What is bookkeeping?

Bookkeeping is the process of recording all the financial transactions connected with your business. It should include all money coming in and going out, who owes what to whom and what your business physically owns or capital.
Bookkeeping is not accounting. Accounting starts where bookkeeping leaves off. So accountants look at reports created from your bookkeeping records to, say, complete your tax return or draw up your year end accounts etc. Unlike accounting which happens perhaps just once a year bookkeeping is an ongoing operational and analytical tool providing essential feedback on the financial health of your business.
Well kept books form the cornerstone of a well run business, a fact that is not lost on venture capitalists and other sources of credit. They are necessary whatever the financial climate but absolutely essential when times are tough and credit difficult to acquire. Banks are much more likely to lend to businesses which are demonstrably well run. Good bookkeeping exemplifies this.
On “Dragons’ Den” many businesses overvalue themselves and ask for ludicrous amounts of capital investment in return for a tiny percentage of the business. Despite this always having the effect of making the dragons see red and unanimously declaring themselves out, businesses keep trying this head in the clouds approach. Good bookkeeping enables you to accurately calculate current profits and project these into potential future profits. This can form the basis of an accurate valuation which the dragons, or even just your average bank manager, will respect.
On “The Apprentice”, how many teams have failed, not through a lack of creativity but through simple ignorance of their potential profit and costs? You must know your costs and be able to work out how much you need to sell to cover your overheads. Don’t make roulette of those aspects of your business that can and should be known up front.

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