Bookkeeping Basics for Small Business Owners: Everything You Need to Start Doing Your Own Bookkeeping Bench Accounting

Yearly ocean storytelling photography grants rises and falls in the business finances and budget helps allocate enough resources and make the right decisions. For growing businesses, it’s important to recognize the best time to make the most out of the opportunities that arise. It’s helpful to create income statements because they compare the current numbers to the budget, but also the historical performance of the business.

At the end of every pay period, the bookkeeper will accumulate employee payroll details that include hours worked and rates. From there, the total pay is determined with the applicable taxes and withholdings. In the accounting software, the primary journal entry for total payroll is a debit to the compensation account and credits cash.

This way, when you make a purchase, you can immediately file the receipt in the applicable expense category, saving you time when you need to make your expense calculations. Recording just the cost of those supplies with the cash method might give you an inaccurate picture of how much you are — or should be — spending on supplies. In the accrual method, on the other hand, you would record the expense in January, on the date that you received the invoice — regardless of when you ended up paying for the parts. To understand the difference between these two methods, take this example. You ordered the parts in January, and the manufacturer sent you an invoice that same month. However, you don’t actually pay the fee until you’ve received the parts, in February.

Use an online bookkeeping service

A program like QuickBooks cloud accounting software, for example, can help you track income and expenses much faster than you could with a traditional ledger. When accurate financial reports are so readily available, it only makes sense to check them routinely in order to take the temperature of your business. Consider adding this as the final task on your weekly bookkeeping check-in.

Bookkeeping basics: A guide for small businesses

GAAP stands for Generally Accepted Accounting Principles, which are the best methods you can use to track and manage your business financials. These are methods used by most people in the accounting profession, so if your bookkeeping is ever questioned, your methods will be accepted by others. As a business owner, you’re responsible for reporting crucial financial data about your firm to potential investors and other stakeholders. Your business requires your full attention, and sometimes your best choice is the easiest one—outsource the tasks you don’t have time for so you can focus on the work that really matters to you. A professional bookkeeper won’t be overwhelmed by the nuts and bolts of DIY bookkeeping, and their help allows you to focus on making money, not documenting it. Get in the know with our how-to guide to bookkeeping basics for small business owners.

As much fun as a last-minute, panic-fueled bookkeeping cram session can be right before tax time, you can do your future self a favor download tax software back editions and updates by taking care of routine bookkeeping tasks every week. Diamonds may be forever, but the ink on your expense receipts is not. Since the IRS accepts digital records, it’s smart to use a cloud-based system like Dropbox, Evernote, or Google Drive so you never have to deal with smudged receipts. You can also use apps like Shoeboxed, which are specifically made for receipt tracking.

Bookkeeping is one of the most important tasks that a business owner will delegate over the life of a business. Without it, it’s nearly impossible to produce an accurate record of financial activities that affect everything, from profit to equity to payroll, and more. The specific amount of an emergency fund may depend on the size, scope, and operational costs of a given business. Regardless, work with your bookkeeper and accountant to ensure the amount of cash left in the bank is sufficient for unexpected costs.

Keep up-to-date records

1. If you’re paying your taxes in instalments, quarterly and even monthly financial reports can really come in handy.
2. If you want to crunch the numbers a bit faster and get back to the more exciting parts of your business, we have a few bookkeeping tips to help simplify (and speed up) the process.
3. This will give you a clear picture of your business’s past financial performance and help you make realistic projections for the future.
4. However, it’s important to note that your bookkeeper won’t be the only person working on your business finances.

Most small businesses will either do their books themselves or outsource the work to a professional. If you’re months or years behind, you might want to get a bookkeeper to do some how to calculate subtotals in sql queries catch-up bookkeeping for you (Bench can help with that). Every transaction you make needs to be categorized and entered into your books. When you’re stuck in the minutiae of reconciling your transactions, this won’t feel like “seven easy steps”. Jami Gong is a Chartered Professional Account and Financial System Consultant. She holds a Masters Degree in Professional Accounting from the University of New South Wales.

You can set invoice reminders so your customers remember that they pay you within 30 days of the delivery or receipt. Use tools to help you set a budget and manage your assets to better oversee your operational costs. Doing so also alerts you about discrepancies you want to focus on.

Understanding how to calculate Net Present Value is beneficial for your long-term financial planning. Below are some of the most common statements a bookkeeper uses to monitor activities. One benefit of virtual bookkeepers is that they offer lower pricing compared to local bookkeepers. Thanks to the cloud-based functionality, you can access your files from anywhere in the world and on any device. The obligations about your debt service are crucial in terms of solvency and credit.