"There is no scarcity of opportunity to make a living at what you love; theres only scarcity of resolve to make it happen. "
- Wayne Dyer
How much do you make in a month from home business? This is the most common question asked by many people around you. Also, although it sounds exciting to people that you are doing home business, you realize that the difficult part is keeping the track of your expenses and income to find out the correct profit for your business – and bookkeeping is the solution to all of this.
To grow a company the most important factor is not only on increasing the sales but also to focus on the administration and tax updates.
What is bookkeeping?
Bookkeeping is the recording, on a day to day basis, of financial transactions and information pertaining to a business. Bookkeeping has been always a part of our history with different names. In olden days the bookkeeping was a simple writing of transactions in a notebook with the individuals name and amount. In Hindi, booking is called “bahikhata”. However, today bookkeeping consists of much more and involves lot of activities like:
- Managing incomes
- Tracking payments
- Keeping track of loans and advances
- Keeping track of the capital purchases and expenses.
In today’s time, bookkeeping has become digital and can be done very easily with the help of lot of websites and software.
Why is bookkeeping important?
We might think that mere bookkeeping might not have a very big impact on our business, but we tend to forget that business tends to deal with money in most of the cases and numerous transactions. Therefore, keeping a record of incoming and outgoing transaction becomes very important. Booking helps you to review your transactions whenever you want and also gives you a precise and accurate figure and helps you in decision making.
Why is bookkeeping important for home business?
In India, home business has also existed. In olden days, ladies of the house used to do small business which included preparing pickles and papads and selling them. However, with the growing time the types business and scope of business also increased. Men and women started setting up home business by selling essentials of the household like masalas, clothes etc. Further from last few decades the home business took a hike and many people started expanding their business.
When there is growth in a business the first and foremost increase is the number of transactions. Therefore, the need of bookkeeping arises. Following are few of the reasons why bookkeeping is required:
Maintaining the ledger accounts
It is important for home business to keep a track of individuals whom the transactions takes place. For example, If you have a home business of selling mango pickles, there will be one of two vegetable vendor from whom you buy the mangoes. So, it is important for you to keep track of the quantity of mangoes bought with the rate and total amount paid to him. There might be scenario where you took the mangoes on credit basis and will be making payments by month end. Therefore, booking helps you to keep record of the outstanding amount payable to the vendor.
Keeping track of loans and advances
In a home business, there will be times when you might be taking loans or giving advances to any of your vendors. Hence, bookkeeping helps you to record such transactions and follow up with them.
Keeping track of the stock or inventory
In bookkeeping you can also keep track of your stock or inventory very easily. With reference to our above example, you can also keep a track of how many kg of mangoes where purchased and how many damaged mangoes were returned.
Keeping track of cash account
In any business, cash is the most important aspect. Therefore, bookkeeping helps you to keep a track of your cash account and helps you to determine the profit.
Help in preparation of tax return
Bookkeeping also helps you to prepare tax returns as, in home business you do want to hire a chartered accountant to prepare your return. Book keeping gives you all the inputs required to file a simple tax return.
In home business, the business is owned and operated by the family members and there might be chances that errors may occur if proper records are not maintained. Hence, bookkeeping helps you to take care of all the errors and rectify them in time.
Importance of bookkeeping
Following are few of the importance of bookkeeping which can help you grow your business and also take decisions fort your business:
- It helps you to identify your errors immediately
- It helps you to make decisions
- It helps you to access your financial records anytime.
- Helps you to keep a track of your purchases and sales (Since, a receipt is a proof of transactions happened)
- It also helps you to understand the trends in your business. Whether the item purchase cost is increased or decreased and what is the per unit cost.
- It helps you in building strategies for growing your business.
In today’s date you can keep accountants for your home business as well depending upon the turnover. If it feels as a costly affair for you, you can also opt for part-time accounts. You can also go digital and buy bookkeeping software available in the market which can he very handy and always on your fingertips. In market, there are many online and offline software available for bookkeeping such as Tally ERP 9, QuickBooks, Zoho Books, Profit Books etc.
So, you should start getting smart and growing with the help of bookkeeping in your home business.