10 Reasons Why Bookkeeping Is Important To All Businesses

The main purpose of bookkeeping is to track the financial activities of a business. Alongside the growth of the business, bookkeeping becomes more complex with why the introduction of tax, assets, loans, and investments. Bookkeeping allows businesses to keep an up-to-date record of their revenue and expenses, the amount owed by the business, investors, and customers, and so much more. 

Obvious, detailed, and thorough bookkeeping is crucial for businesses of all sizes. This article will give you a detailed answer to the question “Why is bookkeeping important to all businesses?”

10 reasons why bookkeeping is important to all businesses

1. Optimizes your budget 

Bookkeeping is vital to any business because it makes budgeting so much easier. Bookkeeping helps you organize your income and expenses properly,  and makes it simple to review your financial resources and costs. A clear budget in turn creates a clear financial plan for your business. Then you can plan for future expenses and the anticipated resources needed to cover those expenses. 

See more: 9 Basic Types Of Bookkeeping That Every Bookkeeper Should Know.

2. Simplifies tax planning

Every business has to file their taxes at the end of the tax year. And for many accountants, tax season means scouring their desks to find missing paperwork. If this sounds familiar to you, then you may need to consider setting up a bookkeeping system. With an efficient bookkeeping process, you will have your financial information ready for tax season and your accountants will no longer need to spend hours on the tax filing process. Bookkeeping is important for your personal tax return as well. For business owners, a large part of their income comes from their business. To know their total annual income, they need to know what their business earned first. Having detailed balance sheets over time helps you predict your annual profits more accurately. 

3. Supports decision-making

The best decisions are informed decisions, and to make an informed decision, you need to have access to all available information. Bookkeeping tracks and compiles all of the information needed to support your financial decisions. 

An inaccurate understanding of your financial status and key performance indicators can lead you to make some erroneous decisions that could jeopardize your business. For example, in the short term, if you don’t understand your cash inflows and outflows correctly, you may experience overdrafts, late fees, and difficulty in making your payroll timely. In the long-term, if you don’t know your sales profitability, you may miss many opportunities to invest in the more profitable lines of your business, which leads to lower earnings. The same thing can happen to non-profit organizations. If you don’t know the true cost of your programs, you may make bad decisions on which programs to invest more resources in. Business owners can prevent these types of situations by maintaining accurate books and records. This will simultaneously optimize business operations as well. 

4. Tracks profit and growth

Bookkeeping provides financial information about your company through financial statements. Financial statements, including balance sheets, income statements, and cash flow statements provide information for a set period. For example, you can see if your business is profitable or not from the income statement. Together, all these statements take a snapshot of your business, allowing you to see how well the business has performed. 

Bookkeeping also helps to track business growth. Over time, you will collect months and years of data. You can use this data to observe trends and better understand your business progress and compare results across periods. By keeping regular financial records, you can map out your business goals more accurately and achieve steady growth. 

5. Manages and improves cash flow

Bookkeeping allows business owners to take control of their business’ finances. It draws a clear picture of how you spend money. As a business owner, you need to ensure that your customers’ invoices are paid on time. You can track when your customers and vendors pay their invoices through the routine records of revenues, expenses, liabilities, and receivables. You can also notice if you are paying your bills on time to avoid penalties. 

So, how does bookkeeping improve your cash flow? Bookkeeping provides information regarding your outstanding invoices, such as customer or vendor names, amounts, issued dates, and due dates. Business owners can use this information to implement better cash flow policies, such as shortening payment deadlines or adjusting the time of payment for vendor invoices. By doing so, you can increase the average amount of cash you have on hand at any given time. 

6. Greater focus on strategy

Disorganized books can weigh heavily on a business owner’s mind. Your bookkeeping should not be keeping you up all night. When your books are completed and in order, you can rest easy knowing that your company’s financial information is review-ready. You will then find your mind at ease and more focused on other elements of the business, such as planning and strategy. 

Tactical and strategic planning are at the core of business operations. As you are always thinking of growing and developing your business, bookkeeping will bring you closer to your short and long-term goals. You can use the information provided by bookkeeping to track the results of your strategy and adjust your goals accordingly. 

7. Maintains organized records

As your company’s financial records are important to a number of stakeholders – investors, lenders, customers, employees, etc, providing the information requested by these parties is vital to your ongoing operation. In this case, being organized is a skill that every business owner should be able to find information at any time. If you cannot provide records to the IRS, your business can face penalties and fees. If you don’t provide records that investors and lenders requested, it could result in the stoppage of cash flow and so on. Being disorganized with your books can compromise or even terminate your relationships with these parties. 

Furthermore, the last-minute stress of finding a crucial piece of paperwork can lead to missed deadlines and other errors. Businesses of any size can’t afford to make mistakes, and regular bookkeeping can help with that. By keeping an eye on your bookkeeping frequently, instead of leaving it to the last second, you will be able to maintain organized records and save a lot of time finding the information you desperately need. 

8. Meets law requirements

The law requires businesses to keep their financial records separate from the owner’s personal expenses. Failing to do this can lead to the termination of your business. 

Accurate financial records are essential to filing your tax return properly, and can also minimize the chance of being audited and/or incurring tax penalties. Businesses with bad bookkeeping practices tend to file late and may lack the proper documentation to support their filings. This can land you in deep trouble with the IRS. If you are audited and cannot support your income and deductions, the result can cost your organization a lot. 

9. Data analysis 

Bookkeeping matters because it helps with business analysis. Bookkeeping is a management tool used to analyze business performance. 

One of the most useful products of bookkeeping is the financial statement. Business owners should generate the financial statement regularly to know which lines of business are working or not working. Financial statements allow business owners to focus on their business’s strengths and improve on its weaknesses. 

Bookkeeping reveals the previous financial performance of your business. In order to make future plans, you need a good understanding of your situation. Bookkeeping will give you a clear picture of what does work and what does not. 

10. Makes it easier to report to investors

Investors and shareholders want to know the financial performance of your business so that they can determine the value of their investment. Let financial statements do the work. The combination of the balance sheet, income statement, and cash flow statement presents the value of the business. 

As stated above, the main product of bookkeeping is financial statements. Bookkeeping provides investors with up-to-date and accessible information. Then, investors will be able to make better, well-informed decisions, which is the ultimate purpose of bookkeeping. Bookkeeping is not only vital for current investors but future investors, too. Potential investors are more likely to invest in your business when you have organized information. Speaking of which, if you were an investor, would you invest in a company that did not have accessible and organized financial records? 

Final thoughts 

So now you have the answer to the question “Why is bookkeeping important?” It saves your money, time, and energy and helps you manage your business’s finances better. You can streamline the process even further by implementing a paperless bookkeeping system using Shoeboxed. Shoeboxed helps you clear your desks and turn your data into actionable information. Let us scan and organize your receipts, extract key data, create expense reports, and manage them in standard categorizations. Business owners no longer have to worry about keeping so many receipts, documents, and other accounting paperwork. Just leave it to experts. Contact us today and get ready to see how bookkeeping benefits your business. 

If you have any other reasons why bookkeeping is important to businesses, let us know in the comments!

6 Reasons to Invest in Bookkeeping Management Software for Restaurants

A day in a restaurant is as hectic as you can imagine. Everyone working both front and back of house carries out activities to keep the business running including purchasing raw materials, food preparation, customer service, cleaning, accounting, reporting… and the list goes on! 

A restaurant manager is the one who ensures that things run smoothly and efficiently. The manager usually focuses on customer service and team management during opening hours. Yet they’re usually the one who ends up doing bookkeeping and reporting at the end of an exhausting day. The tedious and monotonous bookkeeping task is often overlooked and much more likely to fall to the very bottom of the priority list. This can lead to confusion and chaos when one inaccurate record occurs. 

Why do you have to make it hard when you can make it smart? Let’s make bookkeeping tasks less tiresome with the aid of bookkeeping management software. 

In this article, we’ll look into the importance of bookkeeping in a restaurant business, examine six reasons a restaurant business needs bookkeeping management software, and guide restaurant owners or managers in finding the right application to fit their business.

Why is bookkeeping important to a restaurant business?

What is bookkeeping?

We all know what bookkeeping is to some extent, but let’s break down what exactly we mean by bookkeeping before diving into why it’s important for restaurant businesses.

  • Bookkeeping is the practice of recording all expenditures and incomes, which demonstrates the cash flow in a business. 
  • Bookkeeping management involves recording all financial transactions such as material expenses, service expenses, payroll, as well as income (like customer or client payments for goods and services).
  • Bookkeeping is carried out regularly so that managers can track all information and money movements on their books to make key operating, investing, and financing decisions.

A bookkeeper is a person responsible for bookkeeping. Without bookkeepers, companies wouldn’t be aware of their current financial position, as well as the transactions that occur within the company’s walls. Many restaurant owners and managers take on their businesses’ bookkeeping management to save costs. The success of this task lies in restaurant owners and managers’ bookkeeping experience. 

Why should restaurants do proper bookkeeping?

Bookkeeping management is a crucial function in the restaurant business for both legal and financial management purposes. It allows you to track every detailed report about the restaurant’s revenue, food, labor, and operating expenses. Based on these, a bookkeeper calculates precisely how much the restaurant is taxed and processes it on time. 

It’s the restaurant’s legal obligation to pay tax and any restaurant owner and manager wants the tax procedures to go as seamlessly as possible. Proper bookkeeping management will save you plenty of time and work. It also ensures your business violates no obligations when it comes to money affairs. 

Restaurant owners and managers often overlook the importance of matters such as keeping records of every penny spent. Over time this leads to confusion or even huge losses for any restaurant business. 

Proper bookkeeping gives restaurant businesses a reliable measure of their performance. Thanks to that resource of information, you can get a snapshot of the business’ health and whether or not to adjust any operational activities. 

Make the switch to bookkeeping management software

Bookkeeping management software which can do the same job as a bookkeeper and costs only a fraction of a bookkeeper’s salary is considered a good solution for restaurant owners and managers. Thanks to such software’s efficiency, thousands of restaurants have switched to these digital tools  instead of hiring a bookkeeper .

6 reasons to invest in bookkeeping management software for restaurants 

1. Storage

A study has shown that restaurants generate more than 1.5 billion pounds of paper waste per year on receipts alone. Your business does contribute a part to that huge number. 

Paper receipts from customers and vendors can take up to 25% of a restaurant’s office space. Like other restaurant owners and managers, you may be keeping two or three copies of some documents and filing them in different places. This duplication creates waste and makes the workplace environment cramped and uncomfortable. 

By digitizing receipts and storing them in bookkeeping management software, you don’t have to worry about storage anymore.

2. Waste

Every business should be conscious of the environment. With many tree-based products being used and wasted, there’s an estimate that the majority of Earth’s rainforests will be completely gone within the next 100 years. Going paperless is every business’ responsibility to help save the environment and protect the Earth. 

Much of the paper waste produced by restaurants are customer bills and vendor receipts. You can help reduce these sources of waste by using bookkeeping management software. 

3. Supply cost

Paper-based records include the cost of paper and several sources of indirect supply costs. The indirect supply costs include costs of filing cabinets, printers and ink, and other stationery. 

Such costs for restaurants change depending on the season, with more papers issued during the busiest periods and fewer papers issued during off-peak seasons. 

With bookkeeping management software, the supply cost remains the same through different points of the year, thus saving a lot of expenses for restaurant owners.

4. Productivity

It’s hard to find the right piece of paper in a pile containing thousands of others. Even in the most organized workplace, it can still puzzle anyone searching for things, which slows them down. It can go from bad to worse if you’re in a rush and have to deal with difficult customers or merchants. 

A digital document archive with a powerful search function will greatly improve one’s productivity. Bookkeeping management software helps restaurant owners and managers cut off lots of time on finding documents, thus staying focused and engaged in more important tasks.

5. Accessibility

Easy data accessibility is one of the key qualities that restaurant owners and managers look for in their bookkeeping management software. With a huge customer and vendor database, extracting and analyzing information done by a bookkeeper for one specific request is nearly impossible. 

With bookkeeping management software, customer and vendor data has been extracted and stored in a place where you can search for it with a click. Thanks to this highly accessible feature of bookkeeping management software, now restaurant owners and managers can search their database in seconds. 

6. Security

Paper documents are susceptible to risk. Keeping piles of files on-site can introduce several risks, including an incident of fire, poor environmental conditions, and even theft. 

If your business office catches on fire, your paper records could go up in smoke. Floods, earthquakes, and other natural disasters can also result in the loss of important business documents. If records are stored in moisture-prone areas, they’re subject to mold. 

Therefore, off-site storage is a solution to protect important documents that many businesses look for. Unfortunately, restaurant records are not as secret and confidential as other financial documents, and restaurant owners and managers could not afford to pay a place at a professional records storage provider. Chances are they’ll look for something which can store documents safely and cost a reasonable price. 

Bookkeeping management software is an optimal solution. Files digitized and stored on the cloud are much safer than in their physical form. Besides, digital documents are protected using multiple security solutions, encrypted, and restricted to limited users who have been granted access. 

What is the best bookkeeping software for restaurants?

Now that you know about bookkeeping management software and its benefits, it’s time for decision making. Choosing the right one is essential because you’ll use it every day to track the money coming in and going out of your business. 

However, the variety of software available in the market can confuse and overwhelm any decision-maker. Ask yourself these questions and you can eventually come up with a clear picture of what you’re finding.

Identify your needs

Do you need a platform that allows you to track inventory, receipt, and sales tax or more direct concerns? Do yourself a favor by making a list of your bookkeeping needs and prioritizing them from least to most important. Understanding your needs before you start researching solutions helps you find the right software without any doubts or concerns.

Look for features that meet your needs

It’s easy to get starry-eyed about features. Don’t blame yourself for this because some software is made to catch the eye of many people. Escape distractions, return to your list of prioritized needs, and evaluate only the software that meets the majority of those needs.

Check your budget

What if bookkeeping management software is amazing, but it’s beyond your budget? Or you may find a hot deal that does not come up with the features you wish to have? All in all, you should figure out the ideal software you wish to have and evaluate whether or not it can fit your budget.

Make bookkeeping management software part of your business operation today

Bookkeeping management software developed by Shoeboxed is an ideal tool for professional accounts and small business owners.

With Shoeboxed, you can turn your receipts into data and organize, make reports and analyze your current financial position at any time and anywhere. 

To get the most out of your bookkeeping management, get started with Shoeboxed for free!

Career Profile: Everything You Need To Know About Bookkeepers

All over the world, most businesses by law must do bookkeeping. Bookkeeping records all financial transactions and systematically categorizes them, calculating the business’s exact income and expenses. In other words, bookkeeping is critical to your business’s success, but how much do you know about the profession that keeps you in the financial loop? Read on to find out the career profile of a bookkeeper!

What is a bookkeeper?

A bookkeeper is someone who records your daily business’s transactions and manages accounting ledgers. In essence, a bookkeeper keeps your finances in order. 

Responsibilities of a bookkeeper

So, does a bookkeeper only enter data into the accounting system? The answer is definitely no! Besides the main task of collecting and recording data, here are some other common roles a bookkeeper performs:

  • Bank reconciliation 

A bookkeeper double-checks whether the money leaving an account matches the actual money spent. 

With cash flow constantly changing and so much money coming in and out, it’s easy for errors to fall through the cracks. To avoid this, bookkeepers check and compare your recordings to documents provided by a third party (such as a bank, a credit card company, etc.) to ensure data is synced and accurate. In case there are any discrepancies, the bookkeeper will review and promptly correct them. 

  • Bills and invoices 

Bookkeepers can also take care of bills and invoices. This directly involves handling accounts receivable and accounts payable. Both of these responsibilities ensure that customers pay you (ideally on time) and that your bills are paid before the due date. 

An excellent tool that can help your bookkeepers to stay on top of these problems is Shoeboxed. Shoeboxed helps you categorize, digitize, and extract important data from your receipts in just a click. Every one of your bills and invoices will be well-organized and easy to find. Using Shoeboxed, your bookkeeper no longer needs to go through piles of paper to process a payment. 

You can sign up for free and let Shoeboxed save you time & money!

  • Payroll management 

Bookkeepers are sometimes in charge of payroll processing, as well. While the procedure may differ among businesses, the task typically entails verifying and calculating employees’ salaries, deducting taxes and other deductions, and then sending payment. 

As every business is different, the responsibilities of a bookkeeper vary across companies and industries. However, in every business, a bookkeeper should carry out excellent and systematic bookkeeping in order to manage finances better and achieve your company goals.

What skills does a bookkeeper need to master?

Here are some ideal qualities and proficiencies to look for when hiring for a bookkeeper: 

  • Excellent with numbers: All the tasks that a bookkeeper performs involve numbers. That’s why a bookkeeper has to be comfortable dealing with complex calculations. In certain circumstances, the nature of your business determines the level of numerical expertise. But there is no escape from numbers and calculation. So it’s best that your bookkeeper doesn’t get headaches whenever they see digits.
  • Extraordinary organizational skills: A successful bookkeeper is someone who’s well-organized. They’re responsible for recording each and every transaction, from supplier invoices to customer receipts. So if bookkeepers don’t know how to organize things, they’re likely to make mistakes and cause you financial damage. 
  • Good communication skills: A bookkeeper needs to be socially intelligent as they have to communicate with customers, suppliers, and colleagues to collect data. Plus, they should be able to speak in plain English, simplifying technical terms so that everyone can understand. 
  • Proficient skills in accounting software (optional): If your business doesn’t use an accounting program, this trait is totally optional. Otherwise, computer skills are essential as they can save you time when training, as well as ensure data entry will be accurate to avoid issues..  

Do bookkeepers need any qualifications?

In general, a bookkeeper doesn’t need any qualifications or license to perform their job. However, many organizations offer bookkeeping certificates. Though these certifications are not regulated by any state or federal office, it’s still a useful tool for you to seek the most suitable bookkeeper for your business. Below are two examples of common bookkeeping certifications:

  • American Institute of Professional Bookkeepers (AIPB): To earn AIPB certification, bookkeepers must have at least two years of full-time work experience, pass a national exam, and agree to follow the AIPB code of ethics. Through its assessment, the AIPB qualifies professionals in many areas like adjustments, error control, payroll, inventory management, internal controls, and fraud prevention. Additionally, bookkeepers need to engage in continuing education to maintain their accreditation. 
  • National Association of Certified Public Bookkeepers (NACPB): Bookkeepers can obtain different types and levels of NACPB certification and license. To get NACPB licensed, bookkeepers must have 2,000 hours of work experience, pass an exam and sign a code of conduct. They must complete 24 hours of continuing education each year to keep their license. 

What is the average salary for a bookkeeper?

The salary or hourly rates you’ll pay totally depend on your business’s nature and what it needs. That means you can determine the right compensation for your bookkeeper through these two factors: services/workload and expertise.

  • Services/workload: This is pretty straightforward as the more work you need bookkeepers to do, the more you have to pay them. For example, if you need someone to check the books once a month, it’ll cost less than hiring someone part-time to handle your daily operations. So, determine what tasks you need professional help with, estimate the time it might take them to finish, and then you can know if you need someone part-time, full-time, or on a project basis. From there, you can determine the cost to hire a bookkeeper. 
  • Expertise: If your accounting system is complex, you would want a certified or licensed bookkeeper. It can give you peace of mind and assurance that your money is in excellent hands, but it will definitely cost you more.

Visit recruiting websites to give yourself a good idea of how much it should cost in your company’s particular market. For instance, according to Indeed, bookkeepers’ average base salary is $38,615 per year and $18,94 per hour (based on 2021 statistics). 

Bookkeeper vs. Accountant

By and large, a bookkeeper mainly focuses on recording and organizing financial data. An accountant analyzes, interprets, and communicates those data to business owners and investors. 

Check out this article for detailed explanations: Accounting Vs. Bookkeeping: What Are The Differences? 

Final thoughts 

There is no reason for you to stay caught up in day-to-day tasks like recording data or organizing receipts. Hiring a bookkeeper is a wise investment that will help your company flourish. A dedicated bookkeeper can take care of your books and keep good track of your cash flow, freeing you up to devote more time to really grow your business. 

Want to streamline your bookkeeping process? Or improve accuracy? Shoeboxed has got you covered. 

Experience paperless with Shoeboxed