How to Meet Your Bookkeeping Needs

Although it’s more complicated, it can prevent bookkeeping errors. And since it takes equity, assets and liabilities — on top of expenses and income — into account, it typically gives you a more accurate financial snapshot of your business. Using the data you gain from keeping a ledger, your next step will be to generate and prepare financial reports for analysis. The major reports to include are the profit and loss, the balance sheet, and a cash flow analysis. Additionally, the aged accounts receivables and aged accounts payables reports are helpful in knowing which customers have not paid and which vendors are yet to be paid.

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  • Effective bookkeeping requires an understanding of the firm’s basic accounts.
  • Hiring a bookkeeper will allow you to become more organized with your cash flow statements to get a better view of your financial situation.
  • If your prospective bookkeeper does, you should consider what you’d do if they’re sick or call out for other reasons—have a backup plan in case your bookkeeper is out of office.
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  • Long-term liabilities have a maturity of greater than one year and include items like mortgage loans.

Bookkeepers are responsible for recording, classifying, and organizing every financial transaction that is made through the course of business operations. The accounting process uses the books kept by the bookkeeper to prepare the end of the year accounting statements and accounts. They tell a story about your business’s health, help you meet legal requirements, and prepare for tax time. Good record-keeping, including tracking every sale and expense with two entries and regularly checking your bank statements, makes generating these reports easier. This way, you can keep a close eye on your finances, make smart decisions, and work towards reducing your tax bill.

How to do bookkeeping for a small business

Asset accounts start with the cash account since cash is perfectly liquid. After the cash account, there is the inventory, receivables, and fixed assets accounts. Firms also have intangible assets such as customer goodwill that may be listed on the balance sheet.

If the prospective bookkeeper operates in a firm with multiple employees, there will be more hands on the day-to-day processes. In this case, it’s important to see what the firm’s internal review and quality control procedures are. Communication styles are sure to vary between bookkeepers, so consider looking into how they interact with their current clients. A good bookkeeper should keep How to Meet Your Bookkeeping Needs honest and open lines of communication at all times—this ensures that their clients are in the loop and on the same page. You can also ask friends or colleagues who have utilized bookkeepers for their businesses. Recruiters are also an option, but word of mouth is often cited as the most trustworthy way of figuring out if a professional is qualified and will perform to your standards.

Chart of Accounts

Together, we’ll explore the islands of liability and equity and dock at the ports of payroll and invoice management. By understanding basic bookkeeping, your small business will survive and thrive on the high seas of commerce. As businesses grow, it becomes easier to let small activities slip. Since good record keeping relies on accurate expense tracking, it’s important to monitor all transactions, keep receipts, and watch business credit card activity. Many bookkeeping software options automate the tracking process to eliminate errors. At the University of Potomac, we can lead you towards a successful career as a bookkeeper.

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  • Freelancing platforms like Fiverr, Upwork, or Freelancer are great places to find clients and build your customer base if you’re just starting your bookkeeping firm.
  • Maintaining bookkeeping tasks is essential for the stability and success of small businesses.
  • If the data is incomplete or contains errors, you’ll have to amend the returns, which may result in interest and penalties.
  • QuickBooks Online users can choose QuickBooks Live Bookkeeping to get year-round access to verified experts who are focused on their success.
  • Luckily, the IRS has put together a comprehensive guide on business deductions that you can consult if you’re ever unsure about a deduction.

Furthermore, accounting measures the outcomes of an organization’s economic actions and communicates this information to management, investors, creditors, and regulators. Some bookkeepers choose to obtain certifications for their business. Bookkeepers can be certified in various financial platforms, such as QuickBooks, or via training programs. You can also choose to become a certified public bookkeeper to market yourself better as a bookkeeping professional.

How to Become a Bookkeeper

Your bookkeeper might also prepare other auxiliary reports for your business, like accounts payable and accounts receivable aging reports. You can use these to make business decisions, but they should not be presented as audited, certified or official financial statements. Bookkeeping includes gathering financial data into a recordkeeping system and posting transactions to an accounting system. The definition often includes additional tasks to keep your business running smoothly. If you’re handling bookkeeping for your small business, you’ll work on several basic tasks. Psst—to stay organized and make recording easier, remember to keep your personal finances and your business finances separate.

How to Meet Your Bookkeeping Needs