Small business bookkeeping is easily one of the biggest pain points for the typical entrepreneur whose expertise lies outside accounting. But it\u2019s arguably one of the most important areas to carefully manage. After all, your business needs to account for its income and expenses in order for you to have an idea of the general fiscal wellbeing.<\/p>\n
Since there are many tasks that you can do yourself to help keep costs down, it\u2019s helpful to at least know the basics of bookkeeping. We\u2019ll walk you through some bookkeeping fundamentals for your small business, along with additional resources to help guide you.<\/p>\n
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A chart of accounts refers to the structure of your financial records in your enterprise. For any business, you\u2019ll have at least a few accounts to keep track of: cash flow, expenses, accounts receivable, wages\/salary, etc. Your actual business structure will determine which accounts are important and necessary to use. You can also ask a professional for a suitable chart of accounts for your enterprise.<\/p>\n
For example, a graphic designer operating as a business\u2019s sole proprietor would likely need to account for billable client hours and supply expenses (maintained in two separate accounts), but not necessarily real estate assets or rental income.<\/p>\n
Without a dedicated chart of accounts, budgeting for and tracking specific business expenditures becomes much more difficult. It also helps your business remain fiscally compliant. Essentially, your chart of account should mirror your business\u2019 budget for each of the allocated expenses.<\/p>\n
For more information on setting up a chart of accounts for your business, visit AccountingTools<\/a> or The Strategic CFO<\/a>.<\/p>\n <\/p>\n Whether you use a single- or double-entry accounting system<\/a> will also come down to your business\u2019 needs. A double-entry accounting system is better suited for more complex businesses, whereas a single-entry accounting system might be all that\u2019s needed for a simple bookkeeping system in a low-volume small business.<\/p>\n You\u2019ll also need to choose between a cash- and accrual-based accounting system. Cash-based accounting systems record transactions when cash<\/em> actually changes hands, whereas an accrual-based accounting system records the transaction when the sale<\/em> occurs, such as when you send an invoice to a client (even though they don\u2019t pay immediately). To simplify matters, many small businesses start with a cash-based system and adapt to a more appropriate model as they grow.<\/p>\n <\/p>\n You\u2019ll need to ensure that you have a solid recordkeeping system. If your transactions aren\u2019t recorded in a timely manner and\/or you don\u2019t have an organized system, your finances become much harder to gauge at-a-glance. It\u2019s equally important to hang on to important financial documents like payroll and timesheets<\/a>, business credit card statements, client invoices, tax records, deposit slips and so on. A scanner and dedicated electronic filing system can help save you a lot of time and hassle down the line.<\/p>\n Electronic accounting software, like QuickBooks, Xero or Wave<\/a>, for example, provide a user-friendly interface for most non-accountants to easily use. You can also incorporate a basic preformatted Excel template<\/a> for many of the same tasks, though these manual methods may be better suited for small business owners with more advanced bookkeeping skills.<\/p>\n For more help with setting up your accounting system, payroll or business entity, check out the QuickBooks Resource Center<\/a>.<\/p>\n <\/p>\n Regardless of your industry, you\u2019ll likely encounter a time when your expenses exceed your operating cash. But if you have a credit card or business line of credit<\/a>, you\u2019ll have another option to cover expenses when your cash flow is low. Revolving credit is especially useful for small business owners since you only borrow the amount that you actually need<\/em>, which can help you save money on interest over time.<\/p>\n <\/p>\n Unless you have a solid financial background, there will likely be a time that your business requires the help of an accountant<\/a>, controller or tax professional. Utilizing an expert for more advanced matters can help you save money on unnecessary expenses, prevent you from being federally audited and\/or involved in other potential financial hiccups, like a lagging cash flow<\/a>.<\/p>\n <\/p>\n If you\u2019re looking to keep costs down, many accounting professionals work on a retainer, but you can also hire industry experts on an hourly or fee-based schedule. Keeping your books up-to-date and accurate can also help you save money when the time comes to involve a pro.<\/p>\n <\/p>\n","protected":false},"excerpt":{"rendered":" Small business bookkeeping is easily one of the biggest pain points for the typical entrepreneur whose expertise lies outside accounting. …<\/p>\n","protected":false},"author":16,"featured_media":2597,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[609],"tags":[339,527,151,528],"class_list":["post-2596","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-small-business-finance","tag-accounting","tag-bookkeeping-basics","tag-small-business","tag-small-business-accounting-basics"],"yoast_head":"\nDetermine Which Accounting Method is Right for Your Business<\/strong><\/h2>\n
Always Record Transactions as Soon as Possible<\/strong><\/h2>\n
Be Prepared for Unexpected Expenses <\/strong><\/h2>\n
Know When to Hire a Professional<\/strong><\/h2>\n