We already know that bookkeeping is a laborious painful task, but why should business owners take it seriously ?
The first reason why you should keep your books up to date is for budget reasons. Without budgeting and planning, how will you know how much money to set aside for your rent, vendor payments, employees’ salaries etc. ? Also, you need to keep track of who owes you money and how much. If you do not maintain records, your customers will not pay you.
Secondly, if you are planning to obtain a business loan or any form of investment from external investors, then you must have a set of financial statements. The foundation for preparing financial statements is bookkeeping.
Thirdly, you need solid financial data to make strategic decisions for your business.
Fourthly, you need financial statements to prepare your tax returns. Regular bookkeeping helps you to catch tax deductions that you might forget about.
The fifth and final reason, perhaps the most important reason of all. As a business owner, you MUST have basic knowledge of bookkeeping in order to review the work of your bookkeeper and to be able to ask the correct questions. In my experience, there have been too many cases of bookkeepers who defraud their business clients for many years simply because the business owner was too trusting, uninvolved, or not interested in understanding the finances of their business entity. Please make sure that you are different and more aware than the average business owner.
