8 Bookkeeping Tips to Simplify Small Business Financials Bench Accounting
Manual bookkeeping is the “traditional” way of preparing and documenting your business’ financial records. 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. If you run a start-up you can save time by recording all transactions as they come up.
If you need to borrow money from someone other than friends and family, you’ll need to have your books together. Doing so lets you produce financial statements, which are often a prerequisite for getting a business loan, a line of credit from a bank, or seed investment. If you’re using accounting software, financial reports might be automatically generated. If someone on your staff or an outside accountant prepares the report, review it for accuracy and keep apprised of your financial standing. As a business owner, you’re responsible for recording every expense paid from your business account. No matter the payment method used, each transaction must be recorded with the date, amount, and purpose.
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. When hiring external team members, keep in mind that some of the responsibility still falls to you as the proprietor. Though often confused for each other, there are key differences between bookkeeping and accounting.
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.
Accounting Services
Your goal in bookkeeping is to keep the most accurately detailed account of business financials. To do so, you must factor in the historical cost of certain items. 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. GAAP stands for Generally Accepted Accounting Principles, which are the best methods you can use to track and manage your business financials. These are methods used by most people in the accounting profession, so if your bookkeeping is ever questioned, your methods will be accepted by others. In the cash method of accounting, you record the transaction only when the money has actually changed hands.
- If you don’t carry a receipt book with you everywhere you go, you can always rely on technology.
- QuickBooks cloud accounting software also has options for payroll, expense tracking, and inventory.
- You can further analyze your balance sheet and get insight into your business using financial ratios.
- However, you don’t actually pay the fee until you’ve received the parts, in February.
- No matter the payment method used, each transaction must be recorded with the date, amount, and purpose.
- This type of account is designed for everyday use and allows businesses to make unlimited deposits and withdrawals.
Use that day to enter any missing transactions, reconcile bank statements, review your financial statements from the last month and make any major changes to your accounting or bookkeeping. When running a small business, it’s essential to track cash flow and have the ability to cover unexpected expenses. Unless you’re using a bookkeeping service to alert you when a problem arises, you’ll need to track your income and revenue closely. This can be challenging with the other commitments of operating a small business.
Outsourcing to a professional
There’s good news for business owners who want to simplify doing their books. 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 rethinking activity simplify the process. You no longer need to worry about entering the double-entry data into two accounts. Using the data you gain from keeping a ledger, your next step will be to generate and prepare financial reports for analysis.
Sending Invoices
If your business incorporates brick-and-mortar sales with online sales, payroll will be different between the two. To analyze which type of sales amount to the largest profit for your company, you must segregate in-person sales from online sales. When creating the company’s balance sheet, the FIFO method of valuation offers costs that most closely resemble the costs most recently incurred. The accrual method is a bit more difficult, in that your bank statements might not reflect the amounts on your income sheet.
Easy-To-Use Platform
Selecting reliable cloud accounting software is vital for efficient and secure bookkeeping. These tools offer significant advantages over traditional methods. As a responsible small business owner or bookkeeper, you should be aware of your company’s revenue streams. Proper financial records make it easier for you to analyze the financial state of your firm and determine areas that need improvement. As businesses grow, it becomes easier to let small activities slip.
