Are you struggling to maintain your business accounts regularly because of a busy routine?

Benefits of Monthly v/s Yearly Cadence of Bookkeeping

Written by Team Bookkeypr | Published: 23 December 2022


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    Benefits Of Monthly V-S Yearly Cadence Of Bookkeeping (1)

    Are you struggling to maintain your business accounts regularly because of a busy routine? Don’t take it so hard on yourself! You’re certainly not alone, many small business owners ignore accounting because of other pressing tasks at hand. This doesn’t mean you can sit back and join others. Irrespective of what others are doing, your business accounts should not be neglected.

    Keeping a timely track of your financial records can help predict future business expenses in advance. Moreover, a good financial record also warns you about business shortfalls so you can plan accordingly. For instance, if your business is facing an unforeseen crisis, having a monthly or yearly cadence of bookkeeping helps to make immediate decisions in favor of your business.

    But what is more favorable, a monthly or yearly cadence of bookkeeping? What are the benefits of each type of bookkeeping? Which of these would work for your company?

    To answer these questions and concerns about bookkeeping, we have simplified the bookkeeping process for you. 

    What is Bookkeeping?

    Simply put, bookkeeping is a process of keeping a record of your business’s financial transactions on a daily, weekly, monthly, and yearly basis. With these records, one can easily generate financial reports for tax audits and other business operations that help improve company decision-making.

    Now you may ask, which bookkeeping frequency is beneficial for your business?

    Monthly OR Yearly Cadence of Bookkeeping?

    We have come across these questions countless times, “Which bookkeeping frequency is best for my business? Should I opt for monthly or yearly accounting? Which method will help me track my finances better?” If you are sailing in the same boat, let us help you make the right choice. Let’s closely examine the significance of both frequencies of bookkeeping.

    Businesses that maintain books monthly can spot shortfall signals on time and respond immediately as compared to yearly records. Moreover, with the monthly cadence of bookkeeping, you can find answers to these questions:

    • What happens if your regular customers limit their purchases because of dissatisfaction?
    • Why did your cash receipts increase/decrease in the existing month as compared to the previous month?
    • When your supplier raises their prices, will you get notified before it’s late to switch to other reasonable sources?
    • What is the cash burn on marketing, sales, and other business operations?

    Besides getting answers to the above questions, you can track seasonality within your business when reporting accounts every month. Moreover, you can easily find at what time of the year your business is facing a downfall or if there is some variance. Detecting accounting errors is simplified with the monthly accounts rapprochement method. With the monthly cadence of bookkeeping, you can compare revenues and losses every month and set realistic business goals with a breeze. 

    You can also keep a check on your savings by digging deep into financial reports and finding out where you can cut down costs to increase savings and/or run rates. The yearly cadence of bookkeeping is beneficial for businesses that have fewer transactions to manage in a financial year. However, you may still encounter challenges with yearly accounting. With an annual accounting system, you may not be able to find unauthorized or non-registered transactions done by vendors, workers, and other personnel involved in your business accounting administration.

    Keeping all of this in frame, it’s suggested that if you want to have a tight grasp on your business and spot issues and opportunities as they arise, you must prepare precise financial statements each month. This gives you a better understanding of your business’s accounting records.

    For more clarity, below are some highlights that you need to know about monthly and yearly accounting. 

    Monthly Accounting Yearly Accounting
    Monthly bookkeeping simplifies tax planning because of up-to-date transaction records. Tax planning with yearly bookkeeping can be tedious, especially if you have multiple transactions to record. 
    You can spot accounting errors each month. You’re unable to track errors until the end of the year. Moreover, you may need to hunt for missing receipts and old documents.
    Monthly accounting helps to reduce workload and allows you to manage accounts easily. With hassle-free documentation, you will be able to save a lot of time, effort, stress, and money. It consumes time, and you may not be able to manage all the documents for the entire year. This creates chances of error, and you cannot spot tax fees and deductions in time.
    You have a good track of monthly payments. So there are fewer chances of missing payments. There is a high chance of payment errors. Either you miss payments or need a lot of documentation to remember them.
    Monthly accounting requires small bits of work daily/weekly to manage accounts. However, this will be highly efficient in the long run and you can easily find missing payments, payments done, and other expense records. This doesn’t require short-term work, but it might be less efficient in the long run. You will need to do a lot of work on accounting to track all financial transactions done in the year, which is time-consuming and inefficient.
    Final Thoughts

    As we wrap up the benefits of monthly bookkeeping in comparison to the yearly cadence, it is harmless to say that you should opt for monthly tracking of your business finances. 

    While there are various drawbacks to using annual accounting that include accounting errors and missing payments, to mention a few, this process may disturb your financial reporting and cost you more than money. This is why monthly accounting is known to be a better approach for business reporting and decision-making.

    Now that you know how important monthly bookkeeping is, are you ready to do your business accounting effectively? Truth be told, there is no better time to begin than now! If you wish to outsource your business accounting and bookkeeping, you can contact our experienced team here

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