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Clarifying Eight Common Myths About Bookkeeping - Henderson Edition

2024.5.18

by:  Aleksandra Svetina

Bookkeeping is often misunderstood in the world of finance. Without knowing these misunderstandings and being clarified often mislead entrepreneurs from adopting best practices for their business. Let us go through eight myths to get a better perspective.

Myth 1: Bookkeeping is just about recording income and expenses.

Bookkeeping is not just about keeping track of what comes in and what comes out. Actually it involves much more. Some of the things are: categorizing transactions correctly, managing bank reconciliations, tracking receivables and payables, preparing financial statements, etc… In reality bookkeeping is crucial at helping businesses make informed decisions and forecasting future performance.

Aleksandra Svetina Bookkeeping expert

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Myth 2: Bookkeeping is only for large businesses.

No matter the size, every business will benefit from disciplined bookkeeping. Some small businesses make mistakes by underestimating the importance of bookkeeping. No matter the size of operations, bookkeeping helps in better financial management, makes sure you comply with regulations, and simplifies preparation for audits. Keeping books in order can be beneficial for monitoring financial health and improving profitability.

Myth 3: Bookkeeping software automatically handles everything.

Buying a good bookkeeping software does not eliminate the need for manual oversight. Software significantly helps in bookkeeping by automatization of tasks and reducing errors, but does not replace knowledge of expert bookkeepers. Human interaction is still important to oversee the automation process, making sure system functions correctly, and providing valuable financial insights. Software also requires customization and adaptation to fit the specific needs of the business. In order to set up the system correctly, knowledgeable bookkeepers are irreplaceable.

Myth 4: Bookkeeping doesn’t require any specific skills or knowledge.

Understanding of the accounting process, great attention to detail, interpreting financial data effectively are just a few of the skills every bookkeeper must possess. Without having these skills the financial records may be misleading. It is important to make sure you have these skills before you try and do your own bookkeeping. If not, pay attention to the next myth on our list.

Myth 5: Hiring a professional bookkeeper is expensive and unnecessary.

In the long run, hiring a professional can actually save you a lot of money. A skilled bookkeeper can easily identify cost saving, optimize cash flow and will avoid the mistakes typical for DIY bookkeepers. Passing the burden of bookkeeping will also save time for business owners and let them have more time to do what they are best at (their business).

Myth 6: Bookkeeping is the same as accounting.

Bookkeeping and Accounting are related, but not identical. Simply explained, bookkeeping is the process of consistently recording daily transactions. It forms a basis of the accounting process. Accounting is broader and includes several different tasks. One of them is for example tax planning.

Myth 7: Digital records have eliminated the need for physical receipts and documents.

Keeping physical copies of certain documents is still a legal requirement. Do not throw them away or replace them with digital records. Make yourself familiar with regulations in your area and maintain records accordingly following them.

Myth 8: Bookkeeping is tedious and doesn’t offer strategic value.

Many view bookkeeping as a boring task focused solely on numbers and receipts. However, effective bookkeeping provides data informing strategic business decisions. By offering insights into financial trends, profitability, and cash flow patterns, bookkeeping is very valuable for strategic planning. It helps businesses identify their strengths and weaknesses financially and enables proactive management.

 

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