An eye for long-term and sustainable business growth requires you to ensure reliable financial management is in place. Accounting and bookkeeping are vital aspects of this management, where accurately recording data in books is a critical one. Many businesses rely on single-entry bookkeeping, which involves the basic process of entering data. On the other hand, double-entry bookkeeping also covers assets, liabilities, and equity information along with regular records.
Although timely and accurate data records can help the business grow substantially, here’s how the double-entry process gives you an upper edge.
- Better for Long-term Growth: If you are eyeing rapid growth in your startup business, you should opt for the double-entry process. Having a complete record of transactions, assets, liabilities, and equity can help create better decisions.
- Maintaining the Right Balance: Every entry in the books is accompanied by a relevant entry in the ledger. Debit transactions point to an increase in the asset while credit ones convert to increased liabilities in the ledger. With this data, a business owner can make decisions and create plans to reduce liabilities while increasing assets overall.
- Financial Status Analysis: After every sale or service completion, a double-entry gets recorded in the ledger and the books. It covers both sides of the coin, including expenses incurred by the business, pending liabilities, and gained revenue. Thus, a simple calculation helps determine the remaining cash in hand (or profit) for every service or sale.
In short, a double-entry system gives better insights into how a business is performing and projections for the future. However, you might need forensic accounting services from Sydney to make those entries accurate and get actionable insights for informed decision making.