If you’re a small business owner, you most likely also wear the hats of the bookkeeper and the accountant. But with most entrepreneurs starting their own business after they’ve already established a full-time job, this can lead to an overwhelming workload and reliance on juggling payments and employee schedules between your personal and business lives. Bookkeeping isn’t just for larger businesses with teams of employees that specialize in it; it’s essential for any entrepreneur who handles their own accounting needs.
The Most Important Aspects of Bookkeeping
You need to know how to categorize transactions. Generally, transactions fall into one of the following categories: sales, expenses, assets, liabilities, equity (capital), and gains/losses. You also need to know whether the transaction is classified as cash or non-cash; these are classified as accounts receivable or accounts payable. You should keep track of revenue and costs on the income statement.
What is a Chart of Accounts and Why is it Necessary?
The Chart of Accounts is a list of all the accounts in your business. It is necessary to record every transaction that your business performs because it does not matter how much money or inventory you have, if you don’t know what it costs or what you are worth, then you are flying blind.
How to Minimize Risk for Your Business by Properly Managing Books
Managing your books means that you are taking an active role in the success of your business. The first step is to create a budget that encompasses all aspects of your company, including the expected growth and the funds needed to scale up. Having an accurate accounting system can help you understand where revenues are coming from and what you need to do to stay within your budget.
What You Need to Know about Taxes and Legal Compliance
Taxes and legal compliance are something that every business should be aware of. This is in order to stay in good standing with the government and avoid fines or penalties. You should know what forms you need to submit, how much they cost when you need to submit them, and who needs to be included in them.
Tips for Keeping Your Books
You need to know what books to keep and how long to keep them. There are different types of books, such as the general ledger, the subsidiary ledger, and journals. Each type should be kept for a different period of time because each type has its own purpose. The general ledger is used for financial statements that must be based on historical data. The subsidiary ledger includes all transactions that affect stockholders’ equity and needs to include all transactions for the year. Journals are where you record all transactions and can include both journal entries and temporary accounts.
Things to Consider When Hiring a Bookkeeper
When ready to hire a bookkeeper, there are many things to consider. The first is the time commitment. Some bookkeepers work on an hourly or project-based fee arrangement. Others charge a monthly retainer. The right bookkeeper will have plenty of experience working with businesses just like yours, so can provide a fair estimate up front.
You can find a comprehensive guide on bookkeeping here.