By Yvonne Nhuta
If you are interested in this topic, take a look at our University of Cape Town Bookkeeping course.
Commonly referred to as “keeping the books”, the basics of bookkeeping can be sidelined in a business when the main concern is making that sale or delivering those goods. From collating receipts piled in a shoebox to managing a payment system that uses a cash register, bookkeeping is something every business needs.
There may be other matters of a business to consider but the best way to decrease the chances of getting into financial trouble is to summarise income and expenditure records on a periodic basis.
Keeping receipts and other necessary records of every payment and expense from a business will ensure that the ins and outs of commercial dealings remain transparent. That’s where the bookkeeper comes in.
By keeping track of the finances a bookkeeper can help a business continue to do what it needs to do most ¬– make money. Becoming a bookkeeper is simple once you know the basics. This means getting a good understanding of accounting, a solid handle on bookkeeping software, bank reconciliations and finding out the function of the finance department. There are two straightforward goals of bookkeeping.
That is, firstly keeping track of your income and expenses. As well as secondly, collecting the necessary financial information about your business in order to file tax returns and tax registration papers. It is a mouthful, but what you need to know about bookkeeping can be broken down quite effectively.
The importance of accounting
Accounting is an important part of keeping the books successfully. One of the first things involved in bookkeeping is setting up a chart of accounts.
This is a list of categories that each financial transaction is assigned to. Setting this up may take some time, but by the end of the process you will have a good idea of what types of purchases the business is making and how it is spending.
A basic understanding of accounting will help you in dealing with tax matters, audits on the company and will also help you give advice and draw conclusions on the risks and impacts of certain financial transactions.
A handy tool to have available is bookkeeping software. Knowing how to use on bookkeeping software such as Bookkeeper can help make your job that much easier. This software can help you:
• Control your financial costs and cash flow
• Track your profit and loss
• Reduce the risk of loss and debt
• Manage the payroll
• Reconcile the books quite easily
Bank reconciliation allows you to evaluate the transactions in your cashbook in order to ensure that all transactions have been noted. Reconciliation also allows you to make sure that your bank transactions have been completed.
Some irregularities on your bank statement that may have slipped through the cracks can be picked up through the process of reconciliation. This means that you can save money by noticing when you have undercharged or overspent.
Because bookkeeping is part of the finance department of a business, it is important for a bookkeeper to be aware of how the certain aspects of the department function. From how the business receives its financing needs to the dividend distribution to shareholders, financing gives the business a chance to see its strengths and weaknesses in their entirety.
Not only will you be able to gain a clearer financial picture of your business but you will also be able to make smart, thought-out decisions concerning all your business transactions.
This article is published under the Creative Commons Attribution license.