What should small businesses know about bookkeeping?

Bookkeeping is essential for any business, but if you are a small business you might be wondering what you really need to know about bookkeeping?

Through bookkeeping, an owner can identify if a business is generating profits or losses.

1. What are bookkeeping services?

Bookkeeping is the recording, storing, and retrieving of financial transactions for a company, non-profit organization, individual person, etc.

Bookkeeping can include common financial transactions

• paying suppliers
• billing for services provided or goods sold to clients
• documenting receipts from customers
• recording invoices
• processing employees’ payroll
• financial reporting
• monitoring accounts receivable
• recording depreciation
• and more!

2.What is the difference between accounting and bookkeeping?

Both bookkeeping and accounting are necessary for any business, but they aren’t the same thing.

Bookkeeping is the recording of financial transactions. Whereas accounting is the interpreting, classifying, analysing, reporting, and summarising of financial data.

In accounting there is interpreting and analysing data, in bookkeeping there is not.

3. Types of bookkeeping systems

The 2 main types of bookkeeping systems are the single-entry system and the double-entry system.

Single-entry bookkeeping is used for companies that have few or uncomplicated transactions.

This system records business expenses and cash sales that are paid when incurred.

Single-entry bookkeeping typically consists of a cash sales journal, a cash disbursement journal, and bank statements.

It is not typically used for a company that has accounts payable, accounts receivable, or a lot of capital transactions.

Businesses that have more complex transactions use double-entry bookkeeping systems.

The double-entry bookkeeping system posts single transactions as an income or expense item.

Then a second entry is created to trace the transactions to a corresponding account.

4. Bookkeeping software is common for small businesses

Nowadays, many small businesses do most or all of their bookkeeping using bookkeeping software, instead of traditional systems.

Popular bookkeeping software, such as Xero and Sage, use the double-entry system. But the user doesn’t need to be well versed in the method to be able to use the software.

The software is usually designed to be user-friendly and can help reduce bookkeeping mistakes.

Benefits of bookkeeping software:

• can process accounts quicker
• increase reporting accuracy
• provides necessary accounting reports
• streamlines filing your business taxes
• data is backed up
• more benefits of bookkeeping software
• Bookkeeping software is becoming increasingly popular among small businesses.

It is an effective way small business owners can access the financial information they need.

5. Proper bookkeeping helps you pay your taxes on time

The more organized your books are, the easier it is to file your taxes.

You will need to gather all financial records and organize them by category.

Accounting software, like Xero and Sage, helps small businesses keep track of all their financial information.

This can help reduce stress and last-minute scrambling during tax time.

6. Always keep data up to date

Even if you hire an accountant to help with bookkeeping, make sure all files are up to date.

An accountant only uses the information handed to them, so any errors or changes need to be addressed as soon as they are realized.

7. Maintaining consistency is key

No matter what type of bookkeeping system you use, consistency is vital.

Have daily, weekly, monthly, and annual tasks that you check in on.

If you aren’t doing the bookkeeping yourself, follow up with who is.

Some of The Hollies Bookkeeping Services include:

• monthly, quarterly, and annual bookkeeping
• individual and company payroll services
• ledger and financial statement prep
• At The Hollies, we will work with your current staff and train them on crucial everyday aspects they use.

Our goal is for your books to reflect your operations, and to streamline your bookkeeping process to make it as efficient as possible.

We are also certified for QuickBooks online and desktops and can integrate our services into any existing software campaign.

For help with keeping on top of your books, or just a discussion to find out whether you need a bookkeeper, please call us here at The Hollies Bookkeeping Services on 01743 790086.