Managing a business is only one aspect of running it. Being able to manage employees, create websites, and plan marketing strategies are all important aspects.

Understanding your finances will be essential for you to manage them on a daily and long-term basis. Bookkeeping is an important subject.

Although it may seem like a difficult learning curve for those who aren’t numbers-oriented, bookkeeping can be a rewarding career if you have the right guidance. This guide will provide a detailed look at the most important bookkeeping tips and tricks for small businesses.

What’s bookkeeping?

Traditional bookkeeping consisted of keeping track of all transactions in a logbook. Bookkeeping was the practice of keeping track of all transactions in a book.

Bookkeeping and accounting are not the same things, even though it sounds like accounting. They often work together.

Bookkeeping is vital

Bookkeeping should not be ignored. Before hiring outside help or using accounting software, you need to know the basics. 

Separate personal and business affairs

Many business owners struggle to separate their personal and business finances after starting new companies. Bookkeeping is a great way to keep your personal and business finances separate.

Help prevent errors

We all make mistakes. You can prevent these errors from happening again by being organized. 

Keep track of your progress

One way to find out if your business is succeeding is through bookkeeping. This allows you to track cash flow, earnings, and retained earnings. This will give you a better understanding of your company’s financial situation and allow you to make informed decisions about where your money is going.

Make tax season easier

If you haven’t been keeping track over the past year of your finances, it can be difficult to file taxes. This will provide you with more security.

You can get a loan

Knowing the true cost of starting a business will help you decide if it is worth borrowing money. Your financial records and statements may not be well-organized. This could make it difficult to get approved.

Bookkeeping for small businesses

1. Create separate business accounts
2. Choose a bookkeeping program
3. Classify any transactions
4. How do you store your documents
5. Balance your books
6. Create bookkeeping reports
7. Make a bookkeeping schedule

1. Set up separate business accounts

It is essential to ensure there are no crossovers between personal and business accounts when you set up the bookkeeping for your small business. You would have protection for your assets if your company was to go under, or become insolvent.

After draining your bank accounts, you should look into getting a credit card line to cover business expenses. 

2. Choose a bookkeeping program

There are many methods of bookkeeping. You have many options when it comes to bookkeeping. Either you can do it manually, or you can use accounting software such as Quickbooks. You could also hire an outside expert to assist you.

Your business’s location will affect which option you choose. As your business grows, you can begin small with DIY software and later upgrade to an accountant.

Decide how you want to do your bookkeeping 

• A single-entry system allows you to record only one transaction in your book. 

• Double-entry bookkeeping. Each transaction has its debit and credit. This double-entry approach is used by most bookkeepers and accounting software.

You’ll also have to decide on your accounting method 

• Cash method. You note transactions only when money has been received or paid. 

• Accrual Method: This is where you take note of all transactions starting from the moment that you invoice someone or receive an invoice. 

It is up to you to choose the best accounting method for your business. Smaller businesses should start with single-entry bookkeeping and cash accounting.

3. All transactions must be

After you’ve chosen the bookkeeping software that you prefer, you can start tracking transactions. 

There are many ways to categorize transactions. A debit is a money that leaves an account. Double-entry bookkeeping allows you to have both a credit and a debit for each transaction.

To further classify where money is coming and going, you can refer to other accounts. There are generally five types.

• Assets refer to anything your company owns, such as equipment, cash, or inventory

• Liabilities can be money owed to someone (e.g. A loan, payment to a seller

• Equity is money that the company owner owns. It is not usually repaid.

• Revenue refers to the revenue earned from services.

• Expenses are the money you spend to operate your business

4. How do you store your documents

You will need somewhere to store your paperwork. The IRS (Internal Revenue Service), may request copies of documentation to prove expenses.

It doesn’t take much to organize your documents. This makes it simple to track all transactions and protects you from misplacing or losing receipts.

5. Balance your books

If you’ve been keeping track of and recording all transactions, you will eventually have to balance your books. 

Small business owners often have to balance the books. It involves looking at all your assets and liabilities and then using a simple equation to calculate your business equity.

Equity = Total Assets + Total Liabilities

There will be mistakes in balancing your books. The trial balance is what you get after the equation has been calculated. Make sure to check all transactions and review the data.

If your errors are rectified and all transactions have been completed, your business will be moving in the right direction.

6. Create bookkeeping reports

Once your books are balanced, you can begin to create reports about the business’ finances. This report is an excellent way to analyze the company’s overall progress.

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• This report is very similar to an income statement. This report allows you to compare income and expenses over time. This will ensure your business is making more than it’s spending.

• Cash flow: This report shows you where your company spends the most money, and how much it has to pay for expenses.

• Accounts payable/receivable aging: This will let you know if a customer takes too long to pay or if you haven’t yet paid a vendor. It will also help you to make sure they receive and send payments on time so you can follow up.        

7. Create a schedule for bookkeeping

Once you have gotten into the routine of bookkeeping, it is important to keep it up. To maintain order, you need to keep your books updated regularly. This will prevent accounting mistakes.

You should set a weekly time to record your weekly transactions. Next, schedule another time each quarter for you to balance your books.