How to Keep Books for a Small Business: 13 Tips to Follow

She is a former Google Tech Entrepreneur and holds an MSc in international marketing from Edinburgh Napier University. Magazine and the founder of ProsperBull, a financial literacy program taught in U.S. high schools. When manually doing the bookkeeping, debits are found on the left side of the ledger, and credits are found on the right side. Debits and credits should always equal each other so that the books are in balance.

  1. As a business owner, you’re responsible for reporting crucial financial data about your firm to potential investors and other stakeholders.
  2. Some accounting systems let you attach receipts directly to transactions so everything is in one place.
  3. A ProAdvisor can assist you with small-business bookkeeping and installing or learning how to use cloud accounting software.
  4. Local bookkeepers, in-house bookkeepers, and freelance bookkeepers, to name just a few.

As long as you automate tasks and pick the right bookkeeping system for your specific needs, you’ll have an easy time implementing all the advice above. Having a solid overview of your bookkeeping and accounting reports gives you a good enough start for cash flow projections for the following months. Luckily, most modern-day bookkeeping and accounting  software have tools that make cash flow tracking a breeze. Make sure you open a business bank account for your business expenses and do private bank account transactions on personal accounts. In the cash method of accounting, you record the transaction only when the money has actually changed hands.

This will also avoid the temptation to allocate a private expense to the business. Seychelle is a Maryland-based personal finance writer and business owner. She’s passionate about helping others out of financial pitfalls she’s already dug herself out of. Most of her finance knowledge stems from her career as a Financial Consultant and Branch Manager at the 7th largest US bank. Income tax, payroll tax, unemployment tax, excise tax, sales tax, property tax…that’s a lot of taxes. If you’re ready to save time and automate your bookkeeping system, check out Lendio’s risk-free plans and pricing.

It’s much harder to know where you stand when you constantly have to decipher your transactions and guess whether it was a personal purchase or a business expense. Debits are recorded on the left side of an accounting ledger, while credits are recorded on the right side of the ledger. This is generated by looking at your assets and what you own versus your liabilities and outstanding debts.

Bookkeeping Options for Small Business Owners

Do you think they’re great becauseeverything they says about the books sounds just like they know whatthey’re doing and at least you don’t have to? There is nothing worse than having a job done by someone, like a plumber, and then waiting for months for an invoice. Being forgetful about the above will result in the bookkeeping system not reflecting a true record of what has occurred. It can be tempting to take the cash right away to purchase supplies but this might cause a mess in the bookkeeping system.

Look at the item in question and determine what account it belongs to. For example, when money comes from a sale, it will credit the sales revenue account. Making sure transactions are properly assigned to accounts gives you the best view of your business and helps you extract the most helpful reports from your bookkeeping software. At the end of every pay period, the bookkeeper will accumulate employee payroll details that include hours worked and rates. From there, the total pay is determined with the applicable taxes and withholdings. In the accounting software, the primary journal entry for total payroll is a debit to the compensation account and credits cash.

They’ll save you plenty of money and time spent shuffling through receipts. Bookkeeping is a way for you to track and manage your business finances and is one of the many responsibilities that come with being a small business owner. You need to know what’s happening with your business cash flow and finances. One of the advantages of using accounting software is that much of the reconciliation process is completed by simply linking your bank accounts to your software of choice. This allows easy daily or weekly reconciliation, making the month-end process that much simpler.

This investment can benefit your business in that an accounting professional will be up-to-date on tax laws and regulations and can sometimes find deductions that were overlooked. Should the need arise when you must pay a business expense with your personal funds, be sure to reimburse yourself by check. Depositing your salary into your personal account may help alleviate bookkeeping errors. If you find it feasible to keep your books in-house, you might consider using a software accounting program. This can help alleviate some problems you might run into with manual record keeping.

It will be even easier to keep your records organized, stay on top of time management, send out invoices and more in a cloud-based accounting software like QuickBooks Online. But the best way to keep up with your accounts is by scheduling consistent times designated for balancing the books. An easy practice is to set aside a block of time whenever your credit card statement is due and combing through that month’s transactions to ensure they are accurate. This should typically take an hour or two and will simplify your life come tax season.

If they creep up too heavily, it can take much longer to correct them and prevent losses in the long term. It helps you estimate whether a given project or investment would result in more money coming in, or if you’d lose money on the venture. Understanding how to calculate Net Present Value is beneficial for your long-term financial planning.

This can be challenging with the other commitments of operating a small business. Learn how bookkeeping can streamline business practices with small business bookkeeping tips. You’ll learn which accounting methods to choose, how to track expenses, and much more. Keeping track of bookkeeping tasks as a small business owner can be challenging.

Keep records of business expenses.

The two primary methods of small business accounting are cash-based and accrual. While the cash-based method is the simplest to use, it’s not suitable for every small business. Take a look at the difference between cash and accrual accounting and the restrictions.

Keep On Top of Your Sales Invoicing

As a business owner, you’ll most likely have to create a complete financial report at least once a year, for tax purposes. However, there are plenty of reasons to make quarterly, or monthly financial statements as well. Frequent financial reports are a great way to check on your budget, and figure out where you can make adjustments if necessary. While accounting encompasses these data-gathering duties, this field also tends to involve analyzing the numbers and making profit and loss projections.

These insights will help you avoid dangerous amounts of debt and leverage your existing capital to its utmost potential. Coming full circle—these informed business decisions will improve your financial health and help you qualify for financing. Hiring capital contribution llc a good bookkeeping or accounting service is an investment that saves you time and outsources a painstaking task to someone who specializes in it. Most bookkeeping services are relatively affordable and handle everything from accounting to payroll.

How To Do Bookkeeping For a Small Business

With automation, you can streamline your small business bookkeeping tasklist and get back to doing what your business needs. The right accounting software is a great first step in this direction. Here, we’ll cover some quality bookkeeping tips you can use to simplify your accounting process and make your life easier.

Bookkeeping is one of the most important tasks that a business owner will delegate over the life of a business. Without it, it’s nearly impossible to produce an accurate record of financial activities that affect everything, from profit to equity to payroll, and more. When it comes to bookkeeping tasks, there’s a great deal to learn.