash flow: The most elementary necessity of doing accounts and doing them right is to understand how much money you had, how much you have and how much you will have. Daily cash reports are important to understand how much you can spend without running deeply into credit or debit each week. Additionally, it gives you vital data on profit, loss and the possibility to expand.
- Legitimacy: In a way, your accounts validate your business and officially reflect your credibility. More so, if at any time you require a loan, banks and financers will determine a lot of variants and agree to the monetary support based on what they read in your financial records.
Primarily for these reasons, if not many more, it is wise to keep your books and your accounting up to date!