Small business bookkeeping is a crucial aspect of managing a company’s finances effectively. It involves setting up a framework, choosing a method, and keeping track of details. There are three main ways to tackle bookkeeping for a small business: doing it yourself, using an online bookkeeping service, or hiring an in-house bookkeeper.
Doing Your Own Bookkeeping
Using accounting software can make it possible to do your own bookkeeping, but it’s essential to have the resources and time to commit to handling it yourself. Accounting software can automate tasks like transaction categorization, but understanding what’s happening behind the scenes is still important.
Using an Online Bookkeeping Service
Outsourcing bookkeeping to an online service allows for communication by email or phone, and the scope of work can vary depending on the provider. This option gives access to expertise and flexibility in managing finances.
Hiring an In-House Bookkeeper
Hiring a bookkeeper to work directly for the business provides access to their expertise and allows them to become familiar with the business’s finances and accounting tools. However, it’s important to understand the tasks the bookkeeper is and isn’t responsible for handling.
Setting Up Accounting Software
Setting up accounting software involves entering business information, connecting business bank accounts, and giving accountants access to the software. It’s also important to organize the chart of accounts in a way that makes sense for the business.
Choosing an Entry System
Deciding between a single- or double-entry accounting system is crucial, as it impacts how finances are managed and bookkeeping processes work. Single-entry accounting records transactions once, while double-entry accounting enters every transaction twice, as both a debit and a credit.
Choosing an Accounting Method
Choosing between cash or accrual basis accounting affects how reports look, with cash basis accounting recording transactions when money changes hands and accrual basis accounting recording invoices and bills even if funds haven’t been exchanged.
Importance of Bookkeeping
Bookkeeping is essential for running a small business, as it provides a sense of cash flow and helps with tax filing. It’s also important for making informed operational decisions, investing resources, applying for loans, and detecting fraud.
Bookkeeping Options
Small business owners can handle bookkeeping internally, use bookkeeping software, or outsource to professional bookkeepers and accounting professionals. Bookkeeping software options like FreshBooks can be flexible, mobile, and secure, making it easy to manage tasks like tracking expenses, managing financial reporting, and producing customer invoices.
Basic Bookkeeping Principles
Basic bookkeeping principles include keeping receipts, maintaining a ledger, creating financial reports, and proactively handling tax liabilities. Keeping detailed records of transactions, summarizing financial performance in a ledger, generating financial reports, and being proactive with tax liabilities are all crucial steps in establishing a reliable bookkeeping process.
Tips for Small Business Bookkeeping
Tips for small business bookkeeping include choosing accounting software that works for your needs, choosing an accounting method, tracking expenses, and more. Small business bookkeeping can streamline business practices, and with the right tools, you can feel confident managing financial transactions and helping your business grow.
