What is Bookkeeping and Why it is Important?

by Muhammad Ali

What is Bookkeeping and Why it is important?

What is Bookkeeping?

Bookkeeping is the process of systematically recording, maintaining, classifying, and organizing all the transactions happening in the business or organization on a daily basis. It involves keeping a record of all the financial activities, such as purchases, payments, sales, invoices, receipts, and spending in a structured manner. 

The primary purpose of bookkeeping is to ensure accurate financial information that allows the company’s sustainability, and better financial decisions such as establishing a budget, and what money comes in and flows out of a business.

Back in the day, when bookkeepers used to track all the financial records in physical books, simply this process is now done on software like QuickBooks, FreshBooks, Xero, etc. It can be used in both large and small companies & businesses.

 

Why bookkeeping is important?

Bookkeeping plays an important role in managing any business and helps you analyze financial performance, prepare for taxes, planning for future business decisions, and communicating with stakeholders. 

Many small companies do not hire a proper full-time accountant because of the cost factor. Instead, small companies usually hire a bookkeeper because of 

  • Technology & Software: Technology has made bookkeeping tasks more accessible. All most every small or large business now use accounting software and cloud-based platforms that actually simplify bookkeeping task.  
  • Scalability: When a small business grows, its financial needs also become more complex. Therefore, in the initial stages, hiring a full-time accountant may not be necessary. Starting with a bookkeeper allows the companies to scale their financial resources gradually as the business expands. 
  • Cost-Effective: Hiring a full-time accountant can be expensive for small businesses, especially for those with limited financial resources. A bookkeeper typically has lower rates or a part-time arrangement, which makes it a more affordable option for small companies.
  • Day-to-Day Financial Tasks: Bookkeepers primarily focus on day-to-day financial tasks such as recording transactions, reconciling bank statements, and managing accounts. These tasks are important for maintaining accurate financial records. 

Types of Bookkeeping

Before you start bookkeeping, you must decide what method of bookkeeping you are going to follow. There are 2 main types of bookkeeping.

  1. Single Entry Bookkeeping: This method is simple and straightforward and a good choice for a small business. You don’t need any formal accounting training for it. Single-entry bookkeeping records all transactions in one row, two-column ledger one for revenue and one for expenses. Typically, this method is suitable for keeping records of cash flow, and taxable income, maintaining records of income and expenses, and calculating profit or loss. It is kind of like keeping a checkbook.
  2. Double-entry bookkeeping: In this method of bookkeeping every transaction should have at least two parts, which affects two ledger accounts one as debit and the other one as credit. This system process is more robust. Using double-entry bookkeeping method is useful if your business is large. Enterprises often choose the double-entry system because it is less likely to produce errors. As it names, in a way it double checks daybook because every transaction is being tracked as two matching but offsetting accounts. 

Where to find a right bookkeeping

The person who is responsible for all these tasks is called bookkeeper. They usually write a daybook or book of original entry. [Descriptive and chronological (diary-like) records of day-to-day financial transactions]

Whenever you select a bookkeeping service, before choosing a bookkeeper you should consider these factors such as their bookkeeping education, experience, industry knowledge, availability, and the level of support they provide. So, if you are worrying about how you will find a right bookkeeper for your business. Your search ends here, 360accountants.net is the only solution you need for your business. We are the trusted and worldwide service providers

Why to choose 360 Accountants

360accountants.net was established with a vision of helping businesses take control of their finances and achieve their goals. We are a team of dedicated professionals who partner with our clients to navigate complex financial issues and drive growth and profitability. Whether you’re a small business just starting out or a large corporation looking to optimize your financial management, 360 Accountants is here to help. We provide Financial Analysis, QuickBooks Bookkeeping, Tax Consultancy and many other financial services.

Our Financial Analysts team can help you make informed business decisions and achieve your financial goals. Our Financial Analysts have years of experience working with businesses of all sizes and industries. We’re dedicated to providing you with the highest level of service and expertise.

Let us handle your bookkeeping needs, from basic data entry to financial statement preparation and more.

Our tax services cover a range of countries, including Pakistan, Canada, the USA, UK.

With our team of experienced tax experts, you can be confident that your taxes are being handled by professionals who have years of experience in tax planning and compliance.

Our flexible pricing options are designed to accommodate a range of budgets, making it easier for you to access the services you need at a price you can afford. With our transparent and competitive pricing, you can be confident that you are getting the best value for your money.

Experience the benefits of our collaborative approach firsthand by working closely with us every step of the way. We value your input and make sure you have a clear understanding of our recommendations, so you can feel comfortable with the solutions we propose.

Accounting

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