Bookkeeping is one of those tasks that routinely show up on lists of things business owners loathe. Yet, ignoring bookkeeping can also trigger a lot of unpleasant results. Think in terms of overpaying on taxes, leaving revenue locked up in receivables, and triggering IRS audits.
Is your bookkeeping is always running behind? Are you new to it and just don’t quite have a handle on everything you’re supposed to do with bookkeeping yet?
Keep reading for our quick guide on the ins and outs of bookkeeping for your small business.
What Is Bookkeeping, and What’s It For?
In essence, bookkeeping is a running record of all the financial transactions your business does. Every payment you make or receive goes in the book, so to speak.
In the old days, there was a literal book, but most businesses just use bookkeeper software now. Software makes bookkeeping for small business owners a much simpler and more accurate process.
Bookkeeping serves two main purposes. First, it helps you understand whether or not your business makes a profit. Second, it helps you defend your taxes to the IRS or your state tax agency.
That begins with deciding on single-entry or double-entry bookkeeping. Pro tip: unless you run a profound simple business with basically no assets, liabilities, or equity, you’ll end up using double-entry bookkeeping.
Create a system for tracking and logging all your expenses, even if it’s just a box where everyone puts receipts. Block out a specific time each week that you do the books.
Make that time sacrosanct. Never book appointments, meetings, or take calls unless a full-on emergency is underway.
Balancing and Reports
Since it’s a business, you’ll probably balance the books every three months for quarterly tax purposes. Basically, this means you add up all of the credits and all of the debits. If they match, your books are balanced.
Then, you generate three main reports: a balance sheet, a profit & loss statement, and a cash flow statement. These give you a picture of your business’s financial health.
Many small business owners learn they can do the bookkeeping, but struggle to find the time every week. If that sounds familiar, you can solve the problem with bookkeeping services.
These services typically handle bookkeeping jobs for several businesses. You can find them with a simple online search for bookkeepers near me.
You can also hire an in-house bookkeeper. Just make sure you look into the local norms for bookkeeper salary requirements.
Bookkeeping and You
Bookkeeping is often a tedious, even torturous, task for small business owners. It soaks up time and mental energy, but it’s also a critical task if you want your business to survive.
Start by getting yourself organized. Pick a bookkeeping method, invest in software, and start tracking every transaction. If you can’t block out the time or make too many errors, get help from a bookkeeping service or in-house bookkeeper.
Looking for more tips on keeping your business’s financial house in order? Check out some of the other posts in our Finance or Business sections.