Bookkeeping is a vital function of any small business as it keeps companies aware of all the financial transactions they process daily. If you keep it organized, you will know exactly where and how much your company spends or receives money. It can be a reliable weapon in your arsenal to bring stability and profitability to your business. Some business owners look at it as a chore. But you must maintain your books to know your company’s financial standing. Small businesses especially have strict budgets to follow. So, it can be another good reason to update everything on this front. Chasing a financial goal or implementing necessary changes becomes easy when you ensure that. It strengthens your investment, expansion, and other strategies due to immediate access to precise financial data. A business can also avoid unwanted compliance issues and hefty penalties.
How do you streamline your bookkeeping process? Consider outsourcing this task to experts. A platform like Sound Advice Bookkeeping can help in this matter. They can manage any bookkeeping task you assign. At the same time, here is a quick view of a few steps to help you build a strong foundation for your in-house bookkeeping process.
- Entry system
Single and double-entry methods are standard bookkeeping practices. Since small businesses handle small transactions, maintaining single-entry records of income or expenses can suffice. However, larger transactions may need to be handled in double-entry systems such as credit or debit. These systems can be complex but offer comprehensive financial views. Nevertheless, you can choose between them based on your business size, type of financial record requirement, and transaction volume.
- Accounting method
After selecting an entry system, you must determine an accounting method, cash-based or accrual. If your business is involved in immediate transactions, a cash-based option can be suitable, which records a transaction as soon as the cash moves from one place or entity to another. However, companies with extended sales cycles may rely on an accrual accounting method that lists incurred transactions regardless of the time of cash exchange. The choice of accounting method should be based on cash flow, business operation, and future growth strategies. Anything that meets your current needs and adapts to evolving business demands can be perfect.
- Accounting software
Accounting processes have become simple thanks to modern accounting software that handles invoices, expense tracking, etc. How do you select a suitable one? An intuitive system can suit your business. Plus, your business model can guide you to the correct choice.
- Receipt management
These proofs of purchase help you identify all the transactions you record in your books. You need these details for data accuracy and tax payment. Receipts help you determine your business expenses to deduct them from your tax liability.
- Accounts payable and receivable
You must know what you have to pay to others and what your customers should pay you. These information pieces are necessary to calculate your revenue and manage resources. You can also thwart errors like late payments, which your vendors and other partners greatly appreciate.
Bookkeeping is an entire system, so staying organized is the key to success. You must explore every resource that simplifies this business function, such as outsourcing different bookkeeping tasks to an agency or embracing advanced accounting tools.