Owning and operating a business comes with many responsibilities. While you may prefer to focus your attention on growing your bottom line, it’s important to keep in mind that managing the financials of your company is just as essential for achieving success. Bookkeeping is a critical function of any company and plays a key role in maintaining a competitive organization. As such, even if you outsource this task, it’s wise to have a basic understanding of how it works. The following guide will provide a better idea of what bookkeeping means for your business. 

Understanding Bookkeeping 

What Is Bookkeeping?

Bookkeeping is the process of keeping up-to-date records on all financial transactions a company makes. This is a detailed account of all the money coming in and going out of your business on a daily basis. These records present a clear picture of the financial state of your organization and can be used to make future decisions for your operations. 

Why Is It Important?

Without knowledge of your finances, your business won’t be able to survive long-term. By providing insight to the overall health of your cash flow, bookkeeping allows you to gauge how profitable your company is, set priorities, establish an organizational direction, and identify obstacles preventing you from reaching your goals. It also makes tax planning more streamlined and helps to ensure your IRS obligations are properly fulfilled. Additionally, organized books are easier to report to investors.

What Does It Entail?

There are a variety of duties involved in bookkeeping. This includes maintaining a general ledger, tracking all income and expenses, handling bank and credit card reconciliations, and managing accounts receivable and payable. It also requires generating and organizing different financial reports, such as income statements, balance sheets, cash flow statements, and change in equity statements. 

Because of how integral bookkeeping is to the growth of a business, it’s wise to seek professional help in implementing an effective financial management process. You can rely on the team of experienced accountants at Arehart Associates, Ltd. to take over your company’s books and maintain accurate and organized records. Based in Waynesboro VA, they’ve been providing organizations throughout the Shenandoah Valley with a full suite of accounting services for more than 40 years. Call (540) 949-0124 to set up an appointment or visit them online for more information on how they can meet your bookkeeping needs.