Definition: Book keeping refers to the process of record keeping your business’s financial transactions such as sales and expense on a daily basis.
It is considered an essential part of a business among the reason being when you keep transaction records updated ,you can generate updated financial reports key in measuring the business performance.
Book keeping entails
i. Keeping track of business transactions mostly sales and expenses
ii. Tracking debts and credits issued
iii. Preparing financial statements(income statements ,cash flow statements)
iv. Creating and tracking invoices
v. Managing staff Salaries(payroll)
Methods of Book Keeping
1.Single-entry book keeping
2.Double-entry book keeping
1. Single-entry book keeping
This is where one entry is made for each transaction in your books, simply tracking incoming revenue and outgoing expenses.
The good thing as a business owner is that you do not need formal account training to use this single entry system.
It’s suitable for small businesses and medium scale businesses.
2.Double-entry book keeping
This method follows the principle that every transaction affects at least two accounts, and they are debit and credit. As an example if you make a sale of ksh 100 ,your cash account will be debited for ksh 100 and your sales account will be credited by the same amount. In a double-entry system the total credits must always equal the total debits.It is when this happens that your books are balanced.
Mostly suitable for large enterprises.
Why Book Keeping is important to your business.
1. Helps in budgeting accurately
When your income and expenses are properly organized it’s simple to review your financial resources and costs.
When your records are not up to date it’s harder to get an accurate budget this comes out as guess work. Tracking your business’s income and expense is regarded as a mundane task however it has great rewards as it helps you work on your spending habit.
2. Business Performance
The desire for a micro small and medium businesses owners is to get their business to grow. Unfortunately it becomes a challenge when you have poor financial records. With no accurate and timely data to analyze it is not easy to reach your business goals as your mainly operating on guess work in a very competitive market.
3. Learning
Whether a beginner or a book keeping specialist. Doing digital book keeping provides one plenty of opportunities to learn. What you learn will be beneficial to your business in making smart business decisions.
4. Maintain Organized Business Records
By recording your daily sales and expenses and capturing them in an organized way removes the stress in trying to find a crucial piece of a business information in the event of deadlines and avoiding errors.
The beauty of keeping digital records is that anytime you can access them from any device and can be backdated as well track your sales performance a manual process will take you time to do this.
5.Tax ready
Businesses have to file their taxes, with a digital book keeping solution in place all your information is ready just a matter of clicks not pen and paper trying to crunch numbers saving on time. In the event the tax man wants to review your records it’s a click away.
Summary
Reasons to do book keeping for your business no matter the size:
1. Helps in budgeting accurately
2. Business Performance
3. Learning
4. Maintain Organized Business Records
5.Tax Ready
Conclusion
Staying on top of your daily sales and expenses is a tedious process to micro small and medium enterprises mostly done through the traditional pen and paper and errors are prone to occur.
Bonus Tip
It is for this reason that Biashara Book wants to save you the headache and give you power with a few clicks and you are always on the know no matter where you are from sales made, expenses incurred ,inventory management to debt collection reminders your business is basically at your finger tips.