Why is bookkeeping important?
- Budgeting and financial management:
Just like in your personal life, budgeting is key to financial success. If your income and expenses are organized in the best possible way, it becomes easier to determine where your money goes. A budget also helps you create a financial roadmap. You will be able to plan for future expenses, and reserve resources for those expenses. With proper bookkeeping comes an accurate record of what you spend your cash on, and what cash is coming into the business. Keeping careful track of your bills and invoices will help ensure your bills are paid on time and that you never miss out on a payment owed to you! This is key to keeping track of, measuring, and improving cash flow. Keeping accurate books will also help with your state of mind. There’s a lot of things to remember when you’re running a business: customers and their needs, suppliers, inventory, employees, etc. With accurate bookkeeping, you can at least cross one worry off your list; correct and up to date financial records! - Organization:
Having the right information at hand when you need it essential for speed and efficiency. Also, organizations like your country’s tax agencies and investors are all interested in your financial records. Having to dig through years of paperwork to find the answers you need could end up incurring you some late fees, and being disorganized could stress these existing relationships. - Business Analysis, planning, and decision making:
Financial statements are a product of bookkeeping; these reports are used for measuring business performance, analyzing cash flow, planning for the future, visualizing profitability, and more. Without accurate reports, you would be shooting in the dark everytime you tried to plan your next move. These reports are also important for investors. They’ll be more at ease investing in you if they can see that you have a long track record of accurate financial statements. - You’re “Legally” required to:
It is required by statute and code that you keep financial records for a set amount of years. Failing to do so can lead to penalties, up to and including termination of your business. It’s also likely that you’re paying taxes, so it is of utmost importance that you stay organized and keep your books as accurate as possible. You don’t want to miss anything in your filing!
When bookkeeping for a Public company, there are thousands of rules around how “income” and expenses must be categorized.
“Oh, your business sells X product? “Income” must be categorized this way, tax included.”
“But wait, you’re selling it for this reason? Then you can only include 25% tax and it must be categorized THIS way.”
“OH but SIR, the moon is waning, mercury is in retrograde and my cousin’s best friend’s donkey just died. So, you must split the payment between this account, and this other one that is only used in this one particular case. Should you record taxes on it? Dunno man, you’ll have to dig through this super obscure statute on a rather unwieldy government site to find the answer.”
As you can see, this gets absurd very quickly. But when we do our business in the Private realm, bookkeeping becomes infinitely easier. Instead of categorizing “income” based on arbitrary rules, we’re tracking your compensation and costs related to doing business. Instead of keeping records for “authorities”, we’re producing reports that show you (and perhaps investors) the financial health of your business. Why would you need to bother with accurate bookkeeping in the private? Because “cooking the books” only hurts yourself!
Bookkeeping in the Private
A business entity in the Public
Does your business/sole proprietorship operate under a SIN number or business number? Do you have a business “License”? Are you registered with the State as a Sole Proprietor, an LLC, LTD, a Corporation? Do you track and remit any type of taxes? Do you compile and send reports about your business to an “authority”? A business that does any or all of these things is a Public entity, (That includes things like PMA’s and Private Trusts!) and is subject to government regulation and the “Legal” system. Your business is operating in the world of the dead. However, there are certain “benefits” and “protections/privileges” that Public entities are afforded. For example, it’s perfectly “legal” to operate a large, polluting ocean liner and dredge up massive amounts of fish if the government gives you a “license” to do so! A “License” = Permission to do something that would otherwise be not right/unlawful. Like James Bond’s “license” to kill.
Welcome to the world of the living. You conduct voluntary trade and contract with other members of mankind directly; that could be trading your labour, your services, your artwork, your produce, anything. You bill them for your time/products, and they compensate you for it. Compensation could be anything agreed upon. It could be currency, wine, vegetables, bottlecaps, etc. Whatever you receive as compensation is yours, it cannot be taken by the “legal” system or anyone else, as long as you’re willing to defend it. You can structure your business however you wish; it can be just you, it can be a store you run from your home with another wo/man working with you, you could get together with several members of mankind and name that group whatever you like (think band names, not ENTITIES!), anything you can think of. You are free to do your business how you choose. However, you are not protected by the “legal” system. Your actions MUST be guided by the natural law, and a sense of what is right, in order to avoid controversy with those who work with you, with those you work for, and with the rest of mankind that you may come into contact with. For example, is it right/lawful to go door to door demanding payment for services that some members of mankind didn’t agree to partake in?
Doing business in the Private
Dive Deeper.
Let’s untangle the financial web!