9 Small Business Bookkeeping Basics to Know

A bookkeeper records your business or organization’s financial transactions – petty cash, purchases, sales, payroll, revenue, expenses, and other transactions. Bookkeeping is the process of keeping organized records of your business’s financial transactions, such as income and expenses. It’s a step-by-step process that accountants go through to ensure that all financial transactions are properly recorded during a given period . Depending on your business structure, a separate business bank account can be either legally required or not obligatory. However, it’s strongly recommended to have a separate account. This way, your personal and business records won’t mix up, and it’ll be much easier for you to prepare for the tax season, secure a loan or a credit line, and talk to investors. It’s necessary to distinguish between accounting and bookkeeping because people often confuse these two notions.

Let’s review some tasks involved in bookkeeping, especially as they relate to your business’s day-to-day operations. If you have a team that manages your company finances, ask them for visibility into your bookkeeping activities. Go through the numbers as if you were being audited and do this periodically with a fine-toothed comb. As you stay on top of all your small business bookkeeping needs, ensure that you are aware of incoming funds. If a party hasn’t paid you on time, follow up by email or leave a paper trail of your follow-ups. Doing so can help in extreme cases where you may need to seek legal recourse. For example, tools like Intuit’s Quickbooks automate your bookkeeping and represent data through engaging graphs.

Use accounting software if:

You can also use apps like Shoeboxed, which are specifically made for receipt bookkeeping 101ing. Keeping an accurate, up-to-date set of books is the best way to keep track of tax deductions . With records in good shape and neatly organised, you know exactly what is stored where so you save a lot of valuable time.

Our seasoned bankers tap their specialized industry knowledge to craft customized solutions that meet the financial needs of your business. Delivering a personal approach to banking, we strive to identify financial solutions to fit your individual needs. Free insights to help you take control of business finances. If you’re not sure what financial documents are worth keeping on file and organizing, here is a list. When your revenues rise above $1 million, then you may need to hire an in-house bookkeeper for your company. Also, you won’t catch fraudulent transactions in a timely manner.

Review your inventory

These accounts and their sub-accounts make up the company’s chart of accounts. Assets, liabilities, and equity make up the accounts that compose the company’s balance sheet. You also have to decide, as a new business owner, if you are going to use single-entry or double-entry bookkeeping. Single-entry bookkeeping is much like keeping your check register. You record transactions as you pay bills and make deposits into your company account. It only works if your company is relatively small with a low volume of transactions.

The key is to get in a consistent habit so that you don’t forget.If you’re receiving multiple invoices a day, then posting daily is a good idea. One of the first decisions you have to make when setting up your bookkeeping system is whether or not to use a cash or accrual accounting system. If you are operating a small, one-person business from home or even a larger consulting practice from a one-person office, you might want to stick with cash accounting.