What it Means

Bookkeeping and financial record-keeping are the systematic processes of recording and organizing a business's financial transactions. This involves tracking all purchases, sales, and daily transactions, often with the aid of accounting software or manual record-keeping methods. It's akin to the financial diary of a business, capturing every financial move made.

Bookkeeping doesn't just ensure compliance with the law when reporting earnings and expenses; it provides a clear picture of the company's financial health. Proper record-keeping can show where the business stands in terms of profitability and cash flow and can guide crucial business decisions.

Why it Matters

Practical Examples

Let's consider a small online boutique. The owner diligently enters daily sales, returns, and expenses into a cloud-based accounting software. At the end of the month, she reviews her financial statements and notices that sales of a particular clothing line have surged, while another hasn't performed as well.

Using this insight, she decides to run a special promotion on the underperforming line to boost its sales and negotiate with her supplier for a bulk discount on the best-selling item. When tax season arrives, she has all the necessary financial statements and receipts ready, making the filing process smooth and ensuring all eligible deductions are claimed.

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