You’ve probably seen it before—articles announcing “7 Reasons Bookkeeping is Important for Your Business”, “15 Reasons Why Bookkeeping is Important”, and even “Definition, Types and Importance of Bookkeeping”.
The information you will find in these articles is absolutely valid. Of course you need to be compliant with tax reporting, be able to effectively budget and forecast, and understand how your business is functioning financially. However, as technology adoption changes not only the way we do business, but also how and why we track financials, how the IRS regulates businesses, and a business’ fighting power, it’s critical to understand the importance of bookkeeping beyond the basics.
Let’s look at some of the reasons why bookkeeping is more important than ever.
The Digital Transformation of Business
Across the board, from security to cloud-computing from multiple locations and beyond to blockchain and remote management and work, businesses are more mobile and non-traditional than ever before.
The digital transformation of business not only means more to manage within your books, it means niche software for different businesses. Our crypto team runs entirely different accounting and bookkeeping software that integrates with Quickbooks and other popular software. The needs from a security and regulation standpoint are so specific that crypto-specific software is essential for crypto miners, investors, and hobbyists.
With robust accounting software options available, we are beginning to see more niche specialization that is able to handle larger, more complex, and more industry-specific data. The tools for predictive modeling rely on accurate bookkeeping data. And as AI further enters the game in financial analysis, modeling, and prediction, bookkeeping that integrates with these new tools will be absolutely essential.
What’s more, real-time financial reporting is becoming a more common request from stakeholders, CEOs, and even department heads. If you don’t have the right digital tools that can generate these reports in a few clicks (or offer robust financial analysis), you will likely end up falling behind.
GEO-Tracking Can Help with Expense and Mileage Monitoring, as Well as IRS Disputes
Invoicing software like Quickbooks, for example, allows you to enable GPS on your mobile phone to track your mileage automatically. Not only does this ensure your mileage is exact, it also allows you to monitor route-changes while auto-calculating data. This information is overwhelmingly helpful if there’s ever an issue with the IRS, an employee, or your financial team.
Realtime location tracking data offers tremendous oversight when it comes to expenses and mileage. Not only that, it makes the process more efficient for both you and your employees. This offers protection for employees, businesses, and the IRS.
As technology catches up to the day-to-day needs of bookkeeping (for small businesses and large firms alike), the expectation for accuracy, appropriate monitoring, and technology implementation grows higher in response. Meaning, if ever there is a dispute with the IRS, or a concern from a stakeholder, or even an ask from an acquisition team, not employing such tools and having this level of accuracy is a loss of protection. It can also make your business seem like a risk, and bring into question the validity of your books.
Monitoring and Automation Tools Grow More Sophisticated Every year
Two key arenas that are changing with new tech—monitoring and automation. So, how does this affect the importance of bookkeeping?
Monitoring
As we discussed in the section on geo-tracking, bookkeeping is no longer about line items and values. Now, good bookkeeping includes tracking data and powerful tools that covers everything from accuracy of reports to tracking expenses, income, and invoices. Banks have long been ahead of the game when it comes to security and monitoring, and for bookkeeping the expectation is no different.
Automation
One of the most impactful benefits of software implementation in bookkeeping is automation. Having accurate books is essential, of course, but utilizing software that auto-populates eliminates significant opportunity to error. It also eliminates the workload of double-checking and resending invoices and payments. Auto-followups ensure that invoices are paid on time, some software even allowing late fees to accrue without requiring the interference of a bookkeeper.
But, automation isn’t just about entries and accurate data anymore; it’s now about AI tools and financial analysis. Particularly if you are looking for investment, or planning to one day sell your business, predictive modeling is becoming critical. Built on the backbone of accurate bookkeeping data, expectations of what that data can do are shifting. It may no longer be good enough to simply offer a few projections on a slideshow. Bookkeeping data must now be expansive and dynamic.
Bookkeeping Processes and Technology Directly Impacts Your Creditworthiness
The key indicator of a business’ creditworthiness is its financial records. With money and loans being more difficult to acquire and more expensive to get, bank officers are exercising much more caution in assessing loan applications. Whenever this is the case, extensive reports, accurate bookkeeping reports, and various projection sets based on a variety of potential influences and outcomes will help your business secure loans and credit.
KPIs and Employee Performance
Particularly for businesses in which sales teams are tracked, your bookkeeping becomes so much more than a record of financial transactions. Robust bookkeeping allows you to evaluate not only the overall performance of the business as a whole, but the individual performance of sales teams and individuals. In these scenarios, bookkeeping data serves as so much more than a financial history—it’s a roadmap for better sales and business strategies.
Yes, Bookkeeping is More Important Than Ever
If there’s one thing that indicates bookkeeping is becoming a more critical and dynamic part of every business, it’s the shift to outsourced bookkeeping. As bookkeeping software has grown more powerful in functionality and dynamic in reporting, the barrier to entry and understanding has been raised much higher. Sophisticated programs designed for the day-to-day use of CPAs become more of a nuisance to the everyday business owner. We are seeing more and more entrepreneurship, and with it, a desire to offload the bulk of the bookkeeping workload onto a team. This outsourcing is a trend many major firms predict will become the norm in the coming year, and we certainly agree with that assessment. Our clients enjoy the ongoing reports and hands-off approach, and appreciate how it empowers them to think more strategically about their businesses without getting caught up in the details. If you’re interested in bookkeeping services, check out what we offer here: Stress-Free and Accurate Bookkeeping
