Bookkeeping Basics Small Businesses Need To Know

bookkeeping basics small business bookkeepers

It can be challenging to be a small business owner. You are not just an owner, but also the quality control department, the finance department, the supply chain department, and even the production department. Depending on your small business, you may have to wear other hats throughout the day. 

However, one aspect most small business owners struggle with is bookkeeping. As most small businesses create artistic goods, they may have little to no time to keep track of their finances. But getting acquainted with bookkeeping basics is the first step towards mastering them. Let's take a look at some bookkeeping basics that every small business should know: 

Entry Systems 

There are two types of bookkeeping entry systems: single-entry and double-entry. 

The single-entry system requires you to enter all transactions only once, whereas double-entry requires entering each transaction twice. If you have a small business that doesn't require too many transactions, a single entry method will suit your business as it is simpler. 

However, if your business requires various purchases on top of selling receipts, you will benefit more from the double-entry system. It takes a little more time but for small business bookkeepers it is thorough and detailed at keeping track of the numbers. 

Accounting Method 

Similar to entry systems, there are two types of accounting methods too, where one is simpler and one is more detailed. 

The simple method is called the cash-based method. While it isn't really based on "cash" as most transactions take place digitally in today's computerized world, it refers to accounting cash, i.e., recording transactions as they take place. On the other hand, the detailed method called the accrual-based method requires you to keep a record of transactions that are supposed to happen but haven't happened. 

The accrual-based method essentially keeps track of all bills and invoices before they happen and keeps track of money before it is exchanged. This method is preferred for all businesses, big or small, as it allows them to see a clearer picture of their investments, expenditures, and profit. 

Bookkeeping Software 

While you can develop a manual bookkeeping system, signing up for an online accounting and bookkeeping system, such as Gecko Bookkeeping, can be significantly helpful. Since most transactions take place online, it becomes easier to manage them online too. You will only have to set up the system online once and add to it as needed when needed. It also requires less time than manual bookkeeping. 

Transaction Management 

Managing transactions is an important tool in bookkeeping basics as it helps a small business owner on a day-to-day basis. If you have software in place, you will only need up to fifteen minutes every day to mark transactions like expenditures, bills, or purchases. 

Payroll System 

As your small business grows, you will need to hire some people and set up a payroll system to determine and pay their salaries. Many online bookkeeping systems allow this feature. 

However, if the bookkeeper software you choose doesn't allow it, you can also set up a separate system for it. A payroll system allows you to track your employees' hours every day and calculate their salaries accordingly. It can also keep track of paid or unpaid leaves and overtime. 

Tax Filing 

All businesses, big and small, are required to file taxes. If you wish to continue and grow your business without any hassle, you will need to equip yourself with tax and tax system knowledge as soon as you can. 

Once you have equipped yourself with all the necessary knowledge, you can keep track of your business finances concerning tax every month. Keeping track of the amount of tax every month will help you manage your books accordingly and save your time when it is time to file taxes. 

Last but not the least, make sure to keep a record of all the receipts, incoming and outgoing, online. Even if you prefer manual bookkeeping, you can end up losing or misplacing bookkeeping files and folders. But an online record of all receipts will greatly help you or an accountant make new books in any unfortunate event. Plus, cloud servers will typically offer better accessibility, speed and space for you to utilize. 

The Bottom Line Of Business Bookkeeping Basics

The main goal of bookkeeping is to keep track of finances so the business keeps running efficiently and smoothly. Moreover, bookkeeping and basic accounting also allows you to see if you are earning a decent profit or when you can put your products on sale or increase their rates. After learning bookkeeping basics, you can easily manage your business's finances for the long term and keep yourself on track to achieve your goals.

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