Small Business Bookkeeping For Beginners

Bookkeeping might not be the most exciting topic globally, but it's important for small business owners. Unfortunately, many people don't know where to start when it comes to bookkeeping, which can lead to a lot of stress and confusion. In this post, we'll outline some basic tips for small business bookkeeping so that you can get started on the right foot!

Bookkeeping can be daunting for any business owner, but it's especially tricky for small businesses. Luckily, you can take some simple steps to make bookkeeping easier and less time-consuming. In this blog post, we'll outline the basics of bookkeeping for beginners and share tips on how to stay organised.

Are you a small business owner who is overwhelmed by bookkeeping? Do you feel like you should be doing something but don't know where to start? This blog post is for you! We will take a look at some simple steps that will help get your bookkeeping under control.

This guide will walk you through bookkeeping basics and show you how to get started keeping track of your business expenses and income. By following these simple steps, you'll be able to stay on top of your finances and make informed decisions about your business's future.

We'll also discuss some of the most common mistakes small business owners make regarding bookkeeping. So whether you're just starting or struggling with bookkeeping for a while, read on for some helpful tips!

So what are you waiting for? Start learning today!

Let's get started!

How Do You Define Bookkeeping?

Recording and categorising all of your company's financial transactions is an essential part of keeping accurate books. In addition to this, it is important to maintain track of the money that is received and spent by your company.

The term "bookkeeping" comes from the practise of managing these chores using books and ledgers in the past. Following their entry in daybooks, cashbooks, or journals, the transactions would be moved to a ledger for further processing.

To a large extent, the use of physical books has been rendered obsolete by the advent of bookkeeping software.

Why Are They Needed?

The following are some of the responsibilities of a bookkeeper that will assist in maintaining the efficiency of your company.

1. Monitoring daily transactions

The recording of day-to-day financial transactions is one of the responsibilities that fall under the purview of a bookkeeper. Your bookkeeper will find this to be an extremely helpful tool if the accounting software you use incorporates daily automatic bank feeds into its functionality.

When the lines from your bank statement are loaded into your accounting software, it is much simpler to monitor cash flow, and it also saves time that would have been spent entering data manually.

2. Creating invoices and keeping track of payments received

In most cases, the job of preparing bills and sending them out to customers falls on the bookkeeper. A bookkeeper's responsibilities typically also include managing the ledger for accounts receivable and following up on overdue payments.

3. Keeping track of the ledger for accounts payable

Bookkeepers will typically make payments on behalf of the company up to a particular dollar level, depending on the nature of the business. This covers the payment of invoices for the company's suppliers, as well as expenses and petty cash.

4. Observing the cash flow

Making certain that the business has sufficient funds for its day-to-day operations is one of the bookkeeper's most critical responsibilities. They are able to accomplish this by carefully monitoring the proportion of income to expenditures. Then, if it appears that the company requires additional quick cash, they will be able to take action or offer recommendations.

5. Making ready for the accountant to look at the books

It is the responsibility of the bookkeeper to guarantee that the accounting records, when requested by the accountant, are accurate and up to date. This allows the accountant to use their skills and knowledge to make business recommendations, report to the board and file corporate tax returns.

In a nutshell, the bookkeeper is the one who is responsible for the day-to-day job, while the accountant is the one who is responsible for the strategic financial operations. Therefore, bookkeepers play a crucial part because accountants are unable to conduct their jobs properly in the absence of bookkeepers.

Why Is Bookkeeping Necessary for Small Businesses?

A solid foundation for a prosperous enterprise is a set of books that are kept up to date, accurate, and in good order. This is why:

• You have the ability to verify that your income is higher than your expenditures.
• You will have access to trustworthy financial information for the purposes of planning and budgeting.
• Keeping track of when you are expected to receive payment from consumers and when you are required to make payments to your suppliers can help you anticipate a cash flow crisis and prepare for it accordingly.
• It is more probable that you may discover fraudulent or improper payments, which could end up costing you money.
• You can complete correct tax returns.
• When your financial information is well-organized and organised, it is much simpler for you to collaborate with other parties, including lenders, investors, and accountants.

Here Are Five Ways That A Bookkeeper Can Be Of Service To Your Company

If your company is on the smaller side, you may find that you need to keep the books yourself — at least until you can afford to pay someone else to handle this responsibility. When your company reaches a particular size, it is time to start thinking about hiring someone to take care of the bookkeeping for you. The following are five ways in which a bookkeeper can be of assistance:

1. Pay attention to your business plan

The process of keeping accurate books requires meticulous attention to detail and the use of specialised software. When working with these figures, it's not uncommon for it to be difficult to see the bigger picture. Therefore, it is frequently preferable to have another person carry out this work.

2. Spend less on accounting

Employing the services of a bookkeeper to keep track of your everyday activities and manage your payroll on a monthly basis? In such a case, hiring a bookkeeper to handle this work on your behalf rather than doing it yourself could save you a significant amount of money.

3. Be a second set of eyes keeping an eye on your cash flow

You need to keep an eye on your cash flow if you want to avoid the unexpected occurrence of running out of money. This topic is covered in our guide to managing cash flow, which can be found here. It is beneficial to have another person monitoring the data here and making sure that your cash flow is not disrupted. That is something that a bookkeeper can do.

4. Quickly access important data

It is crucial to have a professional accountant handle the monthly business reconciliation and reporting responsibilities. But what do you do if you require some information about your finances in the middle of the month? Bookkeepers are able to provide you with the information you require in a timely manner, removing the need for you to wait for your accountant to answer.

5. Be in charge of your money records

Because most small firms lack the financial resources to hire their own accountant, the majority of accountants serve their clients on a contractual or part-time basis. It would be much simpler for everyone involved to work together if they handle your finances using high-quality online accounting software.

If you have quality accounting software, your bookkeeper and your accountant will be able to collaborate on the same data set. As a consequence of this, they are able to collaborate in order to provide you with the optimal result and contribute to the expansion of your company.

Explaining Bookkeeping Methods

Recording transactions and ensuring everything is in order are two of the most crucial aspects of bookkeeping for small businesses. Let's analyse them in more detail.

1. Keeping track of each transaction

Record your sales. Historically, this was accomplished by handwriting the transactions into a cashbook or manually entering them into a spreadsheet. On the other hand, owners of businesses are increasingly inclined to import sales information into their accounting software directly from point-of-sale or billing software.

Record your transactions. Every single purchase that pertains to the company needs to be documented. If you want to deduct that expense from your taxes, you need to make sure that you save the receipt or other proof that you bought the item. Again, you have the option of writing these particulars down in a book or on a spreadsheet. You may also automate the process so that all of the debits from your business bank account are imported into the software that you use for bookkeeping.

Depending on whether you use cash accounting or accrual accounting, you can record your income and costs at a variety of different times.

2. Consolidating each transaction

The process of reconciling your business's books is making routine comparisons between those books and your company's bank statements to ensure that all of the company's transactions and balances are accurate and, if they are not, to determine the causes for the discrepancy. In many cases, it will be necessary for you to account for bank fees, interest payments, deposits, and payments that have not yet been sent to your bank accounts.

You may need to reconcile your bank accounts on a daily, weekly, or monthly basis, or even less frequently, depending on the volume of financial transactions that pass through your company. However, before completing your tax returns, you will most likely be required to at least reconcile your books. This is a bare minimum requirement.

Transactions need to be reconciled as soon as possible so that errors can be detected and fixed as soon as possible. It is preferable to complete the task on a regular basis, perhaps on a daily basis, so that the job does not accumulate. You may find additional information in our tutorial that explains how to perform bank reconciliation.

Fundamentals of Bookkeeping for a Startup or a Small Business

1. The pleasure of sound bookkeeping procedures

Keeping accurate books is about much more than just controlling your financial flow. As the owner of a company and an employer, you are obligated by law to ensure that you are in compliance with all of the regulations that apply to you.

It’s also a vital approach to keep an eye on the details of how your business is going. This whole process is simplified with the help of tools like the Xero accounting software, which also gives you critical business information at a glance.

It may be overstating things to say that it can turn into a "joyous" experience. However, it's great when you can see the impact of the business decisions you make just by looking at your Xero dashboard.

2. Choosing the best bookkeeping software for small businesses

Your decision regarding the accounting software to use is a highly essential one, and the software itself is one of the foundation stones that make up the "wall" of your company. When it comes to accounting software, one size does not fit all businesses by any stretch of the imagination. When offering the most appropriate accounting software product for clients, we always address three crucial questions:

What kinds of things does your company require? Do you require options for your payroll, inventories, debtors, creditors, or invoicing, or do you require job costing software? What is your current level of expertise in accounting?

3. Which is better, cloud computing or traditional bookkeeping software?

Accounting software that is hosted in the cloud is quickly becoming the most popular alternative for use by smaller companies in Australia. The fact that they offer a "pay as you go" option, higher security and availability through mobile devices, and most crucially, no internal IT infrastructure are the primary reasons that small firms favour this strategy.

4. The effects of choosing the incorrect bookkeeping software

Our customers make the mistake of utilising inappropriate software in their operations far too frequently. This software is frequently not much more than a "computerised shoebox." It is common practise to employ this software because, as the saying goes, "it was inexpensive," or because the previous owner employed it.

Continuing to use this software may result in a significant rise in the cost of compliance, both in terms of the time it takes and the additional accounting expenses that are incurred. Therefore, minimising accounting costs that aren't necessary is a fundamental component of the notion of lowering compliance expenses.

We are able to provide you with training on the Small Business Bookkeeping software options that are the best, easiest to use, and most cost-effective. One such solution is the Xero Accounting software.

5. The small business bookkeeping software

The requirements of your company as well as your current level of expertise in accounting will guide your decision over which accounting software to choose. Because of this, we support a number of bookkeeping software options for small businesses, including Xero, MYOB, and Reckon (QuickBooks).

Xero bookkeeping software

The cloud-based bookkeeping software provided by Xero enables you to log in whenever you like on any of your devices—a Mac, a PC, a tablet, or a smartphone. In addition to this, Xero gives you a glimpse of your cash flow that is updated in real time.

Improve your business procedures by personalising your Xero software

You are able to tailor Xero to the needs of your company by utilising the "add-on marketplace" that Xero provides. This marketplace contains powerful add-ons for customer relationship management (CRM), inventory management, task flow, job costing, and debt collection. We are able to guide you through the process of selecting the add-ons that will provide your company with a significant advantage over that of its rivals.

6. Business on the move

Cloud-based bookkeeping solutions are becoming increasingly popular among customers since they enable users to manage their businesses at any time and from any location.

The only thing you require is access to the Internet. After that, you'll have access to your record keeping online, where you may also allow your accountant or bookkeeper to view the same data alongside you. This enables you to receive helpful advice and find solutions to difficulties in the here and now.

Solutions such as Xero Bookkeeping software enable you to operate on numerous devices, operating systems, and platforms at the same time. These may include Linux, Windows, or the Mac operating system. Some bookkeeping software solutions for small businesses also offer a mobile version that is optimised for use on mobile devices like the iPhone, Android, and Blackberry.

7. Keeping your small business accounts secure

Increasingly, you should place a premium on the protection of your small business. If you use bookkeeping software that is hosted in the cloud, even if your computer or mobile device is stolen or misplaced, your data will still be safe.

When you utilise bookkeeping software that is hosted in the cloud, each user that you invite has access to the most recent version of your company's financial data. Because your software is hosted in the cloud, you will no longer be responsible for downloading and installing software updates on your computer.

8. Training for Xero and other bookkeeping software solutions

Before embarking on this path, it is imperative that you have a solid understanding of double-entry accounting or that you have undergone some form of fundamental training. This is despite the fact that there are many cloud-based accounting software programmes for small businesses available to Australian small businesses.

You can also tailor Xero to the needs of your company by utilising the strong add-ons that are available in the Xero "add-on marketplace" for customer relationship management (CRM), inventory management, work flow, task costing, and debt collection. In addition, we will assist you in determining which add-ons will provide your company with an essential competitive advantage over its rivals.

9. The practise of outsourcing one's bookkeeping

Because the majority of the time, our customers want to concentrate their energy on the activities that bring in money, we also offer guidance on how to outsource the bookkeeping services for your company. Alternately, if you choose to engage with an outside bookkeeper, we are more than pleased to communicate and collaborate with them.

How We Can Assist You in Better Comprehending Your Company's Financial Statements

There is much more to accurate bookkeeping for small business owners than simply monitoring the deposits and withdrawals of a single bank account.

Instead, your accounting should include a record of all financial activities, such as sales, payroll, and accounts payable. There are five areas that need special attention:

- Assets: Cash and resources that are owned by the company (things like inventory and accounts receivable).

- Liabilities: The financial commitments and debts that are owed by the company (things like business loans or accounts payable).

- Expenses or expenditures: the outflow of cash to pay for goods and services purchased from a third party (things like employee salaries or utility bills).

- Revenues/income: This refers to the money that is made via the regular activities of a firm, such as sales.

- Equity is the total value that is left after any liabilities are deducted from a company's assets. The owner's equity is a representation of the ownership interest they have in the company (things like stock or retained earnings).

It is essential to have a bookkeeper for the operations of a small business since they can organise each account to record individual transactions to the categories that are appropriate for those activities.

Even though no two firms are the same, there are a lot of different sorts of company accounts. Establishing them in a way that enables the proprietor of the company to keep an eye on things will contribute to a superior grasp of financial matters.

Getting Started With Basic Bookkeeping For Small Business Owners

It is one thing to have an understanding of the different types of accounts you will need to keep track of, but it is an entirely different thing to actually record them.

In days gone by, keeping track of a small business's financial transactions for the purpose of bookkeeping required a physical ledger and involved human labour.

Nevertheless, most modern companies keep track of their financial transactions using computers.

Your company will require a ledger, regardless of whether it is in the form of a book, a spreadsheet, specialised accounting software, or an online bookkeeping service. While the format may change, the fundamentals will remain the same.

Spreadsheets using common office software may appear to be the most cost-effective approach to keep track of your ledger; however, it is important to keep in mind that manually building a ledger might need a significant amount of time in addition to a high level of competence.

It's possible that if you own a small business, you don't have enough time in the day to keep a ledger by yourself.

You run the risk of losing track of things, making inaccurate entries, and eventually spiralling into a bookkeeping nightmare if you continue in this manner.

You are not the first Australian business owner to get into this problem, and you most surely won't be the last. If any of this seems familiar, don't worry; you are not the first and you certainly won't be the last. It is possible for it to occur to anyone.

Imagine that you've finally gotten things under control and have been enjoying some success with your company for a few months, but then you turn around and see that your books are completely out of hand.

You have no record of who has paid you; you are unsure of who owes you money; and dealing with your overdue BAS is becoming a nightmare for you. You have no record of who has paid you.

In certain circumstances, the owners of businesses might have the impression that their bookkeeping is up to date, but they might not be sure whether or not the information is accurate.

This is a particularly common occurrence if your primary expertise lay in a different area of your company's operations than its administration.

When it comes to the working life of a business owner, there are few times that are more stressful than when BAS time rolls around. This is on top of the stress that comes from wondering whether the employee and payroll aspects of bookkeeping, such as superannuation, salary sacrifice, and PAYG, are being tracked and processed correctly. There are also few times that come after BAS time that are more stressful.

Utilizing the services of an online bookkeeper who specialises in working with owners of small businesses is a better alternative to outsourcing your bookkeeping.

This can save you a significant amount of time and reduce the amount of stress you feel, allowing you to concentrate on the areas of your company that generate money.

There Is a Big Difference Between Bookkeepers and Accountants

If you own a small business, you're probably used to juggling a number of different responsibilities at once. In addition to ensuring that things continue to function normally, it would be helpful if you earned income, ensured that your customers were satisfied, and managed financial information.

However, keeping tabs on the finances can be a time-consuming effort, and one of the most important considerations you may have is who you should choose to assist you with your accounting needs. Do you require the services of a bookkeeper, an accountant, or both? Let's take the mystery out of this.

The duties and responsibilities of bookkeepers and accountants are not interchangeable. The primary concerns of an accountant are:

• the preparation of statutory returns and the lodging of those returns.
• advise on the organisational arrangements of legal entities
• providing broad guidance on matters pertaining to business and finances

Most accounting firms need their employees to be members of a professional association. Depending on the nation in which they are employed, qualified and registered accountants may refer to themselves as CPAs (Certified Public Accountants), CAs (Chartered Accountants), or other titles.

Bookkeepers can manage lots of diverse obligations inside a small corporation. However, the organisation, recording, and reporting of financial transactions as an integral part of the daily operations of a small firm are the primary focuses of this topic. In more recent times, some bookkeepers have extended their range of duties to include:

• instruction of customers in the usage of accounting software
• creating economies inside the company by putting into place procedures for managing documents and keeping track of inventories
• installing point-of-sale (POS) systems in a retail environment so that everyday transactions can be recorded.
• the process of designing, putting into action, managing, and evaluating internal business procedures

It is common for a bookkeeper to have a particular area of expertise; therefore, it is a good idea to enquire further about this area of expertise when you are considering using a bookkeeper for their services.

Small Business Accounting Tips

1. Update your marketing and commercial strategies

It is recommended that you review your business and marketing plans on an annual basis. Examine the last year to determine whether you were successful in achieving your objectives, and then plan new objectives for the coming year. Establish your monetary objectives, and be ready for the coming year. This is a basic piece of advice, yet it's still something that some companies don't do. It is essential to your success to make plans for the future and you should not take this task lightly.

2. Look into international taxes

Maybe you've already started to penetrate new marketplaces in other countries. It is possible that you will need to start looking into import taxes as well as any other criteria that are necessary for trading within that country. Start off by having a conversation with an accountant. They are able to assist you in understanding all of the taxation regulations, as well as assist you in preparing the financial plan for the expansion of your firm.

3. Examine your current policies, registrations, and licences 

In addition to going over your company strategy, you need to check that all of your licences, insurance policies, and registrations are in order. It is possible that there are registrations or licences that you do not require any more, but you may find that there are new ones that you do require. Alterations in insurance premiums are also possible. You may be able to reduce your annual spending or get yourself ready for higher costs by giving careful consideration to these three aspects every year.

4. Reconsider your approach

It is important to not be scared to call your accounting practises into question. If you challenge your tactics, you can discover that the things that were successful for your company in the past are no longer effective.

This could be due to the expansion of your company or simply changes in the technologies that are available. If your company has started to experience rapid expansion but you are still handling the financial reporting on your own, you should investigate the possibility of using an accounting service or a professional accountant.

5. Employ a CPA or other accounting firm

Now we'll go on to the last piece of advice. If you hire a qualified accountant, they will either assist you in making more money or point out areas in which you are losing money.

They can assist you in streamlining your accounts and alleviating some of the tension that you are experiencing. Even while it could appear to be pointless expenditures here and there, you will find that it is money well spent in the long term. Contact Link Strategies if you are in need of a reliable accounting solution, and find out where we can take your company with our help.