Updated: Aug 9, 2022
I was recently posed the question, “Why is Bookkeeping so important?’’ and I, for one, have a lot to say in response to this question. After taking the time to speak with some friends who also have over 50 years experience in running businesses, I can tell you why I feel it is so important. My answers to why bookkeeping is so important was oddly similar as to why they have felt accurate, timely, monthly bookkeeping is important to them as business owners, does not matter whether the business is small or big, it is vital. Let me start with an example. When we have children, we take them to the doctor, correct? Why do we track their weight, height and use all different metrics and statistics? To ensure that they are developing. A business is a living, breathing entity. It has an ongoing concern – the concern as to whether it can continue as a business – that was an accounting assumption for you, right there. Most of us track and update a lot of items in our life. When we look at the business as a living breathing entity, then we begin to understand why bookkeeping is essential.
We all know that all businesses, regardless of size, need to update their books quarterly for tax purposes. Monthly Bookkeeping is even better. When you own a business, you find yourself needing to answer the following questions: When do we hire? When can we expand? Are we profitable? If an unusual circumstance or disaster happens will my business survive? Where does our cash flow every month? These questions always come up in some form or fashion for a business from the time it starts to the exit date. There is another question to answer; When do we exit? What is the plan? What are we worth? All these questions look at historical financial data and current data so the business can make decisions on where it is headed. We need historical and current data as the baseline to building a plan, knowing if we are profitable, setting goals and then measuring if we are achieving those goals. This is all essential to a business, Financial Wellness.
Monthly bookkeeping gives the decision makers of the business access to relevant, timely, useful and accurate financial information to be able to make those crucial decisions that are make or break. Since nobody owns a magic 8 ball that tells us when we are going to need to analyze financial data because monthly financial information is the course to take. The decision makers, making those key decisions will have a point in time that they can rely on data to be available and accurate to make decisions.
When the time comes, for decision making, be prepared. The business is dependent on financial wellness, cash is still king and the business needs this to survive. Exactly how do you know what all your financial data means? That is simple, have an accountant.
Brad Murrill and Robert Simpton are registered representatives of and offer securities through SCF Securities, Inc. - Member FINRA/SIPC Investment Advisory Services offered through SCF Investment Advisors Inc. 155 E. Shaw Ave. Suite 102, Fresno, CA 93710 • (800) 955-2517 • Fax (559) 456- 6109. SCF Securities, Inc. and Redfish Capital Management are independently owned and operated. www.scfsecurities.com The views and opinions expressed herein do not necessarily represent the views and opinions of SCF Securities, Inc. or any SCF-related entity. This material is for general information only and is not intended to provide specific advice or recommendations for any individual. SCF does not offer tax or legal advice and this material is not intended to replace the advice of a qualified tax advisor or attorney. Please consult legal or tax professionals for specific information regarding your individual situation.