One of the best things you can do to ensure your books balance properly is to follow the three golden bookkeeping rules. Then categorize your expenses into different categories, start estimating your expected revenue for the upcoming period, and allocate your expenses accordingly. A lot goes into it—from managing payables and receivables to balancing books. But what might seem like an overwhelming task isn’t so bad when you break it down to the bookkeeping basics.

Understand the Income Statements and Balance Sheets

The double entry method leaves less room for error, making it the better choice for balancing complex books. With the help of cloud accounting software for small-business bookkeeping, you can pretty much automate the process. It’s also possible to link your cloud accounting software to other financial programs that your business uses, like your online banking or mobile payment apps.

Budget for taxes

You’ll analyze your financial documents to get key insights into your business’s health, which will help you make smart business decisions going forward. Your cash flow statement shows how money moved into and out of your business in what is a lookback period form 941 and form 944 a given period. It lets you know if your business is making money at a healthy pace, or if you might be struggling to stay afloat soon. The double-entry bookkeeping method, on the other hand, is usually used by businesses that want to expand or do need more nuanced reporting. Single-entry bookkeeping is simpler, and is usually used by businesses with few or no employees, minimal plans to scale, and no need for in-depth financial reporting.

When you keep detailed, organized records of your business transactions, tax season suddenly won’t feel like such a daunting chore. By being proactive with your bookkeeping, you’ll save your small business time when it comes to taxes. Simply turn your financial statements over to your CPA or other tax filings expert, and let them handle the rest.

Balance your books

1. Plus, you can ensure your payroll account has enough money even if the primary account suffers.
2. Best of all, it doesn’t feel like work when it’s part of your small business bookkeeping routine.
3. It’s important to understand the trajectories and trends so you can learn how to make better-informed business decisions in the future.

Maintaining bookkeeping tasks is essential for the stability and success of small businesses. With so many moving pieces (including assets and liabilities, and income and expenses), small business owners must stay on top of it all. Accountants rely on bookkeeping records to analyze and advise on the financial activity, health, and growth potential of a business. Every financial transaction should have a line item in the general ledger, which tracks everything in one place. The general ledger notates the account number to which the debit or credit is applied.

Accounting software

Since good record keeping relies on accurate expense tracking, it’s important to monitor all transactions, keep receipts, and watch business credit card activity. Many bookkeeping software options automate the tracking process to eliminate errors. The accrual-based accounting method works better with double-entry bookkeeping, so it’s best for more complex business structures or businesses that keep inventory or sell goods. You record transactions as soon as they’re invoiced or billed, even if the money isn’t in your metaphorical pockets yet. Accrual accounting provides a more accurate picture of a business’s financial health than cash accounting, as it considers all of the financial transactions for a given period. This accounting method is useful for businesses with inventory or accounts payable and receivable.

These days, you’ve got three options when it comes to bookkeeping tools. The IRS also has pretty stringent recordkeeping requirements for any deductions you claim, so having your books in order can remove a huge layer of stress if you ever get audited. This content has been made available for informational purposes only. Learners are advised to conduct additional research to ensure that courses and other credentials pursued meet their personal, professional, and financial goals. The steps below will walk you through actionable steps you can take to manage your small business’s finances effectively. Unless you’re dying to break out adding machines and slide rules, feel free to take advantage of the many bookkeeping apps and software on the market.

We’ll also give you easy-to-use software to produce financial statements, keep track of your daily expenses, and help make tax time a breeze. Using the accrual accounting method, you record income when you bill your customers, in the form of accounts receivable (even if they don’t pay you for a few months). Same goes for expenses, which you record when you’re billed in the form of accounts payable. To track your business’s financial health, having a bookkeeping system can help you stay organized and aware of where you stand each week and month.