There are many ways to mess up my own bookkeeping for my business. One of the easiest that is often overlooked is not keeping up with the bookkeeping from month to month. Before we tackle that, we have to first look at what bookkeeping is and what it isn’t. Bookkeeping is an essential part of any business that operates and desires to turn a profit in offering services, selling products, etc..
Overview: What is bookkeeping?
When you think of a bookkeeper or an accountant, what are the first things that you think of? You may think of numbers, financial statements, financial transaction(s), or a general ledger. You may think that it is all numbers and spreadsheets and that is boring! Bookkeeping is the art of keeping your financial transactions meticulously organized and set up for success. A bookkeeper or bookkeeping is the process of tracking and recording a business’s financial transactions. These business activities include generating an invoice, recording a payment, charging a debit or getting a receipt. These are just some of the many transactions that take place to keep track of.
- Invoices
- Receipts
- Bills
- Purchase Orders
- Accounts payable
- Accounts receivable
Your business financial information can be recorded by hand in a journal or in an excel spreadsheet of debits and credits to produce financial reports and an income statement for the IRS. Bookkeeping and bookkeeping services like ours at Check Write Payroll and Bookkeeping make things easier. Many companies opt to use bookkeeping software like Quickbooks. They are one of the most prominent bookkeeping software solutions on the market today.
Bookkeeping is just one facet of doing business and keeping accurate financial records. The bookkeeping process should use a solid bookkeeping system, have a chart of accounts and watch your cash flow. It should also use an accounting software like Quickbooks or Netsuite.
Bookkeeping vs. Accounting: What’s the difference?
Bookkeeping Responsibilities are:
- Record financial transactions
- Post debits and credits to a journal
- Prepare financial statements
- Process payroll
Accounting Responsibilities are:
- Review and analyze financial statements
- Prepare to adjust entries
- Perform audits of your records
- File relevant tax returns on your behalf
While it may seem to be the same thing to many. Bookkeeping services and accounting services are not the same thing. They are both time-consuming and keep track of the company’s financial transactions. Accounting is the umbrella term for all processes related to recording a business’s financial data. Bookkeeping is an integral part of the accounting process that works in the day-to-day of the business. Bookkeeping commonly records the company’s financial transactions, posts debits and credits to a journal, prepares financial statements and processes payroll.
Unlike bookkeeping, accounting utilizes data from bookkeepers to review and analyze financial statements, prepare adjustments to entries, perform audits and file relevant tax returns. Your public accounting firm has a legal requirement to make sure your business transactions are accurate and prepared for tax season. Without bookkeeping though, accountants would not be able to successfully provide business owners with the insight they need to make informed financial decisions.
As a new business owner, it is best to start with small firms that can help you with financial planning and make sure your general journal is accurate. The last you as a new business owner wants to deal with is the internal revenue service. These small firms whether they are a bookkeeping firm or an accounting firm can help you to find the right accounting systems for your business. Each business is unique and needs the right accounting system to make sure your business is a success and to chase out errors.
3 key benefits of bookkeeping
1 Access To Detailed Records of All Transactions
By logging all of your transactions you will have easy access to the information that you will need. Intuit makes this easier with Quickbooks Online software. Common categories are goods, services, wages and taxes. You will need to sit down with your bookkeeper and determine what are the appropriate chart of accounts for your business.
2 Ability To Make Decisions Based on Data Not Guessing
Because you now have the creation of financial reports at your fingertips. This data will help you to determine and measure the success of your business. Through documentation, you will now be able to see the profitability or not of your business and make decisions to grow your business further. The reports section of your accounting software will help you to look at the balance sheet, and determine if you are doing your bookkeeping right or wrong. One of the ways you might get it wrong is by doing double-entry bookkeeping (double-entry accounting) instead of single-entry bookkeeping. Your CPA will know what is the correct accounting system you need to use for your business.
3 Better Tax Preparation For The End of the Year
When it is time to prepare and file your taxes, your CPA will review all of your books. You’ll need to comply with the IRS and its rules and regulations for business finances. Some of the most common documentation that you must provide the IRS are financial transactions, financial statements, tax compliance and cash flow reports.
Do I Really Have The Time To Perform Bookkeeping Services For My Company?
Bookkeeping can be time-consuming and tedious. If you are a new business owner, you are likely already spread thin! Adding bookkeeping to the mix will spread you even thinner. If you are like most modern business owners, you didn’t become one thing to practice professional-level bookkeeing. Outsourcing the work to a seasoned bookkeeper can allow you to focus on your business growth.