Bookkeeping 101: Why Should You Bother Keeping Your Books Updated?

Bookkeeping is the process of documenting every financial transaction within a business to maintain clear financial records. Every debit or credit is recorded within a ledger—sometimes twice if you use a double-entry system. 

Some companies have better-organized books than others. They employ dedicated bookkeepers to record, sort, and report any financial movement between accounts. Other companies are less staunch in their organizing efforts. Learn the pros and cons of good bookkeeping to decide which option is best for your business. 

The Pros of Keeping Your Books Updated

There are several benefits of maintaining good books for your business. In the short term, you can diligently pay your invoices and maintain accurate inventory levels. In the long run, you can make strategic moves with the data to direct your business forward. A few other key benefits of keeping good books include:

1. Tax preparation is much easier because you can quickly pull your deductible expenses, payroll costs, and income numbers from 1 source. 
2. You can set clear goals for your business based on sales numbers, demand, and expenses. 
3. You can stay in the good graces of your vendors by paying their invoices quickly. Good bookkeeping allows you to better track the invoices you owe while knowing if you have enough money to pay them. 
4. You can more accurately report your business status to investors. The people who fund your business want to make sure their investments are secure. Good books can prove that they made a wise choice in supporting you.  
5. You are following the law. You are legally required to keep financial records of your business. Bookkeeping keeps your business legal and protects you in the face of an IRS audit. 

Additionally, good bookkeeping turns into great accounting. With your books updated and organized, an accountant or business analyst can sort through the numbers and make recommendations on how to increase your profit margins or reduce costs. These key insights can play a significant role in the success of your business, especially if you’re just starting out. 

Con: Bookkeeping Can Be Tedious

There is only 1 major drawback to keeping your books updated: it takes time and can be tedious. As your business grows, you will need to record more expenses and more credits.

If you fall behind in your books or lack a process to audit them for accuracy, you could quickly get overwhelmed with your records and end up spending considerable resources to catch back up. 

However, you can reduce the tedium that comes with bookkeeping by establishing clear processes to do it. If you dedicate a few minutes each day (or an hour at the end of each week) to balancing your books, you can stay caught up throughout the year. 

Balancing your books can help you to report accurate numbers to your investors, get the most out of your taxes, and have a clear vision for your business. Don’t get overwhelmed by the work of tracking and recording your costs and income. Find a bookkeeping tool like Lendio’s software, which helps you to sort your records and establish a process for staying organized.