How to Do Bookkeeping for Small Businesses?

Did you know that bookkeeping involves financial reporting, recording depreciation, and processing employees’ payroll? 

Bookkeeping is an important aspect of running a small business, as it helps you keep track of your financial transactions, monitor cash flow, and make informed decisions about the future of your company. 

But many people feel overwhelmed and frustrated when they’re trying to do bookkeeping for small businesses. This is why it is so helpful to understand what it is and how it works. 

To make things easier for you, we have put together a guide. Keep reading if you want to find out more. 

Bookkeeping Terms to Know

If you want to understand small business bookkeeping basics, there are several terms that you’ll need to familiarize yourself with. Here is what you need to know. 

Ledger

A ledger is a record of all financial transactions in a company. Ledgers typically feature income statements and balance sheets. 

Accounts Receivable

This refers to money that customers owe to your business. This also might include other companies that made purchases or borrowed from your small business.

Accounts Payable

Accounts payable refers to money that a company owes to its suppliers and creditors. This includes supplier companies and governmental organizations.

Balance Sheet

A balance sheet is a snapshot of your financial position at a specific point in time. It shows your assets, liabilities, and equity. This document will help you understand what your small business owes and owns.

Cash Flow Statement

This statement shows the flow of money in and out of a company over a specified period of time. It is also helpful to have a profit and loss statement. 

This will show your small business’s revenue, expenses, and net income over a specified period of time.

Bookkeeping 

Bookkeeping is the process of recording, classifying, and summarizing financial transactions in a systematic and organized manner. It is an essential aspect of financial management for any business.

Bookkeeping helps you to keep track of financial data such as sales, purchases, receipts, and payments.

Payroll

This refers to the process of paying employees their salaries and wages. It also includes taxes that you’ll need to pay for your employees.  

Key Components of Bookkeeping

By understanding the key components of bookkeeping, you’ll be well on your way to managing your finances with confidence. Keep in mind that you’ll need to do some elements more frequently than others. 

Here are the most important aspects of bookkeeping. 

Recording Transactions

This is the foundation of small business bookkeeping. It involves keeping track of all financial transactions. This includes sales, purchases, receipts, and payments. 

By accurately recording your transactions, it will be easier for you to keep track of your cash flow. This will also help you to monitor your expenses.

Sending Invoices

You will need to send invoices to your customers in order to assure that your customers pay their bills on time. Invoices also help you to keep track of your accounts receivable. 

To streamline the invoicing process, consider using invoicing software that automates the process. And when you’re creating invoices, be sure to include all relevant information.

You’ll need to include the date, amount, and description of the goods or services that you provided.

Preparing Basic Financial Statements

These are key components of small business bookkeeping. They include the balance sheet, profit & loss statement, and cash flow statement.

These statements will provide a snapshot of your financial health. They will also help you make informed decisions about the future of your business.

To prepare these statements, you’ll need to have a solid understanding of your assets, liabilities, and equity.

Completing Payroll

Completing payroll involves paying employees their salaries and wages. It also involves recording all related tax deductions and contributions.

When completing payroll, be sure to keep track of all employee information. You’ll need to document your employees’ hours worked, pay rates, and any overtime pay.

Using Bookkeeping Software

Bookkeeping software for a small business can greatly simplify the financial management process. By using it, you will save time and reduce the risk of errors.

There are several types of bookkeeping software available. Each kind of bookkeeping software has its own set of features and benefits.

You should use cloud-based bookkeeping software is cloud-based if you want to access your financial data from anywhere with an internet connection.

This type of software is ideal for those who need to access their financial information while on the go.

If you are looking for a more comprehensive bookkeeping solution, consider using software that integrates with your accounting and payroll systems. 

This type of software is perfect for small businesses that require a one-stop-shop solution for their financial management needs.

You can also use industry-specific bookkeeping software, such as retail or service-based businesses. This type of software is designed to cater to the unique needs of each industry.

These solutions tend to offer features such as inventory management and project tracking.

Finally, there are entry-level bookkeeping software options available for small businesses just starting out. These types of software offer simple and straightforward solutions for basic financial management needs.

When choosing small business bookkeeping software, make sure to consider your specific business needs, budget, and level of technical expertise.

This will make it easier for you to find a software solution that is well-suited to the needs of your business. 

Outsourcing Your Small Business Bookkeeping

Many small business owners choose to outsource their small business bookkeeping when they are too busy to do it on their own. 

There are various remote bookkeeping options to choose from. But it is important to choose a company that gets great customer reviews.

Contrary to what you might think, it is very affordable to outsource your bookkeeping. If you are interested in doing this, try to choose one that will offer you a small business bookkeeping template. 

Bookkeeping for Small Businesses

It can be difficult to figure out how to get started with bookkeeping for small businesses. This is why it is so helpful to familiarize yourself with small business bookkeeping basics. 

Are you ready to hire a bookkeeping service? If so, we are here to help you. Don’t hesitate to visit our Bookkeeping services page to find out more!