How to Do Bookkeeping: Basics Every Small Business Owner Needs to Know

what i need to know about bookkeeping for a small business

To earn the certified public bookkeeper license, bookkeepers must have 2,000 hours of work experience, pass an exam, and sign a code of conduct. They must take 24 hours of continuing education each year to maintain their license. AIPB certification requires bookkeepers to have at least two years of full-time work experience and pass a national exam. To maintain the credential, bookkeepers are required to engage in continuing education. An accountant can be considered a bookkeeper, but a bookkeeper can’t be an accountant without proper certification. Professional bookkeeper or do it yourself, you’ll be able to reap a variety of benefits. In order to make the most informed and accurate decisions you need to see the best and most updated information on your business.

A digital app lets you keep your incomings, outgoings and everything in between properly organised which makes it simpler to manage your financial records. It can be difficult to track business expenses, but by using a business credit card, for example, you can make sure that all of your expenses are kept together and tracked. The easiest way of doing this is by categorising your bills into types of expenses to make things a lot easier.

How to Hire the Right Bookkeeper for Your Small Business

Pay particular attention to your petty cash and remember to reconcile your accounts at least once a month. With many accounting software options out there, you’re sure to find a bookkeeping solution that will suit your business needs.

What are the duties of a bookkeeper in a small business?

  • 13 Things Bookkeepers Do For Small Businesses. Bookkeeping.
  • Day to Day Management of Accounts.
  • Maintain Up-to-Date and Accurate Records.
  • Keep Businesses Aligned With Laws.
  • Keep You Prepared For Tax.
  • Manage Bank Feeds.
  • Handle Accounts Payable.
  • Send Out Invoices and Manage Accounts Receivable.

Understanding how much money your business is making and spending every month is the only way you will be able to grow your business over time and ensure long term success. Keep your monthly reports in one place so you can easily look back at data and see if you are improving as a business.

Keep Personal and Business Costs Separate

Accountants can analyze the big picture of your financial situation and offer strategic advice. The accountant prepares key financial documents, such as a profit-and-loss statement, if necessary, and files a company's tax returns. Depending on the number of transactions and complexity of services, outsourcing your bookkeeping can cost you anywhere from $500 to $2,500 a month. One of the benefits of outsourcing is that you can customize the services you receive to meet your bookkeeping needs. Depending on the job description and location, internal, part-time rates average around $20/hour. Typically, they perform basic bookkeeping duties and will need to be supervised and managed. Your small business bookkeeper usually makes payments on your behalf.

  • The best option for you may be to hire a part-time professional or to hire a service provider.
  • You can also use apps like Shoeboxed, which are specifically made for receipt tracking.
  • In this guide, The Ascent breaks down the basics to help you get a firm grip on those terms.
  • Bookkeeping makes filing a tax return easier for your business.
  • Some information to capture includes the date, description, account and amount of the transaction.

If you don’t understand how accounting works, you could spend a considerable amount of money paying someone to correct your books. You may pay penalties if you don’t send in withheld payroll taxes or estimated tax payments on time. While accounting software can feel intimidating to those with no bookkeeping or accounting experience, many products are designed specifically for the financial novice. As a sole proprietor, freelancer, or small business owner, you can choose between using a traditional hand-written ledger, spreadsheet software, or accounting software. Traditionally, you would need to wait to receive your monthly bank statement and reconcile the transactions on the statement with those posted in your ledger or accounting software. The purpose behind completing a monthly reconciliation is to see what checks are still outstanding, post any bank transactions, and add additional charges such as account fees. You also need to understand what debits and credits are before you can start to enter any transactions.


The latter requires sales tax to be applied based on the purchaser’s location. However, when you sell online, customers may be located in different cities, states, provinces, and even countries. With the launch of your new small business, you’ll need to get on top of the accounting tasks that come along with owning a store. While accounting may not always the most exciting part of growing your business, it's crucial to start off on the right foot. By not doing the work yourself, you may lose track of important financial details about customers, vendors, or deadlines to pay taxes. A trained professional can advise you about overspending trends, cash flow shortages, problems with receivables and payables or other financial concerns.

what i need to know about bookkeeping for a small business

Asset accounts start with the cash account since cash is perfectly liquid. After the cash account, there is the inventory, receivables, and fixed assets accounts.

Use accounting software if:

If you're growing, the outsourced bookkeeping service should be able to help you scale by adding full service accounting when you are ready for it. If your business is moving into a growth stage, you need to consider graduating to full accrual based accounting, with financial and management reports that help you scale. Typically you will need this level of financial management not only for yourself but for your key stake holders including banks, investors and advisors.

what i need to know about bookkeeping for a small business

The liability accounts on a balance sheet include both current and long-term liabilities. Current liabilities are usually accounts payable and accruals. Accounts payable are usually what the business owes to its suppliers, credit cards, and bank loans.

Become Familiar with Bookkeeping Statements

Bookkeeping is the day-to-day accounting process of recording business transactions, categorizing them, and reconciling bank statements. Generally speaking, accrual accounting is better for larger, more established businesses. It gives you a more realistic idea of your business’ income and expenses during a period of time and provides a long-term view of the business that cash accounting can’t provide.

Good preparation and documentation are critical for paying taxes on time. This is particularly true once the business accounts for its operational costs and recurring expenses. Whether the business needs to pay or receive money, it's wise to make and record transactions on time. This step involves establishing proper timeframes for Accounts Receivable and Accounts Payable . It also includes informing customers and clients of expected deadlines for payment. When you do your books, the retained earnings account tracks your company’s profits that you reinvest into the business and don’t keep for yourself or payout to other owners. The choice to integrate bookkeeping apps into your business is a choice that has become practically mandatory for bookkeeping and accounting.

Creating audit trails in accounting can help your business prevent fraud, improve accuracy, and find missing transactions. To ensure your small business accounting records are as accurate as possible, consider keeping an audit trail.

What is recorded in the cash book?

A cash book is a subsidiary of the general ledger in which all cash transactions during a period are recorded. The cash book is recorded in chronological order, and the balance is updated and verified on a continuous basis.

If you aren’t ready to hire a bookkeeper, you may have trouble trusting your finances to someone else. Financial tasks are completed on a timely basis so you always know how your bookkeeping for small business business is doing financially. BOOKKEEPERGives you more time and energy to focus on growing your business. Initially, when you’re just starting your business, the answer is yes.

Ready to outsource your bookkeeping, so you can focus on your business?

But actually, a liability is something you owe money on, such as a small-business loan. RamseyTrusted tax pros are an extension of your business.What is an expense? Also called "money out," an expense is something you pay for, like supplies or rent. He received his MA in Accountancy from the California State University – Sacramento in 2011. However, if you’ve been hired by a business to work as a bookkeeper, then paying on time is a necessity for maintaining your job.

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