For all businesses, regardless of size, maintaining confident and accurate financial information is essential in building a successful venture. Therefore, ensuring you have the appropriate bookkeeping functions and systems is critical moving forward.
In mid-2021, the Bank of Queensland (BOQ) highlighted the top ten reasons small businesses fail within a five-year period in Queensland. One of the core reasons pertained to financial mismanagement, with BOQ commenting a lack of understanding in managing cash-flow and urgency in maintaining financial responsibilities as some of the biggest factors.
Often, owners get caught in the traps of day-to-day operations – ignoring the time to maintain and review financial records. As such, in a post-pandemic environment, a small business owner who isn’t current on their financial information is at a substantial disadvantage.
The first steps in remedying financial mismanagements take the form of sound bookkeeping functions. Good bookkeeping can frequently provide the support owners need to make informed decisions, provide clarity and form future plans strategically.
In our latest Insights article, we have outlined the areas where a strong bookkeeping methodology can play an important role in business direction and why owners should invest in bookkeeping functionalities to strengthen business positioning and performance.
Improved Management & Financial Analysis
For business owners and management teams, accurate and current financial analysis is essential in guiding decision-making and assess areas for development. Incorporating bookkeeping methodologies as part of a greater finance function allows leadership teams the opportunity to review financial information in real-time, ensuring consistencies between accounts and correct payment/debtor amounts.
Better Cash-Flow Understanding & Reporting
Similarly, good bookkeeping allows for a greater understanding of overall operations of the business and better cash-flow management, projections and reporting. In building a stronger understanding of cash-flow, business owners are offered a sense of ‘protection’ in knowing when and where cash is coming from to pay expense and other business costs. This is equally important in assisting management teams with future planning surrounding large purchases for the business (such as plant & equipment, motor vehicles, etc.) and whether the funds are liquid or finance is required. Furthermore, various bookkeeping functionalities allow for better understanding of invoicing procedures – ascertaining which invoices are being paid per payment terms or which require further debtor management and chasing what is owed.
Better Tracking of Profit & Growth
In building a greater understanding of profit and growth within the business, appropriate bookkeeping functions featuring a current and accurate Profit & Loss Statement can provide heightened ability to identify areas of overspend or whether there is a lack of significant value for money.
First Steps in Strategic Planning
Finally, businesses implementing strong bookkeeping methodologies can make more informed decisions surrounding strategic planning and overall business direction. As such, bookkeeping provides the first steps towards gaining important financial insights – facilitating growth and business development.
This article was contributed by Archer Gowland Redshaw.
You can find more information at: https://agredshaw.com.au/