For that reason, in this article, we are going to be covering the basics of bookkeeping for small businesses while keeping things simple and easy to understand.Accurate, up-to-date bookkeeping is the backbone of any successful small business. It’s a topic that seems extremely complex, but avoiding it just leads to more trouble. Bookkeeping for small business is a topic that many owners run away from.
![]() ![]() Evaluate Performance & Plan for the FutureAccurate bookkeeping helps you trace your firm’s financial records and evaluate its performance levels. Bookkeeping accounting ensures that you have the right information to talk to your team and make them feel like they’re part of the company. They need to know if the company is making some progress and how they contribute to its growth. Bookkeeping programs that incorporate graphs, charts, and other visual aids make it easier to increase data precision and improve communication when you’re wooing investors.You’re also responsible for communicating with your employees and allowing them to know the financial state of your firm. Adobe pdf reader for mac free download full versionBookkeeping accounting lets you know if your small business needs extra employees or requires operational changes. If you’re a small business owner, it’s necessary to set projections and forecast the future of your business. Bookkeeping allows you to have a greater understanding of the areas within your business where you can trim costs.You may need to re-strategize and make adjustments to ensure you stay on top of your business.Proper bookkeeping also allows you to determine the areas within your company that could benefit from improvements. Business Bookkeeping Professional Document ShreddingFor digital records, QuickBooks allows you to easily delete or condense historic transaction data to save you storage space and secure sensitive financial information. Records older than six years can be securely disposed of by hiring a professional document shredding company. Making sure your records are well-organized can save you a big headache if you’re ever subjected to an audit.As a business owner, you’re required to keep financial and tax records for six years after the tax year in which they were received it’s a good idea to keep these archived records in both paper and digital formats for added security. Saving your records in the cloud also ensures that they’re easily accessible in a digital format from any device. Be sure to keep the following:Take the time to organize your records, whether that means buying a filing cabinet or breaking out the label maker. In this method, you might use a pen-and-paper ledger, or an offline program like Microsoft Excel or Word to record income, expenses, interest, and any of the other cash flow items that appear in a financial report. Bookkeeping Methods Manual BookkeepingManual bookkeeping is the “traditional” way of preparing and documenting your business’ financial records. Frequent financial reports are a great way to check on your budget, and figure out where you can make adjustments if necessary. However, there are plenty of reasons to make quarterly, or monthly financial statements as well. A detailed financial report usually includes the following three elements:As a business owner, you’ll most likely have to create a complete financial report at least once a year, for tax purposes. ![]() The double entry method leaves less room for error, making it the better choice for balancing complex books. For example, if you work full time but have a side business selling handmade jewelry, single-entry bookkeeping is probably enough to record your profits and expenses from that side business, so you can claim the amounts on your taxes.However, if your business is incorporated, or if it’s your sole source of income, the single-entry method just won’t cut it. This can be sufficient for very small businesses that aren’t incorporated. For example, if you make a $30 sale, in the double-entry system that transaction could be recorded as a gain in your income ledger, and as a deduction to the total value of your inventory.Single-entry bookkeeping is simpler — you only have to record each transaction once. What is the Difference Between Single-Entry and Double-Entry Bookkeeping?In single-entry bookkeeping, each transaction is recorded as a single entry in a ledger, while in double-entry bookkeeping, a transaction is recorded twice. You ordered the parts in January, and the manufacturer sent you an invoice that same month. Say you ordered some new machine parts from a manufacturer. Cash Versus AccrualBoth the single-entry and double-entry methods can work in tandem with cash or accrual bookkeeping.To understand the difference between these two methods, take this example. Any company that must highlight cash flow retained earnings, or any other changes in a position financially must use a double-entry accounting system. This inability to conform to GAAP’s requirements may not apply to very small businesses which only need to be able to illustrate a method of meeting reporting requirements for taxes and employees. With the help of cloud accounting software for small-business bookkeeping, you can pretty much automate the process.Keep in mind, single-entry bookkeeping’s simplicity doesn’t allow for GAAP conformation.
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