Excellent Book-Keeping is considered to be one of the most important contributions of a successful business. This holds especially true for a small business where late or unpaid invoices can impact the cash flow. Inappropriate financial management can hurt the business, leading to losses and, in worst cases, bankruptcy.

What is Book-Keeping?

Transactional and administrative in nature, book-keeping offers a consistent and, a comprehensive record of financial transactions linked to a business. A less formal approach to accounting, book-keeping practices helps you identify and fix the problem, resulting in better business possibilities. Successful book-keeping involves the following practices:

1) Maintaining General Ledger
A regular check of financials is a crucial ground for a solid business. Having up-to-date records include a check of bank statements, credits, receivables & payables, profit &loss statements, balance sheet, and other miscellaneous expenses. Easy access to financial records helps keep a tab on how things are going and what can be done to meet the business goals.

2) Keeping a Check on Cash Flow
One of the major requisites of book-keeping is to make sure the company has a healthy balance of the fund to meet day-to-day business expenses. The idea is to maintain a balance of revenue to expenses. This involves managing the accounts receivables, chasing the late payments, making sure the payables are paid on time; thereby avoiding late fees and interest costs.

3) Identifying the Accounting System
The accounting system is one of the key decisions to be made when considering book-keeping. There are mainly two types of systems that are followed. They are:
• Cash Accounting: This records the transaction when the cash changes hand. This system works well for a small, single owner business.
• Accounting on Accrual: This type of accounting recognizes revenue when transactions occur. There is no need for actual cash to flow in or out of the system. However, it is important to keep track of receivables and payables. This accounting system is suitable for businesses that operate on a credit basis and have a handful of employees.
One may, therefore, start with cash accounting and can switch to accrual-based accounting when the firm grows and expands.

4) Regular Updates
This involves taking care of financial transactions on a daily, weekly, monthly and quarterly basis. This includes reconciling the financials, cash flow reports, setting up accounting software, payroll set up, coordinating with tax specialists, identifying tax breaks and benefits for the business, to name a few. An up-to-date book-keeping practice makes year-end accounting exponentially easier, saving time and money.

5) Invoice Checks
Whether it is invoicing the customers for services rendered, checking on receivables overdue, or paying the lenders and vendors, an effective book-keeping practice keeps a tab on raising and maintaining invoices.

The intricacy of book-keeping depends on the size and nature of the business. Done personally or by hiring a professional, a well-run book-keeping practice is a key component of a successful business. Acting as a financial watch-dog, an effective and efficient book-keeping practice keeps an eye on the company’s financial trends, looking for optimizing available financial resources. Investing in right book-keeping practices will, therefore, help your business thrive.