What Is General Ledger and What Are Its Benefits
For any business to be successful, there must be effective management of finances. It is where the general ledger comes into play. There are many benefits of adopting general ledger practices for your company.
Let’s learn more about this accounting method and how it can benefit your financial processes.
What Is General Ledger?
The general ledger, or GL, is the central bookkeeping system for a company.
It is a comprehensive record of all financial transactions, assets, liabilities, and equity accounts that occur in the business and updates daily.
The entries from the general ledger are used as a basis for preparing financial statements and reports, such as income statements and balance sheets.
Stats On General Ledger
- 79% of accounting firms perform booking and accounting services.
- Approximately 72% of self-employed contractors do their bookkeeping and accounting.
How Can General Ledger Benefit Your Company?
Here are some benefits of the general ledger for your company:
1. Accounting Of Transactions
Businesses use the general ledger because it ensures timely recording and keeping every transaction in one place.
With this, you don’t have to go through multiple ledgers or spreadsheets to find out what happened with your funds. It makes it easier to track where you are spending your money and where it’s coming from.
2. Accurate Financial Statements
Accurate financial statements are necessary for running a business—from tax filings to selling off parts of your company via IPO or other means.
The general ledger system will ensure that these statements are complete and accurate every time they’re produced.
3. Decision-Making
You can use the information in the general ledger to decide how to grow your business.
For example, if sales have gone down, but inventory is up, you know something needs to change for sales to increase again.
4. Keep Records Consistent
If multiple people use different systems to do their work, they’ll record things differently or overlook important details.
Using the general ledger, you can ensure that everyone is recording things consistently and accurately—meaning fewer mistakes are being made.
5. Improves Cash Flow
The better your records are kept, the easier you can keep track of your finances. The general ledger will help you decide where you’ll spend money and how much you’ll have left over at the end of each month or quarter.
The more accurate your numbers are, the better off you’ll be.
6. Improves Customer Service
A proper general ledger system will allow employees who handle customer service requests access to specific information about each customer’s account.
It will help provide fast and accurate responses when needed. It can help increase repeat business from satisfied clients.
7. Monitor Profit And Loss
A well-designed general ledger system will help you understand what’s going on with your business.
It will help you see how much money is coming in, where it’s going and how much profit you’re making.
In conclusion, the general ledger is a critical part of any business. It provides a comprehensive view of all the business’s financial transactions and helps to ensure that all accounts are reconciled.
