Proper bookkeeping is the basic building block of any corrective and control function of a business. Although it is a time intensive and repetitive process, a business will not be able to have a proper financial picture of the company without adequate bookkeeping. In case of large organizations, bookkeeping is the primary activity to be conducted if we want to have correct and accurate accounting data of the company as bookkeeping is the first and foremost activity to be done for proper accounting.
Let's understand the importance of proper bookkeeping in a company and further understand what the qualities that a good bookkeeper should possess are.
Importance of Bookkeeping
Bookkeeping maintains the records of all the financial transactions of the company. This is very crucial for a variety of reasons such as:
Keeping Proper Records
This is an essential skill that is required by every business. Different departments of the company can ask for any of the document of the company at any time. Every company should be able to present the required documents at a moment's notice. If the company is late in showing the required documents, in such a case, the company may face specific penalties or fines.
Bookkeeping will address this problem of the company by keeping a meticulous record of all the documents. In this way, the said documents will always be accessible to the company.
Provides Financial Picture
The data collected by the bookkeeping function will allow the management to understand the present financial condition of the business and accordingly prepare a budget and take critical decisions. With proper bookkeeping, it is possible for the administration to develop a roadmap for the future of the company. This analysis will help to focus on the strengths and weaknesses of the company properly
Reporting to the Shareholders
Any investor would like to know the performance of the business so that he can make the decision to pull out his investment or remain invested. The review of the balance sheet, income statement and cash flow statement will allow just this. These financial statements cannot be prepared without gathering information from the bookkeeping processes.
He bookkeeping process will also help the prospective investors by providing the data about the company very freely. By ensuring the transparency of data in the company, bookkeeping will increase the goodwill of the company amongst the potential clients.
Easier Tax filing and Auditing
It will be challenging to file a correct and accurate tax return without conducting proper bookkeeping activities. If the wrong tax returns are filed, the company may face losses and fines. The bookkeeping activity will keep a record of all the documents and receipts at a single place, making it very easy to calculate the tax for a certain period of time.
The ones mentioned above are some of the essential benefits of bookkeeping. There are many more benefits that a company can avail by implementing proper bookkeeping activities.
Qualities that a Bookkeeper Should Possess
The process of bookkeeping may become a tedious work for anyone as the process consumes much time and demands much detail to attention, but if the bookkeeping is not done correctly, the whole accounting process may go wrong which will then affect the profitability of the company. Before availing the services of a bookkeeper, you must make sure that he is in possession of certain qualities such as:
Though a bookkeeper need not gain qualifications but having such qualifications make the particular bookkeeper more trustworthy. You can be fit by virtue of experience in the field, but then again you can also get specific certifications by sitting for exams by individual specialist institutes and getting accredited by National Association of Certified Public Bookkeepers (NACPB), Association of Bookkeepers (IAB) etc. Either way, the bookkeeper must be proficient in the double entry bookkeeping system.
Attention to Detail
A good bookkeeper should give proper care to everything, and never allow himself to slip up. It is necessary for a bookkeeper to follow up on every possible lead. Even a small slip may lead to a huge fiasco in the company and in the end the closing of the company.
Much data needs to be collected for the bookkeeping process. A bookkeeper needs to know where is the information which is required available, and he should also know when to follow up which document. A bookkeeper should be able to produce all the documents prepared by him at a moment's notice. Without the records being available on time, the proper accounting of the company is not possible.
A bookkeeper has all the financial information of the company right from the source. This confidential information if gets into the wrong hands may result in the downfall of the company. It is essential that you trust the bookkeeper so that he is able to hold that confidential information to himself.
The bookkeeper who has been referred by many of the colleagues or people in the same industry is usually a good one. Since he has been recommended by many people in the industry, it will be straightforward for the bookkeeper to process the information given out by your company and provide you with the best solution possible. The bookkeeper with the right recommendations and the right amount of experiences will be the best fit for you.
Knows the Latest Technologies
The technologies of today's world have become very advanced and have given birth to new software which will help in the proper utilization. Nowadays, it is almost a mandate for a bookkeeper to be computer literate and he should be ready to spend hours before a laptop. He should also have a working understanding of how to operate the various accounting and bookkeeping software in the market.
It is not possible for the bookkeeper to understand everything about the working of the company. From time to time, the bookkeeper may need to ask some questions to the management of the company to fully understand the functioning of the company. If a bookkeeper can understand the various process of the company, they will be able to provide better solutions to the management.
It is essential for the management of the company that they understand the requirements of the company and the same is also applicable to the bookkeeper. If both the entities are not on the same page, the company may face problems in the long run. If the management feels that the bookkeeper is not able to understand the working of the company, they should consider changing the bookkeeper.
At JAXA Chartered Accountants, we have teams of experienced and professional accountants who will solve all your business problems. They also have a range of other services to provide. For more details on the various services we provide do contact us – we’d be happy to help.