Small businesses are easy to manage, but it is not as easy as you think. Keeping track of expenses can be challenging when the correct methods are unknown. Bookkeeping is an excellent way of keeping track of things daily as it helps to calculate all the costs at the end of the day.
What is bookkeeping?
As the name says, bookkeeping includes keeping day-to-day records of all the financial transactions taking the place of a company. The work of a bookkeeper is to record bank transactions, cash, expenses, sales in a general register.
For a small business startup, a bookkeeper needs to know the importance of the ledger. Keeping it updated and accurate is the crucial aspect of understanding the company’s finance. Transaction recording is posting a bookkeeper’s work that might also include invoice generating or/and completing payroll.
The bookkeeping complexity process depends on the business size and the monthly, weekly, and daily transactions.
What are the bookkeeping methods?
There are two ways of bookkeeping:
- Single-Entry
- Double-Entry
Many businesses use the double-entry method where every record to an account needs a matching and opposite entry to a varying account. For example, a cash sale of $10 would need posting two entries: a $10 debit entry to a “Cash” account and a $10 credit entry to a “Revenue” account.
You can also do bookkeeping on a lined piece of paper or spreadsheet. Moreover, much of today’s bookkeeping is automatic. The software also includes some accounting process components.
The crucial aspect of a great bookkeeper is being strict about precision and completing the record. As humans are bound to make errors, a bookkeeper is usually under the supervision of an accountant to deal with the matters.
Key points to remember for bookkeeping as a small business
Given below are a few key points that are important for any small business’s bookkeeping:
- Dedicate a business account precisely to all revenue and expenses. When a company draws a bank statement to do bookkeeping, everything is in one place.
- It is essential for a business to use statements and mark things as they are entered into a spreadsheet. With the marking off eliminating all items on the bank statement, it becomes clear what expenses have been used.
- Keep a record of all the money earned by the business, including the loans and investment funds. It is essential to keep the investments and loans in different registers and not be kept as revenue. The incoming revenue is generally recorded with related database categories, such as category, date, memorandum, and payee payments.
- Keep an upcoming payment timetable for all the payments to be received in the future by business-like utilities, rents, and other frequent payments. It is known as AP Account Payable.
- If there is an expected one-time expense in the future, it can also create a budget from the same ledger.
- Many businesses book their AP with two dates: the due date and the deadline, expected before the penalties are suffered.
How to manage bookkeeping?
Starting with bookkeeping can be easy when performed accurately; however, you can manage the stats with books or simple spreadsheets. As the business grows, considering more advanced techniques taking QuickBooks and bench into account is essential.
With the growth of a business, it is vital to keep reviewing the time spent on books. It is also important how much time is putting a cost on a business. The right bookkeeping solution helps a company be more focused and precise about the cost and aids in saving more money for the business.
The most important part of a business is to have a hassle-free payment method. It will help the company generate a smooth payment acceptance method that can either be a merchant account or a third-party payment method like PayPal.
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