- Provides for preventing relevant, timely and informative financial data
This financial data – provided by an accurate bookkeping system – gives managers the information they need to make daily business operating decisions. Bookkeeping will let a manager know how much cash is on hand at any given time. Therefore, a manager can monitor this cash account and then decide if ample cash is available to make purchases. This could be purchasing more inventory, or purchasing advertising in a local newspaper to promote the business.
- Cashflow Management
Bookkeeping enables a business to see how money is flowing in and out of its business. Each business must pay suppliers for the goods it purchases, which are then resold to the end-customer. Bookkeeping permits business managers to see how much funds outflow is taking place to suppliers. In addition, cash management, through bookkeeping, enables a business to see how much funds are coming in from sales to customers. Bookkeeping helps keep all customer accounts organized and up-to-date.
- Internal Control
A good bookkeeping system is a safeguard against persistent internal theft. Bookkeeping numbers will alert a business as to whether an employee is channeling company assets elsewhere. For example, a dishonest employee may be channeling funds to his or herself, and then trying to mask this activity through altering bookkeeping records
- Taking out a loan
Proper bookkeeping paves the way for you to produce well-organised financial reports. These reports will in turn play critical roles when you decide to take out a loan. Banks require these documents in order for them to assess your standing. Messy books signify an erratic system, and this could hurt your chances of obtaining a larger line of credit. On the other hand, ironing out your system and organising your books could help you score better terms with banks.