Why Bookkeeping Is Essential for Better Small Business Decisions

Maintaining accurate, up to date financial records is often a chore for small business owners. The reason it's a chore is because they are usually totally submerged in the day to day concerns of running the business and good bookkeeping is not seen as a top priority. The owner is too busy working 'in' their business instead of 'on' it. As a result, the really important parts of business often get left for 'later', and it is these things that can truly make the difference between good and great businesses.

By taking the time to attend to business building functions like planning, marketing and finances, a business owner greatly increases the chance of success. These tasks are not always seen as important on a daily basis as talking with customers, ordering stock, receiving deliveries, directing/organizing/managing staff, paying suppliers and so on. However, their impact on the profitability and long term viability of any business is significant. These are the things that take consistent time and effort to realize the true benefits. And bookkeeping is one of those things. Without up to date and accurate financial records, no business owners can truly make informed decisions about their business.

A specific example may be when looking to hire new staff. Can the business afford it? If so, how much can it afford to pay? What will be the payoff in hiring a new staff member? How will it affect the bottom line? These are all important considerations. However, answers to these questions can only be made if the books are current. That means, going ahead and hiring a new staff member without looking at these numbers, could be a poor decision that will impact the business greatly. Put simply, good bookkeeping affords the business owner the ability to make good decisions.

Another area where good bookkeeping is vital is managing cash flow. Cash flow is the life blood of small business and if the cash isn't flowing, the growth and survival of the business can be limited. Often, a business owner will know that something isn't adding up, but without accurate financial reports, it will be hard to know what is wrong and what area of the business needs to be fixed.

Good financial management is not a luxury, it is a necessity. And this starts with good bookkeeping. Small business owner must invest the time and effort to work 'on' their bookkeeping system to make sure it is setup to run efficiently and consistently. This may require outsourcing the work or doing it internally. Either way, once this function is setup and running smoothly, the owner can enjoy regular financial reports to keep which will lead to better business decisions.