Bookkeeping and Accounting can be boring! However, it is an essential part of your business as it gives you clear information about the status of your cash flow – how much money is truly available in your bank account for spending, who owes you money, who you owe money, how your business is performing overall and so it must be done. Many business owners who handle their own bookkeeping usually update their books on a monthly or quarterly basis; however, it is important to know where you are in your business at any given time – financially, and monthly or quarterly updating will not allow for such readily available information. Bookkeeping should be done in real time! Here are some of the benefits of real-time bookkeeping:
Real Time Bank Balances
In order to give you a true view of your available funds in your bank account, you must update your books on a daily basis. The balance your bank is showing as available at any given time, may not be as accurate as you think it is, unless of course you are using an accounting software such as QuickBooks Online and ensure daily updates. Without real-time Bookkeeping and Accounting your business cannot take into account outstanding checks that might affect your bank balance which the bank has not yet processed. Say for example your bank account balance shows a balance of $15,000 but you recently wrote a couple checks to your employees for your latest payroll, and your recurring rent payment through bill pay is not yet automatically initiated by your bank. Is your bank balance still $15,000? No, the true amount available in your bank is $15,000 minus any outstanding checks. Cloud accounting software such as QuickBooks Online or Xero will eliminate this shortfall as they both do an amazing job at tracking both the bank balance as well as your true available balance. However, this can only be effective if you use real-time bookkeeping and accounting procedure – daily updating.
Real-Time Cash Flow Analysis
It is very easy to overlook information that does not directly affect your business bank account such as business expenses afforded with personal funds. Employees reimbursement or business owner reimbursement may be omitted from your reports if they are not included in real time, which will undoubtedly give you inaccurate information and possibly a false sense of cash flow security when the cash isn’t really there.
“Without real-time bookkeeping and accounting you cannot gain a true perspective of your business stance, or your cash needs.” Eugénie M. Nugent
Bookkeeping and Accounting on a real-time basis offers you a greater level of information than if you updated your books sporadically. It allows you to have greater insight into your business performance by knowing you can generate a Financial Statement like a Profit & Loss in the middle of the month with real updated information. This is crucial to help you better understand if you are meeting your monthly monetary goals, as well as staying within your budget. Real-time bookkeeping update will help you predict how much cash is needed for ongoing expenses you might have by the end of a particular month, for example. Your accounts receivables and payables will be included in your reports – if you are operating on an accrual basis, making your reports more inclusive and true. Without real-time bookkeeping and accounting, you cannot gain a true perspective of your business stance or your cash needs.