When it comes to finance and accounting, it’s common for some new business owners to feel overwhelmed; especially if they have no prior experience with bookkeeping in any form. Business owners will often hire local accountants to take care of their finance and accounting needs, but in the earliest days of a new business, hiring a CPA can be costly and distracting to some extent.
Small business owners making a go of it for the first time must focus on mission critical streams of work – marketing, sales, customer service, hiring and managing employees, etc. Taking substantial time away from these activities can risk failure. Generating and sustaining sufficient revenue is life or death in a small company, whether it’s a start-up or a recently acquired existing business. Getting overly bogged down in accounting means that a business owner can dangerously take their eye off the ball.
Does this sound familiar? If you are a small business owner, it’s important that you handle the bookkeeping in an efficient way. Whether you tackle QuickBooks yourself or contract for professional support, having a very basic, primary understanding of finance and accounting in a small company setting will help you navigate this process.
Bookkeeping Tips for Business Owners
No matter the kind of business you own, it’s imperative that you know the basics of bookkeeping. Whether you own a restaurant in a big city, a clothing boutique in a rural area, or a coffee shop in a community that offers independent senior living in NJ, you should know how to handle finance and accounting. Here are some tips to help you.
Understand and Set Up Business Accounts
The first step to handling finance and accounting in an efficient way is to understand and set up your business accounts. When it comes to bookkeeping, an account is a record of all business transactions; such as payroll or monthly sales. There are 5 kinds of accounts that you should know which are detailed below.
- Assets- cash and resources owned by the business
- Expenses/Expenditures- cash that flows out from business to pay for services/employee salaries
- Revenue/Income- money the business earns through sales
- Liabilities- obligations and debts that the business is responsible for
- Equity- the value remaining after liabilities are subtracted from the business’ assets
All of these accounts should be set up properly and should be well-maintained to stay current.
In the distant past, all accounts were recorded in a physical book; however in the financial world today, accounts are typically managed in specific software such as a spreadsheet (for the most rudimentary small companies), or, more likely, desktop or cloud-based accounting software such as QuickBooks. Digital bookkeeping makes finance and accounting much easier for small business owners and is simple to learn how to use, even if you don’t have a background in accounting.
Record Each Financial Transaction and Balance the Books
It is crucial to record every single transaction you make as a small business owner. From office supplies and repairs to utilities and investments, you need to have receipts and records that detail where your money is going. Not only will recording each transaction make life easier and more organized, but it will also allow you to easily access this information if a financial issue arises, or if you want to budget better.
Similarly, you will need to take the time to balance all books on a monthly basis, which means that when you tally up account debits and credits, the totals should match; making the books balanced. A simple equation to help small business owners balance their books is:
Assets = Liabilities + Equity
If your books are not balancing out, you will need to go back through the entries to find any errors. If you are still having trouble balancing your books, you should talk to an accountant and get professional assistance.
Stick to a Schedule and Store Records Securely
To make life easier and stay efficient, you should set time aside once a week to work on bookkeeping. You should go over invoices, bill payments, sales, and purchases weekly and balance your books quarterly.
Be sure to store all records properly and securely. Storing records will make them easier to locate at the end of the year/month and will allow you easy access to them if any sort of financial issues arises. It’s recommended that you store records on cloud software so that they can never get lost.
Understand the Basics of Bookkeeping
Bookkeeping is not something to take lightly; however, it doesn’t have to be complex and stressful as long as you make it a point to stay on top of things. If you are a new small business owner, do your best to stay on top of your bookkeeping and all other finance and accounting tasks. If you stay on top of it now, you will avoid any issues in the future and may even find ways to improve your business, e.g. reducing unnecessary costs, more effectively marketing to grow revenue.
About the Author
Kelsey Simpson enjoys writing about things that can help others. She lives in South Jersey and is the proud companion to two German Shepherds and spends her free time volunteering in dog shelters.