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

If you’re still feeling uncertain, don’t be afraid to speak with a professional bookkeeping service about securing their help. Many business owners set up a great process only to watch it deteriorate over time, resulting in a effective interest rates disastrous mess and a frustrated office staff. Remember that your cash flow management is less about what you have coming in and out and more about when your money moves. And now that you know how to keep books for small business, you can use this timing to your advantage. Depending on your industry, business model, and state of operation, you may not need to pay sales tax.

A separate bank account is the first step in distinguishing between business and personal finances. Bookkeeping becomes more difficult when business transactions what exactly is a medical aesthetic clinic are lumped together with personal activity. Keep all cash, credit card, and other financial activities separate. Accountants rely on bookkeeping records to analyze and advise on the financial activity, health, and growth potential of a business. Despite the importance of accurate bookkeeping practices, most people don’t feel entirely confident with maintaining detailed business finances.

1. A lot goes into it—from managing payables and receivables to balancing books.
2. They signify a failure to qualify or clarify the initial sales relationship in the first place.
3. When hiring external team members, keep in mind that some of the responsibility still falls to you as the proprietor.
4. Bookkeeping is the backbone of your accounting and financial systems, and can impact the growth and success of your small business.

These withdrawals, also known as an owner’s draw, are easy to track and document in your bookkeeping. Whether you pay yourself officially by draw or salary, those transfers should be recorded in your business account statements. Generally speaking, accrual accounting is better for larger, more established businesses. It gives you a more realistic idea of your business’ income and expenses during a period of time and provides a how to do a cash flow analysis long-term view of the business that cash accounting can’t provide.

Know Your Operational Costs

Thankfully, once you have a simple system in place, documenting your cash flow is easy. Separating your accounts doesn’t mean that your business doesn’t pay you, of course. You can withdraw a regular salary from the business or, if you’re a sole proprietor, pay yourself using the draw method.

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. Finding the right level of cash to be kept on hand requires a proper cash flow forecast and cash monitoring. Businesses might not want to keep all cash in the bank, as having an excessive amount of cash in the bank could mean missed opportunities in investment income.

The tips below are industry standards that will help any small business excel at bookkeeping. You can set invoice reminders so your customers remember that they pay you within 30 days of the delivery or receipt. Don’t forget to save money for office supplies, inventory, maintenance, and repairs. Budget your business for the future to avoid unnecessary stress and surprises. Yearly 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.

Accruals

Accounting software like QuickBooks Online can help you generate financial reports, manage taxes, and handle other small business accounting tasks. This kind of software can make your life as a business owner much easier. Once you’ve chosen your bank, you can set up a new account quickly and easily. Your business bank account will allow you to set up a debit card for any online payments or purchases.

Check your inventory

As payments start coming in and expenditures begin adding up, you’ll see you need to do more than just record them—you’ll have to sort them into their own categories. If you categorize your transactions, then at the end of a month or year, you’ll be able to see how much money each category added to your income or costs. If you don’t carry a receipt book with you everywhere you go, you can always rely on technology.

How to Start Bookkeeping in a Small Business

The more information (and supporting documents) you can give your CPA at tax time, the more deductions you’ll be able to legitimately claim, and the bigger your tax return will be. The magic happens when our intuitive software and real, human support come together. Book a demo today to see what running your business is like with Bench. Our partners cannot pay us to guarantee favorable reviews of their products or services. We believe everyone should be able to make financial decisions with confidence.