When you are in business, you need to have a smart mind and be smarter with managing your money. Maintaining accounts and bookkeeping for SMEs is far more important than you can imagine.
Here are a few reasons why it’s important to maintain accounts, bookkeeping for SMEs:
Maintaining Financial Statements:
Every business needs to keep track of its cash flow to monitor:
- How much you are investing and in what.
- Money you are making, if you are profitable.
- How much you should be reinvesting in the business.
- Losses you incur
- Credit and other small expenses.
Keeping a record of all the above will help you channel your funds better and make use of your money, optimally.
Pricing Your Product/Service Right
You would be surprised at how much accounts and bookkeeping can contribute to determining the right price for your product. To ascertain the cost of a product, you must consider the margin of your profit, which is based on the cost of raw material/labor used to manufacture your product/service.
Meeting Tax Requirements
There are various taxes involved when you are in business. This includes sales tax, excise, service tax and income tax. While the GST will remove certain taxes, businesses will still be liable to pay individual taxes. This can be determined only if you are maintaining accounts. Also, your books can help you settle legal situations when necessary.
Measuring Business Performance
If you maintained accounts and kept your books in check, you will easily be able to forecast the future of your business. Accounts and bookkeeping can not only help predict your business performance but also help you plan a budget. It can help you evaluate your business and take corrective measures if something is going wrong.
Because it’s Mandatory!
According to section 128 of the Companies Act 2013, every business is required to maintain accounts. It is also mandatory for businesses earning more than 10 lacs in gross receipts or 1.20 lacs in sales/turnover annually to pay income tax as per section 44AA of the Income Tax Act.
But I’m Not Good with Numbers!
Accounts and bookkeeping requires expert knowledge, which is why many get their accounting outsourced from third parties. The numbers may get a little too intimidating and the formats of different books and accounts are hard to pick up over just a few weeks.
Sounds like a huge problem!
Instamojo has a simple solution – Profitbooks, a simple cloud computing accountancy tool that helps you create custom invoices, manage inventory and track expenses without having any accounting knowledge.
And it’s FREE!
Experience the easiest way to accounting, custom made for small businesses on Instamojo’s App store today!