How To Do Your Own Bookkeeping Small Business – As a business owner, you are responsible for keeping your business on the books. If you have up-to-date and accurate accounting records, your company is on the road to success. But if you don’t focus on your accounting tasks, your business can quickly sink before it has a chance to grow.
Use these seven accounting tips to keep your books accurate from the start of your business.
How To Do Your Own Bookkeeping Small Business
Consolidating expenses doesn’t seem like a bad idea at first, but it can quickly cause a huge headache for the small company.
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You should set up a business bank account from the start to separate personal and business expenses.
Your business can also benefit from setting up a business bank account. A business bank account can help you:
In some cases, the separation of funds is not something that a business can opt out of. If your business is an LLC or corporation, you must open a separate account for the business.
It’s no secret that automation can be a lifesaver for small business owners. The more you automate, the more time you have for your business.
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To simplify your accounting tasks, consider automating your accounting process with accounting software. With software, you can say goodbye to spreadsheets and manual number crunching.
When looking for accounting software, look at things like storage, accessibility, and security. Make a list of things that are essential to your business, such as certain features, pricing, and reporting.
Don’t rush to buy software. Do your homework to find out which software best suits your needs and your business.
Organizing and maintaining accounting records such as business invoices, receipts and expenses can wreak havoc on your business’s books. Failure to keep accurate records can damage your company’s financial position.
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If you’re a fan of paper records, keep them in a safe place (like a locked filing cabinet). And be sure to organize your paper accounting records using different labels and sorting strategies (such as chronological order).
If you are not a fan of paper-based records, choose an electronic one instead. Keep a paperless version of your accounting data on your devices or in the cloud for security.
To protect your accounting records, consider keeping both paper and paperless versions. This way you have a backup in case your accounting information is destroyed, misplaced or lost.
As a busy business owner, it’s easy to lose track of time and miss deadlines. As soon as you know it, another month or year has passed.
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To avoid missing deadlines and have your books ready, try setting reminders during tax season. Add business tax return due dates and other reminders to your calendar so you don’t miss upcoming deadlines. You can also use a digital calendar (such as Google Calendar) to keep track of important dates and set reminders.
Plan ahead and spend time and money on business taxes. In this way, you can pay your tax obligations on time and avoid penalties related to the deadline.
? If so, you probably remember them leaving behind breadcrumbs to find their way home. Like leaving breadcrumbs, an audit trail helps you retrace your accounting steps.
An audit trail is a set of documents that backs up the transactions recorded in your books. A trail can help you track transactions and verify their correctness. Audit trail documents can include, for example, purchase orders, invoices, and estimates.
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Creating audit trails in your accounting can help your business prevent fraud, improve accuracy and find missing transactions. To ensure that your small business accounting records are as accurate as possible, consider maintaining an audit trail.
It can be difficult to anticipate certain expenses. Some expenses are predictable, while others are unexpected. But if you plan and prepare for the unexpected, your business will do much better in the long run.
When it comes to your books, keep a thorough record of all your expenses, such as inventory, supplies, insurance, and utilities. And have a game plan for how you handle unexpected expenses. This way, you can better predict larger expenses and not get unexpected in the future.
As a small business owner, you have a million and one things to do. It can be tempting to put your books aside to focus on running your business. But if you want to keep your business on the road to success and keep your financial ducks in a row, prioritize your books.
Small Business: A Complete Guide To Accounting Principles, Bookkeeping Principles And Taxes For Small Business: Smith, Mark: 9781726835909: Books
Keep your books up to date and organized from day one. If you avoid your books over and over again, you will find yourself in small business accounting. Take the time to review and update your books to avoid a backlog of accounting tasks.
Record transactions in your books regularly (for example, once a week). The more often you follow your accounting, the less busy you will be.
You need an easy way to track your business income and expenses. Patriot’s accounting software allows you to simplify the recording of transactions. Try it for free today! If you run a small business, you probably have to deal with a lot of day-to-day administrative tasks like bookkeeping.
Even if you decide to hire an accountant or freelance bookkeeper in the near future, it’s still helpful to know at least the basics of accounting. This will help you track and run your business more efficiently.
Simple Bookkeeping For Small Business Owners
In this guide, we cover everything you need to know about bookkeeping for your small business:
Small business accounting involves keeping track of all money flowing into and out of business accounts, summarizing the data into financial statements that can then be analyzed and used to improve the business.
Keeping track of the above using various spreadsheets or even physical folders can very quickly become time-consuming and tedious.
Accounting software is available as a desktop application or as a cloud-based application.
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While both types of software help you perform similar accounting tasks, the added benefit of cloud accounting software is that you can access your accounting data anytime, on any device.
We explain in more detail how you can use cloud accounting software to automate most accounting processes for your company. But before that, let’s review some key accounting principles and terminology.
The accounting equation is one of the basic principles of accounting. It establishes the relationship between the 3 main components of the business: assets, liabilities and capital.
Double-entry bookkeeping is the most commonly used bookkeeping method. In double-entry bookkeeping, two items are created for each business transaction: a debit item and a credit item.
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Here’s a table that summarizes everything you need to know about debits and credits and the different account types:
The account overview is a list of different accounts, separated by type. Remember that the account in the bookkeeping is not a bank account.
The table below summarizes most of the accounts (and their types) that you may need to use for your small business accounting. Highlighted in blue, you can find the 8 most common accounts that every small business should use for their accounting.
Then you need to aggregate all that data into something more useful that can actually help your business make strategic decisions. This is where accounting reports come into play.
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A balance sheet provides a financial snapshot of your business on a given day. This is the primary financial statement used by most small business owners.
While other financial statements cover a period of time (a month, a quarter, or a year), the balance sheet reflects the company’s financial position at that point in time.
An income statement, also known as a profit and loss statement (P&L), shows how your business performed over a period of time.
The cash flow statement consists of three parts for the different activity groups: operations, financing and investment.
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The part of the cash flow statement that deals with direct and indirect cash flows is the operating activity. Essentially, with the direct cash flow report, cash is shown based on actual cash transactions.
And like the cash flow statement, most small businesses will never need a retained earnings statement. Large listed companies usually rely on this financial statement when making decisions about things like paying dividends, valuing the company, etc.
The number one thing you need to decide when doing bookkeeping for your small business is what accounting system you will use. By choosing an intuitive and easy-to-use system, you can simplify the entire business accounting process and save a lot of time.
It’s funny, though, that many business owners think that using a checkbook is still an effective way to keep their company’s books in 2021.
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In the beginning, this can hinder the growth of your business. Once you start scaling, it becomes more and more difficult to accurately record and organize all transactions.
And if that’s not enough, think about the trouble you’ll have to go through when the IRS comes knocking on your door to collect your taxes.
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