Bookkeeping is an important part of business finance and will significantly affect the growth and success of your business. Bookkeeping is important as it gives you the financial knowledge of your business, ranging from the assets and cash you own to the debt you owe. By understanding your business’ finance through bookkeeping, you will be well informed to make better financial decisions regarding your business and plan better for the future.
Accurate bookkeeping also helps to protect your business. An example would be if you find yourself embroiled in a dispute with the government or a vendor during an audit, accurate bookkeeping would ensure the consistency and reliability of your financial record, thereby minimizing any misunderstanding between the different parties. Without accurate bookkeeping, you may be prone to tax penalties or settlements due to financial errors. Here are the basic steps of bookkeeping for small businesses.
Understand Business Accounts
Account, in this case, refers to a record of financial transactions such as payroll. Understanding the various business accounts is crucial for recording transactions in the appropriate categories. Business accounts can be separated into five basic types:
- Revenues: Money earned from the business such as through the selling of products.
- Equity: The money or value remaining after the liabilities have been subtracted from the assets. It represents the owner’s held interest in the business.
- Liabilities: The debt owed by the business.
- Assets: Resources and cash owned by the business. This could be in the form of land, infrastructure, or inventory.
- Expenditure: The cash flow out for payment of services or items such as utilities and salaries.
Accounting Software Setup
Most bookkeeping for small businesses is automated, however, you still have to ensure that all the software and technology is properly set up. Setting up the accounting software could mean connecting the software to various bank accounts, reconciling transactions, and doing some data entry.
It also involves learning about the software, checking for errors, and knowing how to leverage the software to streamline the accounting process and improve your businesses’ financials. There is various desktop accounting bookkeeping software you can use such as QuickBooks Desktop. You can also opt for a cloud-based bookkeeping software such as Wave.
Bookkeeping for businesses requires you to choose either single or double-entry accounting. Single-entry accounting records all your transactions once in the form of an expense or income. Double-entry accounting enters every transaction twice, both as debt and credit. This prevents errors in recording the various transactions and helps in bookkeeping.
Recording and managing transactions are a day-to-day part of bookkeeping. Once you have figured out your desired accounting software and entry system, you have to ensure that the various transactions are properly reconciled and recorded according to your entry system and accounting method.
Why You Should Choose Shogo for Small Business Bookkeeping
By choosing Shogo’s automated bookkeeping and accounting services, you no longer have to manually record, reconcile and recheck information from various transactions and sales. This minimizes human errors and frees up your employees’ time for more strategic work. Our bookkeeping and accounting services are our core product, focus, and competency.