How to Do Bookkeeping: Basics Every Small Business Owner Needs to Know

But whether you plan to do bookkeeping yourself or outsource it to an accountant, it pays to understand the basics of bookkeeping. Whether it’s a sale, income from credit card or utility payment, be sure to record it in your Transactions sheet. Capture the date, description, amount, category and type of account. If you use Nearside’s Excel bookkeeping template, it will automatically pick the values and generate an income statement for you.

• It’s an expense that you no longer track, thus it should not appear on your financial reports.
• The chosen method affects record keeping, expense tracking, and most importantly–interactions with the IRS.
• In addition to CPA credentials, other common accounting designations are chartered financial analyst and certified internal auditor .
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• A newer method is to scan receipts and attach an electronic copy of the receipt to the transaction within your bookkeeping software—a nice function that many accounting programs include for free.
• If you’re too busy to do the bookkeeping for your small business, then you can find someone to do it for you.
• You can also consult professional bookkeeping communities, accounting blogs or industry forums for available professionals.

Whether it’s a lack of interest or knowledge, many businesses outsource this process to a professional bookkeeper. There are many user-friendly accounting software options for small businesses, ranging from free to paid models.

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Intuit’s QuickBooks Online has been one of the most common accounting softwares used by small businesses and their bookkeeping and tax professionals. The software is cloud-based and can be accessed through a web browser or through the mobile app. If you’re too busy to do the bookkeeping for your small business, then you can find someone to do it for you. Bookkeepers often allow you to choose different service levels depending on your budget. That means you can start out with basic bookkeeping at a modest cost and ladder up to more advanced services as your business grows.

An accountant can be considered a bookkeeper, but a bookkeeper can’t be an accountant without proper certification. Every transaction you make needs to be categorized bookkeeping and entered into your books. Double-entry is more complex, but also more robust, and more suitable for established businesses that are past the hobby stage.

Business Bookkeeping

Most of these sites charge monthly subscription fees and usually offer free trial periods. Early setup involves creating an account and answering questions like when your fiscal year starts and whether you use account numbers. Intuit QuickBooks Online is still the best online accounting application for small businesses, thanks to its depth, flexibility, and extensibility. It’s easy to use, well designed, and built to serve a wide variety of users. Keeping a tight grip on finances is critical for the success of small businesses and freelancers.

• If either part-time or in-house bookkeeping is not the ideal solution, switching to outsourced bookkeeping or accounting could be your best option.
• You can use it to snap and store receipts for expenses, track your income and expenses, and more.
• Certified Public Accountants do a lot more than just bookkeeping and taxes.
• Accounting software allows you and your team to track and manage your business’s expense reports, invoices, inventory, and payroll accurately and efficiently.
• As long as there are businesses, there will be a market for people who can help them track their money.

If two sides of the equations don’t match, you’ll need to go back through the ledger and journal entries to find errors. Post corrected entries in the journal and ledger, then follow the process again until the accounts are balanced. Then you’re ready to close the books and prepare financial reports. Your general ledger is organized into different accounts in which you record different types of transactions.

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Reconciling provides you with an accurate cash balance, which can be particularly important to smaller businesses with limited cash flow. Most software that’s designed for sole proprietors and small businesses will include a default chart of accounts, so you won’t have to create one from scratch. Of course, bookkeeping is just one of many processes that small business owners need to think about. Find more information about how you can help your organization succeed through a range of flexible solutions built specifically for small businesses. For general questions about accounting, seek out local small business associations and advisory groups.

Bookkeepers can use either single-entry or double-entry bookkeeping to record financial transactions. Bookkeepers have to understand the firm’s chart of accounts and how to use debits and credits to balance the books. As businesses grow, it becomes easier to let small activities slip.