Bookkeeping is vital when it comes to properly managing business resources. You will need your records for tax purposes or if you ever wanted to receive a loan from a lender. Whether you’re doing your own books or hiring a small business bookkeeping service to keep track of everything it’s important to understand the basics of small business bookkeeping.
Keeping good records gives you the insight you need to know any cash flow issues and potential legal problems that may arise including any Tax issues or audits that could happen if done incorrectly. Here are just a few small business bookkeeping basics that should always be standard practice in your business.
Revenue and Expenses, Assets and Liabilities
Every transaction should be recorded when recording assets and liabilities that would be reported on your balance sheet, where revenue and expenses would appear on your income statement. No matter if it incoming or outgoing everything must be recorded.
It’s vital to record the cash your company spends so you have an accurate number of your expenses at years’ end. Writing reimbursable checks and having detailed petty cash records are both effective methods of documenting cash expenditures. Be sure never to combine personal with business expenses.
When you maintain good records of all your inventory, it helps you forecast for the upcoming year by watching trends, prevents stealing and misplacing of your merchandise, and keeps inventory holdings to a minimum. Some relevant information for your records would be dates purchased, purchase prices, sale prices, stock numbers, and dates sold.
Accounts Receivable and Accounts Payable
Keeping track of what you are owed by customers you and the debts you owe others is prudent to make sure you record including invoice dates, invoice numbers, amounts owed or due, terms, balances, and current client information in real-time.
Hiring even one staff member invokes your responsibility to file and pay payroll taxes, each state has its own tax regulations. The employer is responsible for maintaining employee forms such as the W-4 and the I-9 as well as any vendors you have that require forms as well. You are responsible for keeping records on withholding, unemployment, employer matching, and worker’s comp.
If you decide to do your own bookkeeping instead of using small business bookkeeping services, you should at the minimum consult with an expert at the beginning making sure that you are on track. For more information on how you can acquire small business bookkeeping services from AccountingX click here for your free consultation.