What is bookkeeping? A guide for growing businesses

by Faustine Rohr-Lacoste | July 26, 2018

Running a business can be exciting — especially when you're just getting started. However, you'll quickly come to realise some of the less thrilling parts of it — and bookkeeping is definitely one of them.

While you might want to focus on growing your company, building your product and getting it out there, keeping your administration comprehensive and up-to-date is just as important. And you're not just doing it for the tax authorities, either — it can provide a vital look into the heartbeat of your company, offering a view on how well it's performing and where you can make improvements.

In order to better understand why it's so important, we're going to take a closer look at the history of bookkeeping, its future and how to effectively implement it in your business.

The past and present of bookkeeping

history-of-bookkeeping

An important part of any company, bookkeeping refers to the continuous tracking and indexing of all financial transactions. It has a long history — ever since humans started doing business, we started recording transactions as well. It started off as a very basic way of keeping track of money moving between people by writing everything down in a system of physical ledgers and individual account charts.

Today, however, bookkeeping covers a lot more than that. In a modern business it can include a large variety of tasks, such as:

  • Creating yearly or monthly financial reports
  • Managing incoming financial streams, like customer payments
  • Keeping track of payments to suppliers
  • Payments of outstanding loans

At its core, bookkeeping is primarily about recording incoming and outgoing transactions. While they're not written into physical books anymore, they still need to be entered into a digital system together with an associated document — depending on the nature of the transaction this can be anything from a bank statement to an invoice.

These platforms often work by using a laborious double-entry system that validates both the debit part (taking money from one account) and credit part (depositing it into another account) of the transaction.

It's important to note the difference between bookkeeping and accounting, as the two are often confused. The latter refers to everything regarding the financial process of a company, including the recording, interpreting, classifying, analyzing, reporting and summarizing of financial data – bookkeeping only covers the recording part.

How to deal with bookkeeping

what-is-bookkeeping

What sounds like a seemingly small part of a company actually has a huge impact on the way it operates. Every business deals with money in some regard, and keeping thorough records of all incoming and outgoing transactions is crucial to its operations. It's especially important to make sure that you're doing it accurately, and that you work with professionals when you don't understand certain things or the workload becomes too much.

If you're a freelancer or a solo entrepreneur, there are lots of software solutions that can help you with bookkeeping. These apps offer everything you need, without having to hire someone to do it for you.

It quickly gets more complex when your business is growing, though. The number of employees working for your company, the business volume and the amount of purchases all influence the amount of daily transactions that need to be tracked.

Once you notice that your company is experiencing significant growth, you might not be able to deal with bookkeeping by yourself. Even though you might want to save money, at this point it could make sense to hire a bookkeeper who can take care of your financials.

The more money is passing through the company, the more you need to ensure that everything is handled properly — a tiny mistake might not mean much for a startup, but it could be disastrous for a fast-growing enterprise.

There are more reasons to let someone else do your bookkeeping, like harder-to-track taxes because of a higher transaction volume, and the introduction of other financial products like investments, assets and loans that make everything that much more complex.

With today's digital tools it's also possible to automate large parts of your bookkeeping. While it's still recommended for larger companies to have a full-time bookkeeper on the team, there are lots of innovative tools that can help them to be much more efficient in their job.

How Spendesk can modernise your bookkeeping

One of the most important parts of your bookkeeping is accurately tracking all expenses. Again, a growing company can make it harder and harder to keep tabs on your employee’s purchases. That's where Spendesk comes in — our powerful, automated expense platform takes care of the heavy lifting for you.

Thanks to features like Payment Inbox, which consolidates all payments into one handy view, making it possible for your bookkeepers or accountants to review all payments that need to be added to your books, check all supporting documents and be informed when a new invoice has been added to an existing payment.

The times of dealing with stacks of endless expense reports and tedious paperwork are over. Start being smart about your expenses, discover our features, and talk to us about improving your expense management today:

spendesk-book-demo

 

TOPICS : Fintech

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