Small Business Bookkeeping 2024 Guide


bookkeeping tips

The two primary methods of small business accounting are cash-based and accrual. While the cash-based method is the simplest to use, it’s not suitable for every small business. Take a look at Navigating Financial Growth: Leveraging Bookkeeping and Accounting Services for Startups the difference between cash and accrual accounting and the restrictions. If you’re paying your taxes in instalments, quarterly and even monthly financial reports can really come in handy.

bookkeeping tips

Know your expense types

bookkeeping tips

With the first, you’ll create a receipt for every cash payment you receive. Use a receipt book that makes immediate duplicate records so you can write a quick receipt for a customer and keep a record for yourself. If you want to crunch the numbers a bit faster and get back to the more exciting parts of your business, we have a few bookkeeping tips to help simplify (and speed up) the process. Paying bills and invoicing happen daily, so they can be complicated to outsource. But complex projects like reconciling your accounts and closing the books should be done by a professional.

Accounting equation

bookkeeping tips

As your business grows and you begin making higher profits, hiring staff and handling more transactions, however, it may make sense to outsource the details of bookkeeping to someone else. Tracking income and expenses can become complicated as your business grows. Learn the basics of small business bookkeeping and how to scale up over time. The two primary methods are accrual accounting and cash accounting. The difference between the two methods is how they record the inflow and outflow of cash. According to the NSBA Small Business Taxation Survey, filing and completing their federal income tax returns is one of the top concerns for small business owners.

Want More Helpful Articles About Running a Business?

Get up and running with free payroll setup, and enjoy free expert support. Add transactions into your books on a regular basis (e.g., once per week). The more frequently you keep up with accounting, the less of a chore it will be. When it comes to your books, keep a thorough record of all your expenses, such as supplies, inventory, insurance, and utilities.

  • There are several effective ways to manage bookkeeping responsibilities in-house or externally by using helpful tools and technologies.
  • In many instances, an accountant prepares the initial chart, and the bookkeeper references it while recording transactions.
  • Although bookkeeping is an investment, it’s generally much more affordable than attempting to correct costly mistakes down the road.
  • It includes importing and categorizing transactions properly, reconciling these transactions and making sure they’re recorded according to your entry system and accounting method.
  • But what might seem like an overwhelming task isn’t so bad when you break it down to the bookkeeping basics.

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. If your company is larger and more complex, you need to set up a double-entry bookkeeping system. At least one debit is made to one account, and at least one credit is made to another account.

The double entry method leaves less room for error, making it the better choice for balancing complex books. With the help of cloud accounting software for small-business bookkeeping, you can pretty much automate the process. Online bookkeeping uses software that takes care of most of the calculations and data entry for you. A program like QuickBooks cloud accounting software, for example, can help you track income and expenses much faster than you could with a traditional ledger. A separate bank account is the first step in distinguishing between business and personal finances. Bookkeeping becomes more difficult when business transactions are lumped together with personal activity.

  • Assets also include fixed assets which are generally the plant, equipment, and land.
  • This accounting method presumes that your most recent (last in) products will be the first to sell (first out).
  • When you keep detailed, organized records of your business transactions, tax season suddenly won’t feel like such a daunting chore.
  • Thankfully, once you have a simple system in place, documenting your cash flow is easy.
  • Other elements are completed at certain time periods as necessary to complete a business task.

Most importantly, all of your business transactions—whether online, through the debit card, or via checks—will be reflected in the same account, which will simplify the reconciliation process. If you use cash accounting, you record your transaction when cash changes hands. The financial transactions are all recorded, but they have to be summarized at the end of specific time periods. Other smaller firms may require reports only at the end of the year in preparation for doing taxes. Bookkeeping in a business firm is an important, but preliminary, function to the actual accounting function. From the get-go, you should set up a business bank account to keep personal and business expenses separate.

bookkeeping tips

Accounts payable

At the end of the appropriate time period, the accountant takes over and analyzes, reviews, interprets and reports financial information for the business firm. The accountant also prepares year-end financial statements and the proper accounts for the firm. The year-end reports prepared by the accountant have to adhere to the standards established by the Financial Accounting Standards Board (FASB). These rules are called Generally Accepted Accounting Principles (GAAP).

Assign Transactions to Specific Accounts

Many accountants also prepare tax returns, independent audits and certified financial statements for lenders, potential buyers and investors. Software to automate and synchronize bookkeeping and accounting offers all sorts of benefits, especially if you do your own bookkeeping. It reduces the chances of errors, can help detect fraud, and frees you up to do more productive tasks.

When you’re stuck in the minutiae of reconciling your transactions, this won’t feel like “seven easy steps”. There are several effective ways to manage bookkeeping responsibilities in-house or externally by using helpful tools and technologies. When it comes to budgeting for bookkeeping, the difference hinges on whether you hire or manage using software tools.

For a bigger shift, new software expedites the process by leveraging automation and cloud-based technology. Be prepared for some down time in production whilst employees are learning the new systems – make sure you include this in your budget. Being forgetful about the above will result in the bookkeeping system not reflecting a true record of what has occurred. It can be tempting to take the cash right away to purchase supplies but this might cause a mess in the bookkeeping system.