Bookkeeping Basics for Small Business Owners: Everything You Need to Start Doing Your Own Bookkeeping Bench Accounting
Bookkeeping accounting lets you know if your small business needs extra employees or requires operational changes. Accurate bookkeeping helps you trace your firm’s financial records and evaluate its performance levels. You can look back, see patterns, and even draw comparisons with previous business years. Bookkeeping allows you to have a greater understanding of the areas within your business where you can trim costs. Efficient bookkeeping involves foresight, meaning that a business should always plan for upcoming financial events, including tax time. Good preparation and documentation are critical for paying taxes (including payroll taxes) on time.
Step 5: Review your financial statements
Double-entry bookkeeping shows where money comes from and where it goes—not just one or the other. The only type of business that may not benefit from double-entry bookkeeping is the service provider that only has a couple of large transactions a month and that rarely spends a dime. Anything more than the business registration process a half-dozen expense or revenue transactions warrants this method. While accounting encompasses these data-gathering duties, this field also tends to involve analyzing the numbers and making profit and loss projections. However, bookkeeping as a term doesn’t necessarily include such long-term calculations and analyzes.
Accounting Services
The manual method can work if you prefer a hands-on approach, but it can also be time consuming, and it leaves more room for human error. A separate bank account is the first step in distinguishing between business and personal finances. Bookkeeping becomes more difficult when business transactions are lumped together with personal activity.
See profit at a glance
- Otherwise, a lot of milk (product) would spoil, thus creating a loss for the store.
- Lenders and investors want a clear idea of your business’ financial state before giving you money.
- A platform like FreshBooks, specifically designed for small business owners, can be transformational.
- You’re not actually making or losing any money—it’s just in a new place.
- Online accounting software can help you make sense of your financial reports, review your budget, and prepare for taxes.
- It lets you know how you’re doing with cash flow and how your business is doing overall.
Business owners who don’t want the burden of data entry can hire an online bookkeeping service. These services are a cost-effective way to tackle the day-to-day bookkeeping so that business owners can focus on what they do best, operating the business. For business owners who don’t mind doing the data entry, accounting software helps to simplify the process. You no longer need to worry about entering the double-entry data into two accounts. The first method of accounting is the cash-based accounting method.
Determining the historical cost of something you’ve purchased or acquired is merely accounting for the purchase or acquisition at the then-rate you paid. The accrual method is a bit more difficult, in that your bank statements might not reflect payroll fraud the amounts on your income sheet. However, the accrual method is the required method for large corporations in the U.S., and besides that, it tends to provide you with a more accurate picture of your overall finances. If learning the ropes of small-business bookkeeping sounds intimidating, have no fear.
Outsourcing to a professional
Take a look at the following four steps to manage your bookkeeping. Generally speaking, bookkeepers help collect and organize data and may have certain certifications to do so for your business. On the other hand, accountants are generally equipped with an accounting degree and may even be state-certified CPAs. You can expect most bookkeepers to maintain the general ledger and accounts while the accountant is there to create and interpret more complex financial accounting debit and credit rules statements. When setting up a bookkeeping or accounting system for your small business, you first need to decide between manual record keeping, using business accounting software, or hiring an outside firm. Learn how bookkeeping can streamline business practices with small business bookkeeping tips.
The same goes for using dedicated business credit cards instead of your personal cards, so you leave a clear spending trail. If the IRS audits you and your bank statements have personal and business transactions, the IRS may disallow everything. If you’ve never set up a business bank account before, getting started is easy.
