Keeping accurate records and well organized data is important to the financial well being of companies big and small. Good bookkeeping may not directly contribute to the profits of a business, though some bookkeepers would argue this, it important to the to their fiscal well being. Besides the possibility of increasing profits, there are many important reasons to maintain accurate and organized records.
One of the most important reasons to maintain accurate records is in case the business needs to borrow money for an opportunity to grow or for other expenses. Lenders expect to see solid bookkeeping and to fully understand the solvency of a business before granting any loans. Bookkeepers must keep track of the money that the company or small business has, but also be able to determine whether the owner will qualify for funds in the future. Additionally, companies or small businesses that rely on outside financing to survive must regard this as a top priority.
Accurate bookkeeping is also important in generating data for owners and managers to make management decisions, whether this is on a daily, monthly or quarterly basis. Current ledgers will indicate accurately whether a customer is past due and which are carrying balances on their lines of credit. Without this information, the company cannot effectively respond to patterns of late payments or nonpayment of customers. Additionally, these losses over time will eventually hamper a companies ability to stay in business or have enough to grow.
Businesses also use their records to determine their financial stability. They can see if their gross profits are in line with their projections. Large or small business bookkeeping helps owners decide if the prices of their products and services are sufficient to cover their costs. Additionally, this information is critical at tax time. Accurate income and expenditures are a must for a company to figure their tax liabilities for the IRS.