The Importance Of Bookkeeping For Your Small Business
According to the famous statistician, W. Edwards Deming, “You can’t manage what you can’t measure”. This adage definitely rings true when it comes to the measurement of a company’s financials for performance assessment. Without a proper system in place to compile their financial data in a timely and accurate manner, it is near impossible for small business owners to gauge their performance since they have no access to accurate and real-time information. In this blog post, we highlight the components of a good bookkeeping system, and the importance of a proper bookkeeping system to your small business.
What Is Bookkeeping?
Bookkeeping is defined as the activity of keeping records of the financial affairs of a business. It is a subset of accounting, and forms the basis of a company’s accounts and financial statements. A bookkeeper typically performs the following tasks:
Tabulates supplier bills, records expense transactions and corresponding accounts payables owing to the suppliers.
Administers payments to suppliers and records outgoing payments.
Issues sales invoices to customers, and records the sale transaction and corresponding accounts receivable owing from the customer.
Records customers’ payments against the accounts receivable by reducing the amount owing from the customer.
Monitors and follows up on outstanding unpaid sales invoices and adjusts credit limits accordingly.
Administers expenses claims from employees and directors.
Performs bank reconciliation, which is the practice of matching all bank transactions (both deposits and withdrawals) against accounting data to ensure that all bank transactions are completely and accurately recorded in the accounts.
Importance Of Proper Bookkeeping
Facilitate Management Decision Making
Management relies on accurate and prompt financial information to make key decisions relating to investment, production, recruitment, and funding. A proper bookkeeping system ensures that management reporting will be accurate and timely and will greatly help management to make better and faster decisions. Timely recording of the collection of accounts receivables and payments to suppliers will also mean greater visibility of the company’s cash flow position. This will allow companies to better forecast their future sales and expenses and take advantage of business opportunities when they arise.
Avoid Fines And Penalties From Authorities
All companies in Singapore are required to meet statutory compliance deadlines from Accounting and Corporate Regulatory Authority of Singapore (“ACRA”) and Inland Revenue Authority of Singapore (“IRAS”) (read more here). As there are hefty fines and penalties when the deadlines are not met, it is important that the company has a proper bookkeeping system in place to ensure that the data generated for financial reporting to the authorities are both accurate and prompt.
Bookkeeping Best Practices
Timely recording of transactions and reconciliation with bank statements
Integration of accounting system with business operations (for e.g. invoicing and purchasing systems and expense claims administration) to ensure data integrity and accurate financial reporting to ACRA and IRAS
Integration with a management reporting system to enhance management decision-making process
Robust data retention policies to ensure compliance with statutory requirement for records-keeping
Outsourcing of bookkeeping function to access expert advice and resources
What is Cloud-Based Bookkeeping?
In the past, financial data is stored in a hard drive and can only be assessed through the same device. With the advent of cloud accounting, financial information can now be assessed through a web-based interface as cloud accounting is hosted on servers that are assessed over the internet.
Make Better and Faster Business Decisions
With cloud-based bookkeeping, you will be able to assess real time information from any device and location to make better and faster important business decisions concerning investment, recruitment, bulk inventory purchases, etc. You can keep track of your cash flow position in real time, from monitoring payments to suppliers to debt collections from customers.
Enhanced Financial Reporting System
Cloud-based accounting software seamlessly integrates the accounting system with the remaining business operations (for e.g. invoicing and purchasing systems and expense claims administration) to ensure data integrity and accurate financial and management reporting. It also eliminates manual data entry and human error as bank feeds automatically import bank statements into the system.
Share information in different locations with key stakeholders
With cloud-based bookkeeping, you can share key financial information in a timely manner with business partners, employees, and accountants in different locations.
Is Cloud-Based Bookkeeping Right For You?
It is inevitable for small business owners to have security concerns when it comes to cloud accounting. We partner with Xero, who is certified as compliant with ISO/IEC 27001:2013. Their robust security management program and comprehensive Information Security Management System (ISMS) ensure that your data is secure. Read more here.
Speak To Your Accountant
We understand that juggling bookkeeping on top of running your business can be overwhelming at times. If you have any queries on cloud-based bookkeeping, feel free to drop us a message or email us and let us know how we can assist you. Our general response time is one business day.
