iMPORTANCE OF BOOKKEEPING

Starting a new business can be both exciting and challenging. There are so many things to consider, from developing a business plan to marketing your products or services. However, one of the most important aspects of running a successful business is bookkeeping and financial recordkeeping. Below, we'll discuss the importance of bookkeeping and financial recordkeeping for a new startup or small business. 

What is Bookkeeping and Financial Recordkeeping? 

Bookkeeping is the process of recording financial transactions, such as sales, purchases, payments, and receipts. It involves maintaining accurate and up-to-date financial records that can help business owners and managers make informed decisions about their operations. Financial recordkeeping involves not only bookkeeping but also the creation and maintenance of financial reports, such as profit and loss statements, balance sheets, and cash flow statements. 

Why is Bookkeeping and Financial Recordkeeping Important for a New Startup or Small Business? 

• Better Financial Management: Bookkeeping and financial recordkeeping can provide you with the information you need to manage your finances effectively. This includes tracking your income and expenses, identifying areas of inefficiency or overspending, and creating a budget that aligns with your business goals.

• Compliance with Regulations: Every business is required to comply with various regulations, such as tax laws, labour laws, and financial reporting requirements.  The South African Revenue Services (SARS) has certain requirements for businesses when it comes to financial recordkeeping. These include keeping accurate records of all income and expenses, as well as filing taxes on time. In addition to SARS requirements, there are other laws and regulations that businesses must adhere to when it comes to financial recordkeeping. These include the Companies Act, Tax Administration Act, Income Tax Act, VAT Act, PAYE Act, Customs & Excise Act, and Value Added Tax Act. It is important for businesses to understand these laws and regulations in order to comply with them.

• Facilitate Decision Making: Accurate financial records can help you make informed decisions about your business. For example, you can use financial reports to determine whether to invest in new equipment, hire new employees, or expand your operations.

• Attract Potential Investors or Lenders: Investors and lenders often require financial statements and other financial information before investing in or lending money to a business. This allows potential funders to get a clear picture of the business's current financial situation, which can help them to make an informed decision about whether or not to invest in the business. By maintaining accurate financial records, you can provide potential investors or lenders with the information they need to make informed decisions.

• Plan for the Future: Financial recordkeeping can help you plan for the future of your business. By analysing financial reports, you can identify trends or patterns that can inform your business strategy, such as identifying areas of growth or determining when to reduce expenses.

Outsourcing vs In-house bookkeeper

In-house bookkeepers work in the business doing the full spectrum of bookkeeping duties. They often report directly to the owner (or management) and they may work with an external accountant to deliver all of the business’ accounting needs. In many startups though, the bookkeeper is often the owner of the business. Depending on the size of the business, this is usually fine for a micro-business where funds are not readily available. However, the more complex the business, there more sophisticated the skills that are required to fulfil the bookkeeping role. Should the business elect to maintain a bookkeeper to perform their own financial recordkeeping, then it is advised that the business procures an accounting package appropriate for the size of the organisation. Xero and quickbooks are the most popular accounting packages for small businesses.

If the business does not have a person with the required skills to ensure that the financial records of the company are properly maintained, the company should strongly consider outsourcing the services to an expert service provider. 

Using an outsourced bookkeeping service can provide many benefits to businesses in South Africa. These include: increased accuracy; improved efficiency; cost savings; access to experienced professionals; improved compliance with laws and regulations; better security over the information; access to modern technology; scalability; and improved customer service. 

When selecting a bookkeeping service for your business, there are several factors to consider: cost of the service; experience of the personnel; accreditations and qualifications; customer service-levels; and scalability. Taking the time to research different services can help ensure that you choose one that is best suited to your business' needs.

Bookkeeping and financial recordkeeping are essential components of running a successful business. They can help you stay compliant with regulations, manage your finances effectively, make informed decisions, attract potential investors or lenders, and plan for the future. As a new startup or small business owner, it is crucial to prioritise bookkeeping and financial recordkeeping from the very beginning. By doing so, you can set your business up for success and achieve your goals.

Now, go out there and WIN!!