Bookkeeping is very vital for SME businesses because it helps them to maintain accurate financial records. Despite its being important, many business owners fail to employ it in their business process. Most of them do bookkeeping because it is required under law not because they see it as necessary. But the truth is that bookkeeping can take your business to a whole new level.
Below are 8 reasons why bookkeeping is essential for SMEs.
1) It Helps Your Budget.
Bookkeeping helps you to maintain your budget. When you have all your income and expenses outlined in an organized manner, it becomes easier to perform an audit to know where you stand as a business. With your budget intact, you can plan ahead and decide where you want your business to be financially in the near future. It also helps you to plan for future expenses.
2) Tax Preparation.
In Malaysia, businesses are required to file a tax return every year. But what happens most times is that when it’s time to file the report, many business owners are trying to get the paperwork right because their book is not well organized. This makes the whole process tedious and annoying.
However, with bookkeeping, the tax filing process becomes easier. You don’t have to mess up your office looking for missing paperwork. So when bookkeeping is in place you are prepared for tax time.
Bookkeeping is an analysis tool, it helps you to analyze your business and determine where your business is based on performance. When you do bookkeeping, you generate financial statements and these statements helps you to analyze the business properly.
When you are analyzing your finances, you will be able to track your cash flow. It helps you know what is working in your business and what is not.
4) Helps you Plan.
Bookkeeping gives you the past financial performance of your business. This past performance helps you to plan for the future. This is because when you have a view of the past you will see areas of the business that needs adjustments and areas that you may have to cut off totally.
5) Helps you report to investors.
At one point or the other in your business, you would need investors and they will want to know how your business is performing financially. They will want to look at your balance sheet, your income statement and your cash flow statement.
These statements are all products of bookkeeping and it helps your investors to know where the business is and how to invest. When you practice bookkeeping, these financial statements will be easily available and it will show your investors that you are serious with business.
6) Financial Management
Bookkeeping is essential because it allows you to be in control of the finances of your business. It shows you how much money you spend and also gives you an overview of how much money you owe. This way you are informed and you make good decisions based on that information.
7) Monitor Profit and Growth.
Many business owners do not even know if their business is growing or not because they do not have any indicator for monitoring growth. But if you practice bookkeeping or will help you to know the profitability of your business.
You will know if you are making a profit or running at a loss. It will help you know if your business has taken a quantum leap or not. Understanding the growth of your business goes a long way in managing your business effectively.
8) Better Cash Flow.
Finally bookkeeping helps you to maintain a good cash flow in your business. Money is not held up in unnecessary debts and your business is taken to a whole new level.
The importance of bookkeeping cannot be overemphasized. It’s something you have to do if you are an SME in Malaysia. It’s vital for your growth. To find out more about bookkeeping services in Malaysia, feel free to get in touch with us.