Bookkeeping often gives people flashbacks to math classes that traumatized them as kids. Nevertheless, bookkeeping is one skill that every business owner needs to have nailed down. It’s especially tasking if you consider yourself a creative and would rather not deal with numbers. But, it’s imperative to have the basics nailed down, even if you end up outsourcing.
Even more, having some basic tax time bookkeeping knowledge can have your business excelling more than ever. So, if you want to do more than just stay afloat as well as have intricate knowledge of your business’ finances, here is some basic information you should stay on top of.
- Fundamental Types of Bookkeeping
It makes sense that before you actually dive into the idea of bookkeeping, you have an idea of the types of bookkeeping. There is no blanket format to use for all transactions. First and foremost, every business must have a record of cash transactions. In order to track all cash related activities, this is often divided into cash receipts and cash disbursements. There is also accounts receivable and accounts payable, which can be used to closely monitor what needs to come in and go out.
Of course, there’s inventory, which helps you keep stock of all your products, and sales which involves all revenue brought in through sales. There’s a bunch of other types that you can use, as the need arises. At the end of the day, you should be able to reconcile your accounts and have an organized digital bookkeeping system.
- How to Manage Payroll
It’s not just about paying your workers at the end of the month and waiting until the next month. You need to develop a system that properly documents all your employee payroll information.
The documents should reflect whether you remit payment on weekly, bi-weekly, or monthly basis. There’s also the fact that you need to compile an informative end of year payroll summary. You see, payroll entails quite a lot of processes, try your best to familiarize yourself with it all.
- Management of Debtors and Creditors
Outside knowing how much money comes in and out of your business account, you also need to know how to manage debtors and creditors. To adequately do this, you’ll need to leverage your accounts receivable and loans payable records. It’s important to be on top of dates when payments are due to any creditors. In that same vein, being knowledgable about all the money that is owed by debtors. With all this in place, you can have a clear view of your financial situation outside what is actually sitting in your business account.
- Filing for Taxes
It’s required by law to file for taxes and you do not want to start your business on a wrong foot. Again, this may not be to everyone’s wheelhouse, but it’s required as part of the bookkeeping process. Most people opt for the services of a CPA, which is great, but you should still be armed with some information going in.
Have a basic understanding of how taxes are calculated, so you can understand why you are paying what you are paying. It also helps to set you up for a seamless tax return process. Again, it is alright to pass this on to a CPA, in fact, there are services that can connect you to trusted and reputable accountants.
- How to Complete Bank Reconciliations
This is a very important aspect of bookkeeping that goes a long way to ensure that your business account is healthy. Reconciling your company’s balance sheet and the amount on your bank statement is a necessity and not an option.
Not only will a corresponding balance here ensure that your cash records are in order. It also goes a long way to detect any fraudulent activities or ‘cooking of the books’. Altogether, this is one basic aspect of bookkeeping every small business owner should get a hang of.
- Cashflow Management
Altogether, you are going to need to know exactly what’s coming in and going out of your business account. It is the only way you can truly get a sense of whether your business is making a profit or loss. Using financial records, receipts and other forms of documentation, you will be able to get all the information you need to build a solid record of all your cash flow.
As a small business owner, there are many facets ofthe business you have to control. With the basics listed overhead and a few more, you should be able to navigate properly. Simply stick to it and get as much help as you need.