Business Advice, Finance

A Guide to Bookkeeping for Small Businesses

Business Advice | 21 December 2022 | 1 year ago

Operating a small business can be a lot of fun, especially when things are going well, but there are more ‘serious’ things that need to be taken care of. These might not be as interesting or enjoyable, but they are an important part of running a successful small business. For example, you need to handle bookkeeping, which involves recording and managing all of the financial transactions in your business. This includes incoming payments, outgoing payments, managing tax and paying employees. Bookkeeping is done to keep track of what your business spends, and the money that it receives.

Bookkeeping gets its name from when everything was noted down in books, but now the majority of small businesses use bookkeeping software. Software automates a lot of bookkeeping tasks, saving you time and reducing the chances of mistakes being made. In this blog, we will take a look at the ins and outs of bookkeeping as a small business.

What Does Bookkeeping Involve?

There is a lot that goes into bookkeeping, which is why many small businesses choose to outsource things, or hire a dedicated person to take care of things on their behalf. Though you can certainly handle bookkeeping yourself, it does require a lot of time and dedication, and mistakes can be costly. There are four main areas that are involved in bookkeeping, all of which are centred around ingoing and outgoing payments.

  • Making Payments
  • Collecting Payments
  • Managing Tax
  • Payroll
The recording and reconciliation of your accounts are the most important tasks in small business bookkeeping. You need to record your sales and your transactions, and every purchase made by the business needs to be noted. You also need to reconcile your accounts against your bank statements regularly, as this checks that your transactions and balances match. You could do this weekly, weekly or monthly, and some businesses do it even less often than this. The aim is to find out if your transactions and balances match and, if they don’t, why not.

There are a lot of reasons for bookkeeping. For example, you can check that your business is making more money than you are spending. It’s also helpful to have accurate financial information when you are making decisions regarding your budget. You’re also a lot more likely to spot incorrect payments or financial errors if your bookkeeping is up to date.

As a business, you will need to complete annual tax returns, and it’s vital that these are accurate. Bookkeeping makes filing your tax return a lot easier, as all of the financial information needed is organised and ready to use.

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