Bookkeeping Basics for Small Business Owners

Bookkeeping Basics for Small Business Owners

Bookkeepers have an essential job within a business. They can help save a lot of time for the business owners while taking care of finances, ensuring there is enough cash flow to maintain the daily running of a company while also preparing your company for government audits and preventing fraud and lawsuits.

Whether you hire a bookkeeper or do it yourself depends on the size of your business and how well you can manage your time. It is the preferred option to hire a professional to do it for you as many small detailed things require time and patience. While hiring a professional to do it will cost a fee, it can save you from losing a lot of money in the long run if you have left out important legalities or mentioned inaccurate details.

What Are Basics Of Book Keeping?

You Need To Open Up a Separate Bank Account for Your Business

Keep your personal and business accounts separate so you don't confuse your personal financial statements with your business ones. Being organized right from the start will prevent any mishaps from occurring.

Estimate and Set a Budget Aside For Tax

You can make a rough estimate of the tax amount you are expecting for next year and start setting a budget aside so that it doesn't come as a surprise when the time comes. Having a savings account helps as you can keep putting money in it.

Organize All Your Records

The importance of being organized cannot be stressed enough. This will improve your business's functioning and efficiency, preventing major disasters from occurring.

Maintain Daily Records

Make sure to enter an account of the entire day daily. It is easier to do it as you go along the days than at the end of the week or month. You may miss important details, and there might be a gap in your dealings that you can't explain.

Keep Track of Your Expenses

It helps create debit and credit accounts to make sure each transaction is recorded. Each expense has to be recorded accurately and in the correct account; otherwise, your account balances won't match.

Leave an Audit Trail

By leaving an audit trail, you can track all your expenses by filing all your invoices so they can be traced back to check at any point. This can be done more efficiently and quickly using software rather than manually.

Make Sure the Books Are Balanced

The most crucial step in bookkeeping is making sure your total amounts are balanced in both accounts. Debit and credit account totals must match at the end of the week and month. They must be balanced. At the end of every month, these entries must be entered in a journal and then posted in the general ledger of accounts.

Prepare Financial Reports

  • • After the books have been balanced, you may now use these to assess the financial position of your business. Here are the examples of financial reports made at the end of each year:
  • • Balance sheet
  • • Profit and loss statement
  • • Cash flow statement

Conclusion

Whether you do it yourself or pay an expert to do your bookkeeping, it is always beneficial to learn the basics of bookkeeping and its benefits to ensure it is being done correctly. If you choose to do your own bookkeeping, it is recommended to speak to a professional to gain tips and advice to make the process more efficient and hassle-free