We have met with many business owners over the years, and at times, the finance function takes a back seat to growth/operations. Some business owners believe that the finances, importance of monthly bookkeeping and back-office can occur once per year (i.e. a large catch-up project) rather than completing tasks on a more frequent cadence.
This rarely goes over well.
We strongly believe and urge business owners to ensure their finances are kept up with on a monthly basis.
Having monthly bookkeeping done, for example, instead of annual bookkeeping offers several advantages for businesses. Here are a few reasons why monthly bookkeeping is beneficial:
TIMELY FINANCIAL INSIGHTS
Monthly bookkeeping allows you to stay up to date with your financial data. By regularly reviewing your financial records, you gain timely insights into your business’s financial health, cash flow, profitability, and trends. This enables you to make informed decisions promptly and identify and address any issues or opportunities quickly.
By completing bookkeeping annually you lose your up-to-date financial insights as you’re analyzing historical data.
You’re also looking at transactions you may not even recall (i.e. ones that happened many months ago) – thus the exercise of completing twelve months of bookkeeping can be very time consuming (and ineffective).
BETTER FINANCIAL MANAGEMENT
With monthly bookkeeping, you have a more accurate and detailed picture of your financial position. It allows you to closely monitor your income, expenses, and budget throughout the year. By maintaining a tighter grip on your finances, you can proactively manage your resources, control costs, and make adjustments as necessary to ensure the financial stability of your business.
Our clients become very excited when they figure out how to obtain daily, weekly and monthly reports from their online accounting platform.
COMPLIANCE AND TAX PLANNING
Consistent monthly bookkeeping ensures that your records are well-maintained, organized, and compliant with accounting and tax regulations. It makes the year-end tax preparation process much smoother and less stressful. By having up-to-date financial information, you can engage in proactive tax planning strategies and take advantage of any tax-saving opportunities that may arise. Lastly, if you need to make tax instalments based on previous year’s taxable income, having financial transparency into your profitability is instrumental in ensuring your instalments are up to date.
EARLY ERROR DETECTION
Regularly reconciling your accounts and reviewing financial statements on a monthly basis helps identify errors, discrepancies, or anomalies in a timely manner. Detecting and addressing issues promptly can prevent small problems from turning into significant financial setbacks.
DECISION MAKING AND GOAL SETTING
Accurate and current financial data enables you to make informed decisions about your business. Monthly bookkeeping provides the necessary information to evaluate the performance of your operations, measure against key performance indicators (KPIs), and adjust your strategies accordingly. It also allows you to set realistic and achievable financial goals for your business based on accurate and up-to-date information.
FINANCIAL PLANNING AND FORECASTING
Monthly bookkeeping provides the foundation for financial planning and forecasting. By having a clear understanding of your past financial performance, you can project and estimate future revenue, expenses, and cash flow more accurately. This helps in developing realistic budgets, identifying potential funding needs, and making informed business decisions for the future.
FINAL THOUGHTS
Monthly bookkeeping offers businesses more timely and accurate financial information, enables better financial management and decision-making, helps with compliance and tax planning, and allows for early error detection. It provides a solid foundation for financial planning, forecasting, and achieving long-term business goals. This is importance of monthly bookkeeping.
Contact Abdullah CPA for our Bookkeeping Service.
