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Bookkeeping is the process of recording and organizing a business’s financial transactions. A bookkeeper is a person responsible for that process.
For any small business, it is imperative to record the money going out as well as the money coming in. Because documentation is key, first you’ll need to get organized. Primarily, you need to have an accurate knowledge of all the financial ins and outs of your business. Right from the cash you have on hand to the debts you owe, understanding the state of your business’s finances means you can make better decisions and plan for the future precisely.
Moreover, accurate bookkeeping also protects your business in case of any dispute with a vendor or in an audit by the government. So hold onto those receipts, bills, and cancelled checks. Pay particular attention to your petty cash and remember to reconcile your accounts at least once a month without fail.
Here are the two important steps of Book-keeping that you need to know –
Set up and manage accounts – A key difference between business bookkeeping and personal budgeting is in the handling of accounts. But what exactly is an account? A bookkeeping account is not an individual bank account. Rather, an account records all the financial transactions of a certain type — for example, sales or payroll. Bookkeeping starts with setting up each necessary account so that you can record transactions in the appropriate categories. Every business has different accounts but some accounts are more common than others.
Record each financial transaction – Now that you’ve created your set of financial accounts — it’s time to record what’s actually happening with your money. Most bookkeeping is done using the double-entry accounting system. In this system, any transaction in one account requires an equal and opposite entry in another account.
You can use a single-entry system for small-business bookkeeping, but we don’t recommend it unless you run a small business with minimal financial activity. Single-entry bookkeeping is simpler and faster than dual-entry, although it provides only a limited picture of your business’s finances. This makes it challenging to produce important financial documents, such as balance sheets.
If you are a small or home-based business, knowing the financial state of the business is very crucial. An online bookkeeping tool can help you to analyze, detect fraud, errors and plan your finance in a better way.
More often than not small business owners don’t have the tendency to maintain their orders, transaction details in a systematic way. BulbandKey is a platform which enables small & home-based businesses by giving them an easy to use a free tool known as Order Management. Feel free and Download our android app to use this helpful tool for your business management.