A Beginner’s Guide to Bookkeeping for Business
A small business owner has a wide range of roles to play, from a sales manager to a customer care representative. Too often, entrepreneurs also add bookkeeping and accounting to their long list of tasks. However, many are unaware of how detailed and extensive their business accounting and bookkeeping knowledge must be to correctly and efficiently maintain their books.
If you are still DIYing your business bookkeeping, here are five essential practices you should adopt to manage your business accounts properly:
Get familiar with accounting jargon
Every field and industry has a unique vocabulary to describe specific tasks and processes. Business accounting is no exception. You must understand the basics of accounting and terms like assets, liabilities, expenses, debts, and credits before applying bookkeeping principles in your business. It will make handling everyday tasks and operations much more manageable.
Maintain at least three primary documents
You can keep various financial documents depending on your business needs, but every business must have these three:
- Balance sheet: This summarizes your business finances in one place. It includes everything such as expenses, debts, liabilities, credits, profits, and assets. The right balance sheet is always equal on both ends, so you know where everything stands in one glance.
- Profit and loss statement: This tracks your revenue and expenses for a particular period. Most businesses prepare it quarterly, but you can opt to do it monthly.
- Cash flow statement: This helps you identify where you are spending money in your business. You need to maintain a cash flow statement to keep track of where all the money is going.
Choose a bookkeeping method
Having a consistent bookkeeping method is very important. Choose one strategy and follow it throughout all aspects of your business. Frequently changing or following several ways will create errors and cause confusion. You will need to make decisions such as opting for single-entry or double-entry bookkeeping or deciding between cash or accrual basis accounting.
Record every transaction
One rookie mistake business owners make when keeping books is not recording every transaction. You may consider some expenses too small to bother mentioning them in records. Or you may have personal transactions made in your business account that you think don’t belong in your business records. But for your accounting to be accurate, you must record all costs and incomes, no matter however insignificant.
Consider hiring a professional
If you are starting and don’t have the time to focus on bookkeeping, if it feels like too much work, or if it is too confusing or complicated, consider hiring a professional bookkeeper. They can help you get everything on track and teach you accounting basics. They will also give you sound advice regarding managing your finances and taxes.
About Venus Michael Account-Ability
Venus Michael is among the best bookkeepers and accredited Profit First professionals in Texas region with over 20 years of experience. Let her take care of your bookkeeping and accounting so you can focus on growing your business. Submit the online contact form to book a free consultation today.