Bookkeeping Tips For Small Business – You Can’t Afford to Ignore
Small business owner often believes in doing bookkeeping on their own. Owing to the scope of work and budget constraints, they think it is manageable either on their own or by hiring a local bookkeeper. Bookkeeping is an essential routine activity that records the inflow and outflow of finance.
Accurate and proper books of accounts are essential to having a better understanding of the state of finances. It lays the foundation for the future path of the business. But does the local bookkeeper possess the necessary skills and expertise? Do they provide a customized bookkeeping solution to specific business requirements?
Here, outsourced bookkeeping services for small businesses come to the rescue. Outsourcing small business bookkeeping to a professional service provider like us provides accurate bookkeeping by qualified and experienced experts at an affordable price.
Small business bookkeeping is essential in budget preparation, tax return preparation, financial management, better decision-making, reporting requirements, and analyzing the growth and profit of the business. It is the basic foundation of the finances of the business.
Below are some bookkeeping tips for small businesses you can afford to ignore.
Type of accounting system for bookkeeping:
The first decision you have to make is which bookkeeping method will you follow for recording business transactions- cash accounting or accrual accounting.
The accrual method of accounting usually used by large businesses records revenue and expense when the transaction occurs. For sole-proprietorship cash, accounting may be more suitable as it is simple to track the money. In the cash accounting method, revenue or expense is recorded when cash is received or paid.
Outsourcing bookkeeping services for small businesses save your time and effort while figuring out the accounting system.
Type of bookkeeping method:
There are two ways of recording financial transactions in bookkeeping: single-entry and double-entry bookkeeping systems. In a single-entry bookkeeping system, each financial transaction is recorded once in the journal, and cash registers on the transaction log.
While in the double-entry bookkeeping system, the transaction is first recorded in the journal, followed by a ledger, then compiled in the trial balance, and finally, financial statements.
All transactions have a credit entry and a debit entry. The total debit balances should be equal to the total credit balances. It ensures every debt in the ledger account has an equal and corresponding credit in another ledger account.
Record of all financial transactions:
For the effective running of the business, it is essential to keep track of the movement of financials. Each transaction must be recorded on the right chart of accounts. Or else your debits won’t tally with the credits. This should be taken off from the beginning.
Preparation of financial reports from bookkeeping:
Bookkeeping services for small business is important for maintaining the proper financial layout of a business. A balance sheet provides an overview of the financial position of the business. It shows the summary of the assets, equity, and liabilities of the business.
A profit and loss statement provides a breakdown of revenue, cost of goods sold, expenses, and profits. So, one essential tip is accurate and proper bookkeeping so that when the figure flows to the balance sheet and profit and loss accounts, it shows an accurate view of the financials.
If you need some more bookkeeping tips for small businesses, don’t delay to contact us. At Meru Accounting, we take care of all your bookkeeping needs while you focus more on your business. Contact us at [email protected]. We will be happy to talk business.
