Why Is Bookkeeping Important for Small Business? 6 Reasons Leave a comment

For instance, ever looked at your bank statements and thought, Where is all the money we made this month? If you work with a certified public accountant, business lawyer or tax advisor, ask if they have recommendations for a bookkeeper or bookkeeping service. Sign up for free versions of several tools, such as Zoho, ZipBooks, or Wave, and poke around inside each to see how the function. You’ll want one that makes intuitive sense to you and seems simple to maintain. Once you’ve landed on one, you can connect it to your business bank account so it can track the money flowing into and out of your account. This creates a more automated version of the spreadsheet method. In fact, using a spreadsheet is one of two bookkeeping options available to small businesses.

• However, when you sell online, customers may be located in different cities, states, provinces, and even countries.
• If you’re like most modern business owners, odds are you didn’t become one so that you could practice professional-level bookkeeping.
• You can connect with a trusted adviser and gain visibility into your financial health.
• This means that the software system they sign up for will be designed to suit their needs.
• Follow along to learn more about which method might be best for you and your business.
• You might still consider consulting with a CPA or bookkeeper at the beginning, just to make sure you’re doing everything right.

You can quickly lose track of where your petty cash has gone if you don’t keep accurate records. Make it small enough that your employees won’t feel tempted to steal from it but large enough that it can cover reasonable expenses. You’ll need create an electronic spreadsheet or ledger on a piece of paper. Bookkeeping is one of the most important tasks that a business owner will delegate over the life of a business.

How to Do Bookkeeping: Basics Every Small Business Owner Needs to Know

While bookkeeping concepts deal with recording this financial data, accountants organize and analyze it, often providing recommendations to ensure accuracy and improve spending. When choosing your accounting software, you’re going to want to pick something with certain basic accounting features. Your choice should allow you to manage a balance sheet, do your basic bookkeeping, allow for simple information entry of your revenue. The service should also provide a chart of accounts and accounting features and to help you keep track of your transactions, both online and in person. A key element in starting and growing any business is bookkeeping. The insight derived from bookkeeping and accounting helps business owners make profitable decisions in order to grow. Our professional bookkeeping services will help your small business produce useful, accurate financial records on a monthly basis.

• According to professional services agent Ageras, there are several advantages to hiring a bookkeeper to file and document your business’s financial records.
• These tasks used to be managed using books and ledgers, hence the name “bookkeeping”.
• The choice to integrate bookkeeping apps into your business is a choice that has become practically mandatory for bookkeeping and accounting.
• That’s why working with a real person who can help you make smart decisions with your business pays off.
• Proper account bookkeeping is one of the most critical tasks for a small business.
• Produce balance sheets, income statements, and other financial statements that show financial health and trends.

You also may be able to prevent or uncover fraud, whether from customers, vendors, or employees. Whether you take on your small-business bookkeeping yourself or end up outsourcing to an expert, understanding the basics will help you better manage your finances. You’ll save time chasing receipts, protect yourself from costly errors, and gain valuable insights into your business’s potential. Also called an income statement, this report breaks down business revenues, costs, and expenses over a period of time (e.g., quarter). The P&L helps you compare your sales and expenses and make forecasts.

Bookkeeping Methods

Bank feeds, that link the software with your business bank account, allow you to see each transaction in real time. Unless your business transactions are recorded and organized, you don’t have records of payments, receipts from customers or know much cash is available. When you keep good records, you can track the money that flows in and out of your business. A bookkeeper is responsible for identifying the accounts in which transactions should be recorded. You also have to decide, as a new business owner, if you are going to use single-entry or double-entry bookkeeping. Single-entry bookkeeping is much like keeping your check register. You record transactions as you pay bills and make deposits into your company account.

• You can also browse the Shopify App store for an accounting software that will seamlessly integrate with your ecommerce store.
• Our partners cannot pay us to guarantee favorable reviews of their products or services.
• QuickBooks Self-Employed will total up all business transactions automatically.
• For American store owners, you’ll need to pay estimated quarterly taxes if you’ll owe more than $1,000 in taxes this year.
• Maybe you only need basic financial support like recording invoices and payments.
• You may make more money long-term if you leave the accounting to the experts and focus on your growth prospects.

To find reliable options, look through your accounting software’s directory of certified bookkeeping professionals. You can also consult professional bookkeeping communities, accounting blogs or industry forums for available professionals. Records those invoices and bills even if the funds haven’t been exchanged.

Record every financial transaction

Modern bookkeepers are capable of a variety of tasks, including keeping books. Their duties can vary greatly depending on the business they work with. Business owners who hire bookkeepers see their profits increase by 16% on average. Keeping track of high volumes of transactions can be time-consuming for growing businesses.

Once you approve of the categories, transactions automatically settle in your financial statements. Google offers several excellent excel spreadsheet templates for small business owners to use. These templates are FREE and are capable of managing basic business, small business accounting, sales tax, and financial statements. Wave is an ideal accounting software platform for a service-based small business bookkeeping for small business that sends simple invoices and doesn’t need to run payroll. For many freelancers or service-based businesses, Wave’s free features will cover all of their accounting needs and is the best free software in our review. At year-end, accountants can pull the necessary reports from Wave to prepare a business’ tax return. The most crucial accounting need for most service-based businesses is invoicing.

Develop a bookkeeping system

If a business owner decides that their system needs to be more detailed, they can use an online accounting solution. In-house bookkeeping has become more prevalent in recent years, especially with the advent of do-it-yourself bookkeeping programs. There are many advantages to these programs, such as simplicity, accuracy, and ease of reporting and analyzing. If you’re a sole proprietor, you might be drawn by the bookkeeper’s role. Maybe you only need basic financial support like recording invoices and payments. Wondering how to hire an accountant for your small business? Here’s a list of the best accounting software for small business.

Generally, accrual-based is the recommended accounting method, but the decision is ultimately up to you. Enters every transaction twice, as both a debit and a credit, to “balance the books” between accounts.

Looking to Make Proper Decisions About Your Business?

QuickBooks shows all your costs, such as inventory and maintenance costs, and every sale your business makes over a period of time. It also offers inventory automation using perpetual inventory tracking, so your sales and inventory cost are updated every time you make a sale. You can also integrate QuickBooks with Shopify to stay organized and up to date. Check out the following accounting software you could use to manage your books. There are many user-friendly accounting software options for small businesses, ranging from free to paid models.

• Bookkeepers have to understand the firm’s chart of accounts and how to use debits and credits to balance the books.
• And if you have several business tasks in your hands, it could be easy to overlook a document or make a mistake in your financial records.
• Not analyzing your business expenses could prevent your business from reaching its full potential.
• Revenue is all the income a business receives in selling its products or services.
• It helps to make sure that records of individual financial transactions are accurate and up-to-date.
• You can share your cloud-based information with your bookkeeper, check your bank statements wherever you are, whenever you feel like it, and keep track of your cash flow in real-time.