Why you need to keep accurate books of accounts for your business.
Many MSMEs and SMEs find it very difficult to maintain an accurate record of their business operations.
This is largely because these type of businesses are run by individuals or group of individuals who have very little basic understand of business accounting principles and their main motivation is to generate revenues and make money.
Every business entity involves flow of money.
There is money coming into the business and there is money going out.
There are equally people who are interested in that money circulating in your business.
These people, let us call them the stakeholders, have peculiar interest in your business. They are also the engine that propel your business and keep it running.
They determine whether you will remain in business or not. They may include the business owner(s), the suppliers of goods and services, employees, customers, investors, government agencies and members of the public.
For an entrepreneur who goes to start a business to make money, will have put a lot of effort and capital to see the business running.
The main driver will be to generate as much sales as possible and accumulate as much money in the bank account, pay suppliers, pay salaries, pay taxes and business levies.
Whereas the main goal of many businesses is to make a profit, most businesses mistake cash in the bank for profit.
They fail to understand what comprise the working capital and what is the profit element in the cash balance.
When a business practices accurate bookkeeping, the owners or the managers will be able to identify the assets that generate cash into the business, the assets that can easily be converted into cash, money owed by the business to suppliers and other parties, whether business expenses exceed business revenues and vice versa, whether the business is liable to pay taxes or not, whether the business is able to continue operations in near future or whether the business is growing or not.
But many people wonder where they would get time to sit and do all these and still run their business.
There are several options.
- Depending on the volume of you business activities, you can hire an experienced full or part-time accountant.
- You may also outsource a bookkeeping service provider to look after your books.
- Lastly you can do it yourself.
There are several bookkeeping software that are quick to learn and very easy to use, even when you lack basic accounting knowledge.
All these can make a huge difference in the survival of your business enterprise.
Gichure Chege. Copyright © 2021. All Rights Reserved.
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