Bookkeeping is crucial for every business to track cash that comes in and goes out of the company, how your business is performing, and make accurate financial decisions for your company. Accurate business books can keep you organised all the time, especially during tax time and help you find possible tax deductions to save more on taxes. Therefore, it is crucial to do bookkeeping for small businesses. Now, the question arises, how a bookkeeper can help do your bookkeeping? Let’s check out the answer:
Small Business Bookkeeping Process
Before you start bookkeeping for your business, it is crucial to determine the right bookkeeping and accounting method for your company. Bookkeeping methods include: single-entry method and double-entry method.
Single-entry method
It is used by companies with few or no employees. If there is no requirement for in-depth financial reporting, the single-entry method can be used.
Double-entry method
It is used by companies that want to grow their business or need in-depth financial reporting.
On the other hand, accounting method includes: cash-based accounting method and accrual-based accounting method.
Cash-based accounting method
It makes it easy to track your cash flow. You record financial transactions when money flows in and out of your business, even if they were billed or earned earlier.
Accrual-based accounting method
It works better with double-entry bookkeeping, so it is best for businesses that sell goods or keep inventory. You record financial transactions when they are billed or invoiced. If you are unaware of this method, you can seek help from a tax accountant in Melbourne.
It is crucial to decide which method would work best for your company. Now, let’s have a quick look at the basic steps involved in the bookkeeping process.
Collect Financial Documents
It is vital to collect the company’s financial documents. These documents need to have the following information:
- date of the financial transaction
- seller and buyer
- financial transaction amount
- services or products provided
Melbourne bookkeeper tracks every sale and purchases you make along with tax returns and payroll records since the bookkeeper uses the information from these documents for the next steps of the bookkeeping process.
Categorisation of Business Transactions
After collecting financial documents, it is vital to organise them into a specific category, such as assets, liabilities, equity, expenses, or revenue.
- Assets: Assets refer to anything that the company owns.
- Liabilities: It refers to money you owe to another party at a future date.
- Equity: Any investments or money that come from the owner of the company, goes under equity.
- Revenue: Revenue is what you make from selling goods or services.
- Expenses: Any purchases you make for the operation of your business go under expenses.
- Bank Account Reconciliation
Preparing a bank reconciliation statement includes comparing your business books against your bank statements to ensure the information is accurate and matches each other. Bookkeepers can help you reconcile your bank accounts to identify discrepancies (if any) or any fraudulent activities. If anything doesn’t match, bookkeepers can help resolve those issues.
Prepare Financial Statements
Once you have organised and accurate information, you can use this information to prepare financial statements that will provide you insights into how your company is performing, including:
- a profit and loss statement helps you understand what types of expenses and income affect your bottom line.
- a cash flow statement: a cash flow statement shows how money flows in and out of your company in a specific time period.
- a balance sheet: the balance sheet has information about your assets, equity, and liabilities for a specific time period.
As a business owner, you might have to look at several factors to grow your company. For this reason, you might not be able to do bookkeeping. Therefore, it would be beneficial for you to seek help from experienced bookkeepers.
Conclusion
The blog outlines the steps businesses need to follow to do bookkeeping. You can get help from bookkeepers to manage your business books. If you are interested in getting Reliable Bookkeeping Services, you can contact us.
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