Skip to main content

Bookkeeping Basics For Small Businesses

What is Bookkeeping?

Bookkeeping is the process of recording, organizing, and classifying all the financial transactions in your business. In other words, bookkeeping is the process of the daily record-keeping of a company's financial transactions. Modern bookkeeping uses online platforms or software to take care of most of your business's calculations and data entry. A platform like Online Check Writer can help you track income, expenses, and payments much faster than you could with a traditional ledger.

bookkeeping-basics-for-small-businesses

Bookkeeping is the primary way business owners can keep an eye on their numbers. It helps them keep track of business expenditure, and it also enables them to maintain a good relationship with the tax officials. It lets you identify areas of profit expansion and areas of financial challenges early on. In fact, accurate, up-to-date bookkeeping practice is the backbone of any small business's success. No matter which country you hail from or what type of business you operate, a basic understanding of bookkeeping is essential for the smooth run of your company.

The Importance of Bookkeeping

1. Tracking Profits

Financial bookkeeping is very complicated and time-consuming. It is challenging for business owners to cover the basics, let alone answer critical questions such as: Are we profitable or not? Tracking your company's profitability lets you follow your earnings over time, easily enables you to track transactions, determine how much your business earns on inventory, and plan for ways to improve it in the future.

2. Prepare for Taxation

Tax season can be the most frustrating period for small businesses out there. In fact, most companies have to do bookkeeping every month in order to present it to the tax office. Hunting documents, form-filling, balancing of receipts, expenditures, advance return for sales tax, and invoicing makes the bookkeeping process irritating for many. But it doesn't have to be that way. Starting the bookkeeping process early on can help with your tax preparation well before the deadline. Doing that can make your life way less stressful, especially if you own a small business and plan to claim deductions.

bookkeeping-basics-for-small-businesses

3. Accurate Reporting

Bookkeeping helps to identify the transactions and systematically summarize them, thereby maintaining an accurate record of a company's business transactions. Bookkeeping is required to save money on spending and budget more accurately for future projects. It ensures that the accounting information is correct, up-to-date, and complete. Following the trail of money is another advantage of bookkeeping as it enables owners to understand how the money is being spent and the value the purchases bring. Collecting expense receipts, accumulating payroll data, and tracking outstanding invoices are part of accurate reporting. Much of this data would get lost or be improperly filed without proper bookkeeping management.

4. Easier Decision Making

Bookkeeping might be the most reliable source for companies to measure their financial progress. Accurate bookkeeping helps you trace your company's financial records, thereby giving businesses a precise measure of their performance. You can look back at previous years' reports to see patterns and make strategic decisions to attain income and revenue goals. As bookkeeping gives you a greater understanding of your business, decision-making becomes quicker and easier. Proper bookkeeping also allows you re-strategize and make adjustments to ensure you stay on top of your business. Accurate bookkeeping lets you know if your small business requires operational changes and ensure that you have enough cash on hand to cover your business expenses. If you're a small business owner, it's necessary to set projections, make precise decisions and forecast the future of your business.

Essential Bookkeeping Tips For Small Businesses

1. Keep Your Records Organized

bookkeeping-basics-for-small-businesses

Track every payment and make sure you keep your records organized all the time. If it's already a hassle looking through your accounts to distinguish both personal and business funds, make it clear when they were made so you can easily identify them later. Cluttered records will give you massive headaches. If you keep your records neatly organized, you won't have to worry about where to look for them during the tax deadlines. If you don't keep accurate daily records, you'll have a difficult time tracking the financial condition of your business. Implement a system like Online Check Writer and stick to it so that you can keep organized records of your everyday transactions.

2. Track Your Expenses

Proper record-keeping and tracking business expenses make everything easier for small businesses and comply with the law. By using platforms like QuickBooks & Online Check Writer, you can ensure that all of your expenses are kept together and tracked. You don't want to waste time chasing down last month's missing invoice, or want to waste time separating business expenses from personal ones. The easiest way to rectify this is by tracking and categorizing your bills into types of expenses. Since you have options to claim tax back from business expenses, be sure to keep business expenses separate from personal ones, so you can easily identify which one is which.

3. Choose The Right Software

Choosing the right software and going digital is the perfect solution for all your bookkeeping needs, as you won't have to store stacks of papers and receipts. You might think you don't need any bookkeeping software, and manually processing is the best option. First of all, you're mistaken. Secondly, as your business expands, you may want to streamline your bookkeeping tasks with a more efficient and effective platform—for example, Online Check Writer. You don't have to feel overwhelmed, as a bookkeeping app will make the entire process a whole lot easier, giving you greater peace of mind. Cloud-based platforms like Online Check Writer let you keep your incomings, outgoings, and everything in between properly organized and make it simpler to manage your financial records.

Bottom Line

Create a new business account, keep your records organized, track your expenses, set a budget aside for tax, and leave an audit trail or simply outsource the bookkeeping process entirely to third-party software. Either way, you will witness some radical changes in your businesses' financial health once you are dedicatedly involved in your bookkeeping processes. Rather than spending an enormous amount of time and wealth on manual bookkeeping processes, consider turning to Online Check Writer or similar other platforms for help.

bookkeeping-basics-for-small-businesses

Bookkeeping is a small but crucial part of the overall accounting function, and for a small business, finding a bookkeeper may be more important than anything else. Unless you're specially trained, bookkeeping can be quite a challenging task. So, you should seriously consider getting help—whether by hiring a professional bookkeeper who is well versed with the accounting principles or by outsourcing it using accounting software.

Related Articles