Are you running small business? Is your business home based or SOHO? Are you trying to cut the bookkeeper cost doing your own bookkeeping? If answer to these questions is yes, then be prepared to learn about bookkeeping before you start it. Keeping the proper records of transactions avoid the expenses of hiring someone else to do it. While the basic bookkeeping is not that complicated, you have to make sure your financial records are accurate and up to date all the times.
What are some of the Bookkeeping Jargons?
Small-business owners should learn basic bookkeeping terms and remember them when maintaining the books. “Cash flow” refers to money coming into the business, or inflow, and money going out, or outflow. The word “credit” has particular meaning in bookkeeping, and refers to money added to the books. Its counterpart, “debit,” refers to money subtracted from the books. Double-entry bookkeeping employs two entries — both debit and credit — for each financial transaction. Single-entry bookkeeping employs only one entry — either debit or credit — for each financial transaction. The term “reconciliation” means reconciling the books against the monthly financial statements, and “trial balance” refers to balancing the debit and credit books if using the double-entry bookkeeping method.
Am I using an appropriate bookkeeping method?
Deciding on the appropriate bookkeeping method for a small business is the first step in keeping accurate — and adequate — financial records. If the small business is a “one-man shop,” single-entry bookkeeping should suffice. Small businesses with multiple forms of income and expenses will benefit from using the double-entry bookkeeping method. Single-entry bookkeeping is just like keeping a personal checkbook. All credits and debits go in and out of the same checking account, and the business only needs one log to track the transactions. Double-entry bookkeeping uses two books: one for debits and one for credits. This works well for businesses that want to know exactly what each source of income is financing. The income is credited in one book, and the expenses the income paid are debited in the other book.
Are my records accurate?
Always keep accurate records no matter which bookkeeping method is employed. Do not be tempted to round numbers up or down to make the final balance easy to calculate. This throws the books off and causes problems when balancing and filing taxes. If the business spent 44 cents on a stamp, enter 44 cents for the stamp; don’t ignore the transaction because it is small. Don’t round $1.99 to $2, either. Always enter the exact amount of any the debit or credit.
Am I properly categorizing transactions?
Always assign a category to each bookkeeping transaction. There are different types of income, such as small-business loans, grants and the actual income the business is earning. Different expenses include payroll, employee benefits, office supplies, manufacturing supplies and operating costs. All of these transactions must be categorized when entered into the books, so the business owner can easily identify the cash inflows and outflows.
Am I Identifying transactions for future reference?
It is wise to identify each transaction entered into the books, as well. For example, when accounting for payroll, each employee’s name and payroll identification number should be included in a memo line for each transaction. Never be tempted to just tag a credit “Deposit” or a debit “Expense.” Properly categorize and then properly identify each transaction so there are no questions surrounding the entry.
Am I regularly Reconciling?
Always reconcile the books regularly, usually monthly when the bank statement arrives. Never toss the statement aside. Reconcile the books against the bank statement immediately to ensure there are zero bookkeeping errors. Single-entry bookkeepers should balance the book against the bank statement. Double-entry bookkeepers need to run a trial balance, which is a total of each book, debits and credits, to make sure the month-end totals match. If they do not, there is a mistake in either the debit or credit bookkeeping. Find and fix that error first, and then balance the transactions against the bank statement.
Get Help from the professional Bookkeeper
No matter how small the business, if keeping the books are intimidating or if the small-business owner messed up the books beyond repair, consult an expert. Every small business has to pay taxes at the end of the year, and should the ATO decide to audit the business, accurate records are key to ensuring a smoothoutcome. Small-business owners who simply do not want to deal with theaccounting portion of the business should hire a qualified person to do so.
Accurate Business & Accounting Services is a leading accounting and bookkeeping firm in Sydney. We specialise in bookkeeping to ensure your finances are managed from start to finish.