10 Tips for Better Small Business Bookkeeping

If you dread bookkeeping but feel it’s not worth outsourcing, you’re not alone. The weekly tasks you can assign to employees or complete yourself. Paying bills and invoicing happen daily, so they can be complicated to outsource. But complex projects like reconciling your accounts and closing the books should be done by a professional.

Also, well-documented and organized receipts can significantly help during audits. For LLCs or corporations, a separate account for personal finances is a must. Kelly is an SMB Editor specializing in starting and marketing new ventures. Before joining the team, she was a Content Producer at Fit Small Business where she served as an editor and strategist covering small business marketing content. She is a former Google Tech Entrepreneur and she holds an MSc in International Marketing from Edinburgh Napier University. The sector of the economy that involves the sale of goods to consumers.

  • In this article, we’ll continue to use the term accounts for simplicity.
  • That way, you can sync your bookkeeping software with your business bank account so you always have accurate, up-to-the-minute records.
  • Still, other business owners mean to go over their business finances but get caught up in the day-to-day and never get around to it.
  • Paying bills and invoicing happen daily, so they can be complicated to outsource.

When you implement a proper bookkeeping system, you can get up-to-date, accurate records, avoid missing transactions, and have better control over your business savings account. Once the entries are assigned to the correct accounts, you can post them to the general ledger to get a bird’s-eye view of your current cash status. Most accounting software does this for you, so you don’t need to worry about an extra step. Overall, Net Profit Margin is a vital indicator of a company’s profitability and operational efficiency. It provides valuable insights into how well a company is managing its expenses relative to its total revenue. However, it’s important to analyze this metric in the context of the industry norms and alongside other financial measures.

Step 5: Review your financial statements

Before you start bookkeeping, you need to determine the right bookkeeping method and corresponding accounting method for your business. This content is for information purposes only and should not be considered legal, accounting, or tax advice, or a substitute for obtaining such advice specific to your business. No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customer’s particular situation. Intuit Inc. does not have any responsibility for updating or revising any information presented herein. Accordingly, the information provided should not be relied upon as a substitute for independent research. Intuit Inc. does not warrant that the material contained herein will continue to be accurate nor that it is completely free of errors when published.

  • Review the payroll summary before payments are disbursed to avoid making corrections during the next payroll period.
  • These reports will help you gain greater insights into the financial health of your small business.
  • Consider whether you want to keep your personal and business bank accounts at the same financial institution.
  • Managers need accurate data to increase sales, manage costs, and to oversee cash flow.
  • Make sure to read online reviews, compare different pricing options, and see which features are included in the service.

At the end of every pay period, the bookkeeper will accumulate employee payroll details that include hours worked and rates. From there, the total pay is determined with the applicable taxes and withholdings. In the accounting software, the primary journal entry for total payroll is a debit to the compensation account and credits cash. One key issue with traditional strategies is the potential for human error in data entry and calculation.

Set up budgets

In the accrual method, on the other hand, you would record the expense in January, on the date that you received the invoice — regardless of when you ended up paying for the parts. A bookkeeper who can effectively set up and leverage various automations, such as software integrations, can help bookkeeping for shopify you minimize mistakes. An excellent bookkeeper sets up processes to regularly review, identify and resolve the inevitable errors. Someone who can confidently walk through the issue and their solution step-by-step likely has the expertise and analytical capabilities needed for the job.

Pay attention to your cash flow

This account is simply the total amount of funds owed to your business. You can go for accounting software like FreshBooks to finally get rid of spreadsheets, manual number crunching, and suchlike. FreshBooks is suitable for small business owners, self-employed professionals, freelancers, and businesses with employees. Luckily, most modern-day bookkeeping and accounting  software have tools that make cash flow tracking a breeze. It’s necessary to keep track of your cash payments if you want to have accurate bookkeeping.

Get the Right Software

Do your homework to find out what software will best fit the needs of you and your business. In some cases, separating funds is not something your business can opt out of. If your business is an LLC or a corporation, you must open a separate account for business. You may need to re-strategize and make adjustments to ensure you stay on top of your business.

It’s important to track your A/R to ensure you receive payment from your customers on time. Your accounting ledger serves as the hub for all your financial information. If you have accounting software, it will manage your ledger for you.

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. Even if you’re just planning to offer bookkeeping services remotely as a sole proprietor, it can still be helpful to flesh out the exact steps you’ll need to take to succeed. As you compare online bookkeeping courses, consider the range of topics covered, the course format, and the cost. Whether it makes sense to obtain just one bookkeeping certification or additional tax and accounting software certificates can depend on your niche and the types of services you plan to offer.

Bookkeeping focuses on recording and organizing financial data, including tasks such as invoicing, billing, payroll and reconciling transactions. Accounting is the interpretation and presentation of that financial data, including aspects such as tax returns, auditing and analyzing performance. Look at the item in question and determine what account it belongs to.

When starting a new small business, one of the first steps should be opening a business checking account. You might also consider opening a savings account to deposit tax obligations. The accrual method of accounting provides a broader financial picture, so you adjust your business operations should your financial outlook not be favorable.

If you seek funding from a bank or investor, your business plan will be especially important because it is how potential lenders and investors will understand your business. Automating the tedium streamlines bookkeeping, yes, but you’ll still be involved. For example, your new tool may suggest pairing certain receipts to various expenses, but you must still approve those regularly.

Popular accounting software like FreshBooks offers all the basic features you need for any business’ bookkeeping. You can check for small business packages that use simple templates for all financial documents. Though often confused for each other, there are key differences between bookkeeping and accounting. At its core, bookkeeping is about recording financial data, while accounting is about interpreting financial data.

Leave a Comment