Bookkeeping is an essential part of running a small business. Keeping track of financial transactions and organizing important documents is crucial for the success and growth of any business. Proper bookkeeping ensures that you have accurate financial records, can file taxes correctly, and make informed business decisions based on financial data.
In this article, we’ll discuss how to keep the books for a small business, bookkeeping for taxes, and small business accounting tips.
Bookkeeping Basics for Small Businesses
Setting up accounting software is the first step in managing your small business’s finances. You should connect your business bank accounts, enter necessary data, and reconcile transactions. Check for errors and explore ways to streamline different parts of your accounting process. K9 Bookkeeping recommends QuickBooks, and you can see here why.
Related: QuickBooks for Small Businesses: Which Version Do You Need?
Choosing an Entry System
Small-business bookkeeping requires you to choose between single- or double-entry accounting. Single-entry accounting records all transactions once as an expense or income. This method is straightforward and suitable for smaller businesses that don’t have significant inventory or equipment involved in their finances. Double-entry accounting records every transaction twice as both a debit and a credit, balancing the books between accounts.
Choosing an Accounting Method
You’ll also choose between cash- or accrual-based accounting. Cash-based accounting records transactions when money changes hands, while accrual-based accounting records those invoices and bills, even if funds haven’t been exchanged. Generally, accrual-based is the recommended accounting method.
Related: Cash vs Accrual Accounting: Which Method is the Best for My Business?
Managing Transactions
Managing transactions is a day-to-day part of bookkeeping. It includes importing and categorizing transactions properly, reconciling these transactions, and making sure they’re recorded according to your entry system and accounting method.
Handling Accounts Receivable and Payable
Small businesses also handle accounts receivable, which ensures your business is paid for its goods or services. This can include estimating the eventual value of a finished project, preparing and sending invoices, and providing statements. Small-business bookkeeping also includes ensuring your business pays bills and invoices on time, known as accounts payable.
Setting Up Payroll
How you set up and manage payroll will depend on the software you choose. Some businesses process payroll within their accounting software, while others will have separate payroll software.
Coordinating with a Specialist
A small business needs to identify potential deductions and make tax procedures as seamless as possible. Some accounting software options can connect you with accounting and tax specialists, or you can work with one when it comes to filing business taxes. Working with professionals will also ensure your books are fully in order and compliant with all relevant regulations.
K9 Bookkeeping is already partnered with hundreds of small businesses across the United States, and you can schedule a FREE no-obligation consultation today to speak to their expert team about how they can help you take your time back from stressing about the books to focus on doing what you love: growing your business.
Related: Why Should You Use K9 Bookkeeping?
Managing Financial Statements and Documents
Bookkeeping for small businesses includes managing accounting documents and maintaining the information that is used for financial statements. Many software options allow you to store documents and streamline the documentation process.
Bookkeeping vs. Accounting: What’s the Difference?
Accounting and bookkeeping work hand in hand, and although many people refer to bookkeeping and accounting interchangeably, these two operations aren’t technically synonymous. A bookkeeper maintains a general ledger and accounts and manages day-to-day business details. An accountant creates more complex financial statements and handles higher-level business aspects. K9 Bookkeeping helps with both.
Why Bookkeeping for Small Businesses is Important
Proper bookkeeping ensures you aren’t personally held liable for any debts or issues related to your business. Managing transactions and reconciliation avoids financial issues later on. Simplifying business finances by streamlining tax processes and working with tax professionals can save money. Keeping an eye on business financial health identifies ways to improve or change processes. Organizing documents and records simplifies processes such as applying for a business loan or buying new equipment.
How to Manage Bookkeeping for Small Businesses
There are three ways to perform bookkeeping for your small business. You can manage your own bookkeeping, hire an in-house bookkeeper, or outsource to an experienced bookkeeping service:
- Manage Your Own Small-Business Bookkeeping
If you run a very small business, you might be able to manage your bookkeeping with accounting software, saving yourself time and money by using free options. However, managing your own bookkeeping means you’re in charge of keeping your finances in order, storing records, and creating necessary statements. Using accounting software simplifies many bookkeeping processes, but you’ll still need tech-based skills to run and streamline your business’s software.
- Hire an In-House Bookkeeper
You can also hire a bookkeeper to work directly for your business. Bringing a part-time or full-time professional into your business gives you access to their expertise and allows them to become more familiar with your business’s finances, processes, and accounting tools and software. However, it’s important to note the costs of having an in-house accountant that they will require to do their jobs, including their full-time salary, benefits, equipment, and software licenses.
Related: Outsourced CFO vs. Traditional Accountant: Which Is Right for Your Business?
- Outsource to an experienced bookkeeping service
Probably the most effective option of all. You can outsource all your accounting needs to an experienced bookkeeping service and have all the benefits of a full-time CFO, for a fraction of the price. You will only pay for the work they do for you, without needing to cover any other costs.
Companies like K9 Bookkeeping can help you with business formation, back taxes and tax preparation, cleaning up old books, financial reports and forecasting, so and much more!
Related: Introducing K9 Bookkeeping – Your Partner in Bookkeeping and Accounting Services
We’re happy you found this article informative! Go back to our blog page to find more tips, tricks and guidance on bookkeeping, to ensure your business is financially sound and ready to grow to the next level.
Running a business is hard work, bookkeeping shouldn’t be.
Let our team of professional bookkeepers take care of your books and receive accurate, detailed reports every month. Our team of experts is laser-focused on the latest trends and premier customer satisfaction, so you can always be sure you’re getting the best care and service. Your personal account manager will focus on handling your books, leaving you to focus on growing your business and leading it forward.
Click here to schedule a FREE consultation to join the hundreds of business owners already working with K9 Bookkeeping to help their businesses grow.
