Small Business Bookkeeping Basics

bookkeeping for small business

All of these expenses fall under the loans payable account which tracks what you owe and what’s due for you to pay. Take the simple step of setting yourself a reminder so that you have enough time well beforehand to fill out your tax returns without any mistakes.

One of the most common struggles small business owners have is with bookkeeping. Not only are most business owners not familiar with bookkeeping and accounting, but trying to find the time to sit down and do it when there are other fires to put out is impossible.

Hire an in-house bookkeeper

Firms offering outsourced bookkeeping services tend to also be flexible to make sure their solutions fit your specific needs. These firms specialize in bookkeeping and accounting, so their specialists will likely be more experienced and provide greater expertise than hiring an in-house bookkeeper. Another key benefit to outsourcing bookkeeping to aprofessional CPA firmis the level of expertise received. Small businesses and even mid-size companies don’t always hire the best talent to handle their daily and monthly bookkeeping responsibilities. Without significant prior experience in bookkeeping, it is impossible for a business owner to gauge the expertise level and capabilities of an in-house bookkeeper. One of the biggest disadvantages of hiring a part-time bookkeeper is that they provide only partial support in an area of business that requires a lot of attention and detail.

  • It helps to make sure that records of individual financial transactions are accurate and up-to-date.
  • If you wait until the end of the year to reconcile or get your financial transactions in order, you won’t know if you or your bank made a mistake until you’re buried in paperwork at tax time.
  • Check reviews and support ratings to see how a software company’s customer support is.
  • What may seem like an extravagant expense to someone used to wearing so many different business hats may actually save you money in the long run.
  • Despite the cost, it can save you lots of time and money down the line.
  • You should post accounts receivable regularly, which will depend on the size of your business.

QuickBooks Desktop is one of the biggest names in accounting for a reason. This tried-and-true accounting software offers customizable accounting, strong features, and a traditional feel. ZipBooks offers three pricing plans ranging from $0/month to $35/month. ZipBooks’s Accounting pricing tier offers more advanced accounting features for you and your clients at a custom price rate.

The importance of bookkeeping for small business

This offers more than just time savings, as a professional accountant can become a trusted business advisor. All Live Monthly Bookkeeping plans require cleanup and setup, which costs a one-time fee of $500, and a subscription to QuickBooks Online, ranging in price from $25 to $180 per month. The average salary for a bookkeeper in the United States in 2018 is around$14-$17 per hour which is about$2,400 to $3,000per month. The average annual salary for bookkeepers is between$37,000 to $47,000(per Salary.com). In addition to the hourly charges, state & federal laws will also likely require you to pay for the employee’s benefits such as health insurance and vacation time.

Each staff reviewer at Merchant Maverick is a subject matter expert with experience researching, testing, and evaluating small business software and services. The rating of this company or service is based on the author’s expert opinion and analysis of the product, and assessed and seconded by another subject matter expert on staff before publication. Merchant Maverick’s ratings are not influenced by affiliate partnerships. If you need more help choosing accounting software, read this post about the questions you need to ask to find the perfect accounting solution. QuickBooks Online, Zoho Books, and ZipBooks are the easiest accounting programs to use and learn.

Bookkeeping 101: Bookkeeping Basics for Small Businesses

Start your free 14-day trial of Shopify—no credit card required. In case of an audit, a CPA is the only individual who can legally prepare an audited financial statement. For instance, you might have an unexpected downturn in sales due to uncontrollable external circumstances, or maybe you need a financial boost during slow periods in a seasonal business.

bookkeeping for small business

Then you’re ready to close the books and prepare financial reports. It requires you to record each financial transaction just once in your overall bookkeeping record. This method can work for freelancers or sole proprietors with no more than one or two business transactions a month. Using the right bookkeeping software for small businesses can save you time and increase your accuracy, but which option is the best? Our small business accountants in Raleigh are breaking down how to choose software as well as some popular options for every stage of your success.

Part 2 of 4:Setting Up Your Accounts Receivable

For instance, if you have one cellphone, you can deduct the percentage you use the device for business. Gas mileage costs are 100% deductible, bookkeeping just be sure to hold on to all records and keep a log of your business miles (where you’re going and the purpose of the trip).

Generally, accrual-based is the recommended accounting method, but the decision is ultimately up to you. The Best Bookkeeping Software for Small Business 2022 To find the best bookkeeping software, we looked at key accounting features, ease of use,… Proper record-keeping for small businesses makes the process easier and keeps you compliant with the law. You never want to waste time chasing down last month’s missing invoice, and you certainly don’t want to find yourself in trouble with legal requirements. Visit SBA.gov to find out more about how small businesses can stay legally compliant. If a general ledger is like a book, a chart of accounts is like a book’s table of contents—it’s a list of all the accounts your business uses to record transactions.

Bookkeeping for a solid start

You won’t have to wait for the monthly bank statement to see if your business is insolvent or thriving. The process for reimbursing yourself should be the same as for employees. List the expenses along with the date, vendor, and purpose on a spreadsheet and attach the receipts.

bookkeeping for small business

You may also want to consider what sales looked like for the same period last year to take into account any seasonality in your business. While bookkeeping systems don’t rely on receipts to identify transactions, the IRS does require receipts for all tax deductions. An old-fashioned method of keeping receipts is to have a file folder for each vendor where you place paper receipts.

Want More Helpful Articles About Running a Business?

Think about what takes up a lot of time for your company and make sure the system you pick will help you with that, whether it’s invoicing, shipping, payroll, or inventory. Here’s an overview of the best virtual bookkeeping services for small businesses. Before looking to hire a full-time employee to maintain your books, you should first figure out what kind of responsibilities you need to have handled. A full-time accountant is an upgrade over a basic bookkeeper, as they require less oversight and provide greater expertise across the board. If you’re growing, outsourced bookkeeping services should be able to help you scale by adding full service accounting when you are ready for it. Budgets are important for business; they are the financial guidelines to success.

bookkeeping for small business

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