Quick Small Business Bookkeeping Essentials for You
Bookkeeping is an important aspect of running a small business. It’s necessary for maintaining your small business finances in order, and it’s especially useful around tax time.
Beginners can benefit from bookkeeping, but mastering the fundamentals can save you time and money. Here are some essential bookkeeping tips for beginners that you should not overlook.
Why Is Bookkeeping Essential for Small Businesses?
Small businesses need bookkeeping to keep their accounts, invoices, and costs organized. Late payments, delayed bills, and a hassle when it comes time to file your taxes can all be the result of poor bookkeeping.
You can utilize bookkeeping to assist you in the following ways:
- For business operations, have access to crucial documents and records.
- Having firm finances easily accessible will make it easier to obtain tax information.
- Rectify and manage transactions by identifying transaction errors in real-time.
- Maintain a separation between your business and personal funds.
- Keep an eye on the financial health of your small business for any changes or improvements.
Don’t Ignore These Bookkeeping Fundamentals
You may apply four bookkeeping fundamentals to help your small business develop.
1. It’s Critical to Have a Well-Ordered Record Management System
For your bookkeeping requirements, you have two options: bookkeeping software or spreadsheets. Whatever method you choose, make sure to keep your records updated regularly.
Bookkeeping Software vs. Spreadsheets
Small firms can keep precise records with bookkeeping software. You can increase the accuracy of your inputs by using bookkeeping software. Because of the increased precision, you’ll be able to complete your bookkeeping more quickly.
Bookkeeping software is there to provide reports for specific financial areas of your small business. Bookkeeping software, on the other hand, allows you to keep all of your records in one location.
Spreadsheets provide a simple way for small organizations to save, save, and examine vast amounts of data. They can be used to view data such as customer, financial, and product information.
Spreadsheets can also help small firms keep track of their household spending habits. They can be used to construct financial charts and reports as well. Finally, spreadsheets can be used to make invoices and receipts.
2. Understand the Difference Between Accounting and Bookkeeping
Knowing the differences between bookkeeping and accounting is the second bookkeeping advice for beginners. Although the two names are frequently used interchangeably, there are significant differences between them.
- Maintaining and balancing a ledger
- Debits and credits that are entered.
- Keeping spending and income in check
- Financial statements, such as the balance sheet.
- Keeping track of daily transactions
Accounting encompasses a variety of responsibilities, including:
- Making changes to the ledger entries
- Analyzing the costs of a business
- Completing a detailed planning and forecasting process
- Developing strategic plans
- Getting ready for taxes
- Providing macroeconomic guidance
3. Recognize the Multiple Kinds of Bookkeeping Methods
The cash method and the accrual method are the two sorts of bookkeeping methods.
Method of Payment: Cash
Because of its simplicity, many small firms prefer the cash approach. The cash technique is as follows:
- When you pay a bill, you’ll keep track of your costs.
- If you get money, you’ll record sales.
- When you get or spend money, you’ll keep track of it.
In terms of tracking expenses and revenue, the cash approach differs from the accrual technique. Additionally, cash accounting keeps track of revenue as it comes in. When you pay your bills, you’ll keep track of them.
The accrual technique is the second way of bookkeeping. This accounting system is founded on the matching concept, which means that revenue and expenses are matched.
In terms of tracking expenses and revenue, it differs from the cash system. With the accrual technique, you’ll record expenses even if they haven’t been paid yet. Even if you haven’t received any money yet, you’ll keep track of sales. And you’ll also keep track of transactions as they happen.
For small firms, the accrual technique varies from the cash method. If a company earns more than $25 million in yearly gross receipts over the previous three years, it must employ the accrual method.
4. There Are Many Accounts to Keep Track Of
Learning the basic bookkeeping account kinds is the final bookkeeping for beginner’s guidelines. Furthermore, these accounts are there for a variety of functions and will aid in the preparation of your balance sheet.
Cash is the initial bookkeeping account. It includes:
- Bank accounts
- Checks that have not been deposited
Cash is a form of an asset on a balance sheet.
Accounts Receivable (A/R)
Accounts receivable is a general ledger account. It refers to a credit owed to a business. Accounts receivable are funds on a balance sheet.
The account payable account is part of the general ledger. It refers to a loan that a company must pay. Accounts payable are current liabilities on a balance sheet.
Assets are the things that a company owns. The total liabilities and equity are the assets on a balance sheet. Assets such as current assets and other assets are also on a balance sheet.
Assets that a small business may have include:
- Financial resources
- Fixed assets – assets that stay the same.
- Intangible assets – assets that are not physical.
Liabilities are the company’s debts. They are separated into two categories: current liabilities as well as other liabilities. These factors are added together to establish your overall obligations.
Get in Touch!
Any small business needs to maintain track of its finances. It’s also one of the most important things you can do to help your small business grow. Professional business owners, on the other hand, don’t always have the energy or know-how to efficiently handle their books. This is where Your Part Time Accountant can help. By taking care of your bookkeeping, our team of skilled bookkeepers can assist you and your small business.
When your small business requires assistance with bookkeeping, reach out to experienced specialists. It’s time to find your small company bookkeeping needs with the help of the pros at Your Part Time Accountant.