Bookkeeping is an essential part of any business, especially small businesses that have to compete with larger companies. In order for any company to remain healthy, they must keep track of each and every aspect of their business. This is where bookkeeping comes in. Bookkeeping is the process by which all financial transactions are tracked; this includes sales, payments, purchases, income, and receipts made by the organization and its employees. Ignoring these may come with serious financial consequences.
While good bookkeeping may not contribute to the profitability of a small business, it can most definitely help to prevent it from going under. Keeping track of a company’s expenditures as well as its income allows for smooth business deals and peace of mind when moving forward with business goals. On the other hand, poor bookkeeping can misrepresent a company’s financial needs and lead to poor financial decisions. For example, businesses that wish to take out loans are asked to provide their financial records to ensure that the loan will be used responsibly. A thorough accounting of the business’ financial deals will allow lenders to analyze a business’ stability before committing themselves to a loan.
Small Business Bookkeeping Services and Options
Many small business owners choose to hire an accountant, finance manager, or bookkeeping professional to handle the financial side of their business. A solid, reliable bookkeeper can do wonders for a small business and actually increase revenue within smaller companies if handled correctly. While this method of bookkeeping is recommended, it might be more than some companies can afford since it means hiring another staff member. If this is the case, there are many alternatives to hiring a full time bookkeeper; among them are bookkeeping courses and online bookkeeping services.
Small Business Bookkeeping Courses
There are a variety of courses offered by different colleges and community colleges on the skills needed to take care of small business bookkeeping. These courses are ideal for companies who wish to take care of their own finances but cannot hire someone to do them. A few class sessions will provide any manager or employee with the financial know-how their business needs. Most of these types of classes are relatively cheap as well, which makes it easy to get started. Companies that wish to invest in one of these classes should contact the nearest community college and inquire about their financial courses to get started.
Even easier than taking a basic bookkeeping course from a community college is taking advantage of the online bookkeeping software available for bookkeepers and financial managers to use. More and more small businesses are turning to online applications for their financial management needs. The applications are very user-friendly, which can be ideal for those just getting used to working with numbers and different financial terms. These online programs also allow for multiple users to access information from several different machines, allowing for easier communication and access to important information while at the same time protecting data over a secure server. Another benefit to these types of programs is their ability to organize data into understandable and accessible terms through the use of charts and graphs.
One of the largest benefits to online bookkeeping, though, is that most online bookkeeping programs are able to catch mistakes made by beginning bookkeepers, and can troubleshoot past some of the more obvious errors that often occur in bookkeeping. They can assist with everything from setting up ledgers to calculating expenses and so forth, simplifying the process and allowing businesses to concentrate on other aspects of their business rather than worry about numbers.
Tips for Small Business Bookkeeping
- Be consistent- Consistency is the key to successful financial management. Entering payments, expenditures, and other figures in the same format will save both time and energy in the long run.
- Be timely- Deposit any and all income to a bank or credit union as soon as it is received. This will ensure that all money is always accounted for, and that business owners have a good idea of just how much money they have at all times.
- Do not overcategorize- Overcategorizing can make things harder than they need to be. If certain items and expenditures can be grouped into one, easily labeled category, then it is best to do that instead of having to account for smaller, more miniscule details.
- File paid invoices- Start new folders each year for new paid invoices and paid bills. Only make new folders for customers with a large volume of business.
- Maintain daily records- Once a system has been put in place, maintain it daily. Daily records will help to make keeping monthly records easier as well.
- Petty Cash- Use a lockable box for all cash and coins men specifically for business use. After money is used, it should be replaces by a receipt for the purchase. Replenish the box when needed as part of your system.
- Prepare for the last step first- Certain businesses know they will need to fill out certain forms when tax time rolls around, so a wise idea is filling out the categories on each form as they apply to a specific business, then utilizing those same categories in their bookkeeping system.
- Store each year separately- Keep all of each year’s records in one box. The box should include that year’s bank statements, checks, financial statements, paid bills, and other backup documents. It should also include that year’s tax return. Keeping each year’s record together will ease the research process should the company ever get audited or need to review their records.
- Remember that only profits are taxed- Income taxes should be based only on profits, not all the money that a company has taken out on their business.
No matter how a business chooses to go about handing their bookkeeping needs, it is critical that they do so. Improperly managed bookkeeping can lead to financial disaster if companies are not careful. Successful bookkeeping and accounting, on the other hand, can open the door to financial success in the future.
