Bookkeeping is the process of maintaining your financial records of various transactions for your business. Records include total revenue, gains and losses, expenses, transaction dates, and many other details. Bookkeeping is the basis of accounting process and it is very important, no matter what business you are in.
There are several advantages of maintaining proper bookkeeping for small businesses. Bookkeeping is required for every business by law. It helps business owners know the exact position of their business anytime they want. Details like gain or loss, the amount due to creditors, dates of transactions, and the amount due from debtors are critical in assessing financial position and bookkeeping helps a great deal in these things. Small businesses have to maintain bookkeeping to be legally and financially sound.
Regular bookkeeping with details regarding transactions, turn over, and profit and loss generations helps small business owners a great deal in getting loans from various public and private financial sources. It is always important to have professionals to maintain books. You can have full-charge bookkeepers who take care of the entire transaction process of the company and/or accounting clerks who can handle specific accounts.
Regular updating is essential in bookkeeping. Maintenance and updating your books should be done on a regular basis – daily or once a week. If you are not updating regularly, you will never know the business’ true financial status. Bank statements which show the flow of your funds are essential for small businesses.
For many small businesses, transactions are done through invoices and receipts. The payments are usually paid through checks or credit card payments. Bookkeeping can be done manually or computerized, depending on the size of the business and the volume of transactions. This is usually done by maintaining a monthly spreadsheet of all the expenses incurred daily and another spreadsheet to show the sales, purchases, and gross / net profits.
In cash businesses, it is important to keep track of the earnings and expenses for tax purposes. Proper and regular maintenance of books helps the business a great deal and saves the owner many unwanted troubles, especially with the IRS.
Contact Bonafide Accounting Services to see how we can help your small business today.
