Bookkeeping is a very essential part of any business. – big or small. Small business bookkeeping is a process of keeping accurate records of all the business transactions. This includes what you spend and what you get. If you are a small businesses learning about the importance and method of bookkeeping, take a look at this blog.
Bookeeping for small businesses
For small businesses, bookkeeping is mainly divided into two main categories
Single-entry bookkeeping:
In this kind of bookkeeping, there is only one entry per transaction - either a credit or debit.
Double-entry bookkeeping:
Here, you make two entries per transaction where you record it as a credit in one account and debit in another account.
It is always important to keep a thorough eye on how your business is performing. While a thorough idea about your business operations is very crucial, you need to also be aware of how your business is performing financially. In small businesses, every rupee counts and you need to see how the money comes in and goes out. Here are some reasons of why bookkeeping is very important for small businesses.
- Financial bookkeeping for small businesses helps your take wiser operational decisions
- You can find out the investment resources needed for your business growth.
- It keeps your financial records on track and application of loans becomes easier.
- Bookkeeping for businesses, be it small or big is essential for tax filing.
- You can also find the unnecessary expenses and roots for profits.
Challenges faced while Bookkeeping for Small Businesses
The very first challenge anyone faces is to see if one needs to choose bookkeeping service, hire an inhouse-bookkeeper, or get a bookkeeping software for small businesses. However, the bigger challenge one faces is when there is an issue in tracking the cashflow right and this could lead into bigger issues.
Due to this, the operations can get affected and if there is an issue in the tax filing, it can lead to penalties too. The tax rules and the government laws keep changing and your small business bookkeeping records need to align with the latest amendments in the policies.
How to do Bookkeeping for Small Businesses
If you want to have a successful and correct bookkeeping experience, here is something you need to follow.
Get a bookkeeping software for small businesses
There are many bookkeeping softwares in the market today. Since your business is small, choose something that fits your budget and meets your need. Every business software you plan to choose needs to help you track your business financials. There are softwares that help with the inventory, billing statements, cost estimates and more.
There are also some bookkeeping softwares that will do a thorough analyses on your transactions and give you a fair idea of how your business is performing and what needs to be continued or stopped. Also ensure who would be using this software. If you are hiring an in-house bookkeeper or a bookkeeping service provider. The software you buy will give you the best outcomes if someone who has knowledge about bookkeeping uses it.
Some of the good bookkeeping softwares in the market include Intuite QuickBooks Online, Xero, Wave and FreshBooks. Most of them are service-based bookkeeping platforms and are the bestsellers in the market today.
Choose a bookkeeping method
A bookkeeper has a better idea about making this decision for your business. To get an overview, there are two main bookkeeping or accounting methods that small businesses follow.
Cash-based bookkeeping: This is the simplest method for any small business or a startup. There is no inventor involved in this method and hence is not a preferred method for B2C businesses. The income is recorded as received and is not considered for any revenue. This only helps you with a short-term knowledge of your company’s financial health.
Accrural-based bookkeeping: This method meets the GAAP or Generally Accepted Accounting Principles. It can be challenging as an operation, but is more efficient. The accrual-based bookkeeping method records the income when the billing happens and not when the income is received. It gives smaller businesses a better financial picture and help them make changes to improve the business’ financial health. If you plan to take up this process and are not sure about doing it the right way, hire a bookkeeping service provider.
Record every expense:
We all know recording the incoming cashflow is crucial. Expenses made during the operations of small businesses is very crucial too. The smallest of the miscellaneous expense that keeps recurring each day when summed up in the end of the moth or a year will give a better understanding to the business owner on when to put a cap on the expenses. Each transaction made must be recorded with the date, the amount spent and the purpose for which it was spent.
Bookkeeping schedule is important:
In small business bookkeeping, you can stay well organised in your operations when you schedule sending out invoices to get payments, or paying your vendors and employees. Make a habit of scheduling your recurring expenses that includes payments and salaries, reconciling monthly bank statements, calculating the revenue weekly and making scheduled bank deposits. Plan your tax payments too. In the end of every 5. Ensure your accounting method pays bills and invoices on time.
Get a Bookkeeper for Small Businesses
As you are a startup or a small business looking to expand, there are a way lot of things you need to look at and take care off when you plan to grow. In this situation, a professional bookkeeper or a bookkeeping service provider will solve your need. It is good to get a professional onboarded as a part-time bookkeeper. Choose one of them from the bookkeeping company. This will help you get your bookkeeping done accurately and you will also receive expert guidance.
Bookkeeping can be a little exhaustive, but not with the right experts. Always choose your expert with the best bookkeeping service providing agency that has people with the right knowledge and expertise.