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Are you worried because you are a small business owner without any experience in bookkeeping? You do not have to fear anything. As a beginner in small business bookkeeping, you need to know some basic guidelines that will help you keep your records and retrieve them with ease
But before you think about any bookkeeping, you should think about the people that such tasks are meant for. Think about the investors, vendors, creditors, regulators, and everyone else that needs financial services. These are the people that will guide you in creating a strategy that will make it easy for you to keep records.
In this guide, you will read about how to be successful with business accounting.
Before You Start Keeping Records
It is good to familiarize yourself with the language of bookkeepers before you start the process. You will need to know what a balance sheet is or what a ledger does. You also need to know the meaning of expenses, taxes, revenue, and similar terms.
In addition to knowing the bookkeeping for small businesses’ lingo, a small business owner should know the most important steps. You should know the following:
- The must-have documents for small business accounting
- Choosing an accounting method
- Tracking your expenses
- Preparing tax reports
- Keeping accounting statements up-to-date
Using an Accounting System for Small Business Accounting
You need to choose an accounting system that will help you to record all your financial information. On this system, you will post various types of financial data. You have to be sure that you are entering every detail in the right category to avoid making mistakes that could cost your business its revenue.
These are some of the functions of an accounting system:
Recording the Expenses
The first set of information that you will be entering into your accounting system is expenses. This represents all the monies that you paid out to contractors, suppliers, workers, miscellaneous, and other expenditures. To be sure of capturing the accurate amount of expenses over an accounting period, make an entry as soon as the expense is paid.
Recording Revenue
It is important to know the customers that bring in the highest amount of revenue, and that is why you have the revenue section in your accounting system.
As a small business, you want to track every customer and how they spend so that you know who to prioritize and how to market to them. The easiest way to do this is to have a customer ID for every buyer and record the amount of money that they spend each time they purchase something.
Recording Tax Deductions
Tax is deducted from every transaction that you make, and so, you need to keep the records to know how much tax you need to pay. You will need this information when filing your tax report.
Top Bookkeeping Tips
You need to keep your accounting books in good shape if you want to remain on the road to success. If you fail to do, your new business will sink before you even made any profit. Here are a few tips on bookkeeping that you need to know:
- Don’t Mix Business and Personal Finances
Create a separate business account and keep it independent from your personal one. If you depend on your business, determine how much you want to pay yourself each month.
- Determine Which Method Suits You
Between single-entry and double-entry, there are several differences. Every business is unique, and therefore, you have to find out what works for you. If you are not sure, you may want to consult an expert.
- Always Categorize Your Transactions
Without categorizing your transactions, you will end up in confusion. You may end up mixing expenses with revenue, and that means that all the records will be useless. Always be keen to enter the information accurately.
After knowing how to enter every information in your accounting system, you need to know how to use it to the benefit of your business. You are not recording and storing all this information for nothing. You are doing so because of the following benefits.
Making Management Decisions
It is easy to make management decisions when you have proper bookkeeping skills. You will notice that with the right systems, you can easily generate a business statement, which forms the basis of your decision-making. You can easily see the departments that are performing well and those that need to improve.
For marketers, proper bookkeeping ensures that they come up with the right marketing strategy. They can use the information from these records to know the customers to target. They will also know the improvements that they need to make to their campaigns.
To Finance Your Business
Do you want to seek more funds to expand your business? Your records are your best tool.
When you approach an investor, they will want to know how your business is doing, and this can only be through scrutiny of your records. When they see that you have kept the records properly and your performance is impressive, they will give you the funds.
You can also use these records to determine the exact amount of money that you need to borrow. When you look at your revenue, you know how much you should pump in to boost it because the records provide the information.
To Manage Tax Issues
You must have heard of companies that were slapped with huge fines because they could not provide proper tax information. When the auditors come, they want to look at your records to see how much you made and how much you spent. That is the reason you cannot gamble with tax records.
The best part is that you can try an online bookkeeping system to capture all this information. Such systems make everything simple and can generate a statement any time you request. They also carry out various tasks without needing your manual input.
Get Small Business Bookkeeping Help from a Professional
You are now familiar with the process of small business bookkeeping. However, it is not good to do it alone no matter how much knowledge you have. Always consult a bookkeeping professional to make sure that you are on the right track.
Did you like the information in this article? We have many more articles on bookkeeping on our website.