What Is Bookkeeping?
Bookkeeping is a subset of accounting in which financial transactions are recorded, analyzed, transmitted, and reviewed to make critical business and financial decisions for a stipulated period. The transactions include sales of goods, purchases of business machinery and equipment, vendor invoices, receipts, and payments by an individual or company.
The person who records, handles, and performs day-to-day bookkeeping activities is generally known as a bookkeeper. All cash and credit transactions are recorded and ensured by a bookkeeper responsible for keeping all business transactions in order.
Bookkeeping for Start-Ups
Most medium to large-scale businesses have employees who manage the accounts payable and receivables, payroll, vendor invoices, bills, and other similar day-to-day transactions. They are often supervised by higher authorities or accounting professionals who can predict the company’s fate by making financial assumptions and projections.
Bookkeeping is one of the most critical aspects of every business. For start-ups, the need for a professional bookkeeper to run and manage the day-to-day operations becomes even more crucial. From the beginning, start-ups need to record all business transactions to allow their accountants to sketch a clear picture of the business’s finances.
Why Do Most Start-Ups Fail?
Entrepreneurs who fail to administer their financial records, cash flow, and other essential business areas create trouble that is hard to resolve. Start-ups that fail to task their employees with work, at the later stages, regret when they are out of the competitive race. Since making financial projections and assumptions depends on how well you extract financial data from your bookkeeping records, you need to hire competent employees who will take responsibility for maintaining and managing the business books, otherwise known as bookkeeping.
Bookkeeping for Start-Ups: Four Key Steps
- Gather all records of financial transactions, including deposits, vendor invoices, bank statements, purchase receipts, and sales invoices.
- Enter the data into journal ledgers or accounts.
- Balance the accounts and remove discrepancies.
- Close the books for the accounting period.
Cash Account
Small to medium-sized businesses most often witness cash transactions, meaning business transactions will go through a cash account. The transactions will either be debited or credited to your account. At the end of the defined period, ideally a month, the bank account must be reconciled for any outstanding transactions or errors. It is important to note that closing all discrepancies within the given month is ideal to prevent any confusion or stress later down the road.
Accounts Receivable
The money due from your customers must be tracked properly to receive and ensure timely payments. This can be done manually by a bookkeeper, or you can also incorporate bookkeeping software to know the current status of your transactions.
Inventory
To know the status of your business’s inventory – raw goods, work-in-progress, or ready-to-sell – you must ensure that the actual inventory on hand agrees with your accounting records. Industry veterans recommend conducting physical inventory counts to understand your inventory records clearly. Any discrepancies or variations found in the records can result from inaccurate tracking or, unfortunately, employee fraud or theft.
Expenses Accounts
All expenses incurred by the business for a brief period, ideally a month, must be recorded to know your company’s current expense status. Some expenses may include rent, office, petty expenses, insurance, marketing, cost of goods sold, etc.
Payroll Expenses
Undeniably, payroll expenses are one of the most significant expenses for companies. This includes disbursing salaries, bonuses, and other fringe benefits in bookkeeping records that fall under the payroll expense column.
Conclusion
In conclusion, business financial management’s backbone, regardless of scale, is bookkeeping. The meticulous recording, analysis, and organization of financial transactions provide the foundation for sound decision-making and sustainable growth. Maintaining accurate and up-to-date books is imperative for survival and success, particularly for start-ups where every penny counts.
Failure to do so can lead to many challenges, including cash flow issues, mismanagement of resources, and, ultimately, business failure. By following the key steps outlined and paying close attention to critical areas such as cash accounts, accounts receivable, inventory, expenses, and payroll, start-ups can confidently establish a solid financial footing and navigate the complexities of entrepreneurship.
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.