Bookkeepers are the unsung heroes of the financial world, and without excellent bookkeeping good accounts are impossible. Consequently, running a business is a far greater challenge. Additionally, a bookkeeper has several direct impacts on a business not simply improving the quality of financial reporting.
Irrespective of a business size bookkeepers play a vital role. For the sake of this article the focus will be the benefits to small businesses and their owners. We will explore the direct impact bookkeeping can have, some more indirect influences down to the basis’s of keeping you compliant.
1) PROVIDE THE FUNDAMENTALS OF ALL YOUR ACCOUNTING
Bookkeepers supply the information on which to base your financial reports and decisions. Ultimately this is a good investment as yearend accounts may be more streamlined in their production saving you money. Much like in construction, having poor quality foundations leads to structural issues in the rest of the build. If bookkeeping is done to a subpar standard, then any reports generated will themselves be lacking.
2) ENSURING RECORDS ARE ACCURATE AND UP TO DATE
They perform the standard reconciliations including VAT, PAYE (Pay as You Earn) and wages. In addition, they will ensure your bank feeds are working correctly. This means that your VAT and PAYE liabilities are identified and accounted for while also ensuring correct distribution of wages. Doing this correctly is time consuming for you to do personally especially without years of experience behind you.
3) COMPLETE UNDERSTANDING OF YOUR CURRENT POSITION
Knowing the goings on of your business is part and parcel of being the boss, however having detailed financial understanding puts you on a different platform. Up to date records, as mentioned above, daily bookkeeping more so would enable you to act quicker in the face of potential issues such as upcoming cash flow problems. You can respond to problems pre-emptively not simply re-actively and with more insight than your competitors. It also allows for better planning in times of plenty to ensure you maximise growth and support your future.
4) CREDIT CONTROL
Sending invoices and polite reminders top your customers is industry standard, some can even run credit checks on your clients to provide better insight. Additionally, they can liaise with them on any payment issues and finally arrange a suitable payment plan that benefits everyone involved. In practice this helps to reduce your debtor days and improve your cash position.
5) STRENGTHEN RELATIONSHIP WITH SUPPLIERS
Bookkeepers can schedule payments on your behalf giving you back valuable time. In the eventuality you are unable to pay an invoice this can be addressed far sooner and much like credit control above can be planned out. This is crucial in maintaining supplier relationships and preserving your own credit rating.
6) ANALYSIS OF REVENUE STREAMS
This enables you to ascertain which are doing well and which streams need reviewing. This gives the opportunity to update your offerings to match changing demand. While this is all noticeable when running your business, this can be quicker with a bookkeeper supplying information. Meaning you capitalise on this knowledge sooner.
7) ANALYSIS OF EXPENDITURE
This allows you to see potential areas to streamline and greater understanding of where your money is being spent reducing your profit. This can cut costs to save money or to free up funds to be spent elsewhere.
8) GUIDE YOU ON SUGGESTED SAVINGS
They can not only recommend strategies for saving but also aid you in “squirreling” away funds for upcoming liabilities, including tax and wages. Having three months’ worth of expenses saved is ideal to help weather any lean months, this is explained in more detail within a previous article on cash flow. Systems can be put in place to ensure that savings are adequate to cover large expenses. For example, this could be a quarter end where VAT liability and wages are due around the same time. Bookkeepers can help you plan these out to minimise any risk of falling short.
9) BUDGETING
Budgeting is the best way for a business to have accountability for its spending. Bookkeepers can help with setting up soft caps based on the combined efforts of their experience and analysis of your data. This ensures greater control of expenditure through review and then reporting. For SME’s budgets are often not a feature of their accounting or are not robust enough to keep up with changing circumstances. Hence the importance of regular scheduled reviews.
10) PAYROLL
Bookkeepers can support business owners gathering payroll data as well as preparation and processing, ensuring the necessary journals are posted. This could be a big time saving as well as guaranteeing confidentiality of sensitive information.
11) BOOKKEEPING PROVIDES THE BASIS FOR ANY FORECASTS
This is a powerful tool to track if the business is performing in line with predicted/anticipated growth and exploring “what if” scenarios. Accurate reporting on actuals, forms the basis for providing increased understanding of your business enabling the preparation of growth forecasts and scenarios.
12) FUTURE INVESTMENT AND POSSIBLE LOAN APPLICATIONS
Having well prepared documentation can support future investment and loan applications – banks are more willing to lead if you can demonstrate the health of the business clearly.
13) COMPLIANCE
Preparation,review of VAT Returns and notification of upcoming deadlines and advanced noticed of liabilities. Referring to the point above on budgeting, hopefully sufficient funds should be in your savings to cover this. This supports you to meet your legal and compliance obligations.
BONUS POINT – GIVES YOU BACK TIME
This may not be a direct benefit to the business, but you can dedicate this time to your vital work or doing this crazy thing called relaxing!
If you interested to learn more about how a bookkeeper could help you and your business get in touch!
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