Bookkeeping is a necessity for a business at the very start. Even if you are the only employee selling a product or service, you have to have accurate accounting to know whether you are losing money or making it.
About half of all small businesses across the country outsource either part of or all of their bookkeeping. Many find this is more economical than hiring a bookkeeper whose earnings range from $35,700 to $50,050 annually with certified bookkeepers making 10 percent more. Whether you choose to do the bookkeeping, hire a certified bookkeeper or choose to outsource with Slaton Financial Services, it is good to know the basics.
Bookkeeping vs. Accounting
A bookkeeper is depended on to keep accurate records of all business transactions. They send invoices, manage accounts, pay bills, conduct bank activity and prepare financial documents. This work is the foundation for the accounting process which examines the data and produces overviews to help with budget planning and forecasting.
Bookkeeping is a skill that takes practice to learn. The University of Texas offers an online certified bookkeeper course for national certification. You cannot even begin the course without two years of bookkeeping experience.
Attention to Detail
Records are not helpful to your business unless they are accurate. Finance records have to be kept meticulously on a regular basis. It is easy to get behind or bogged down when you are focusing on other aspects of your business. The only way to know the true financial health of your company is through accurate bookkeeping.
Accounts
Setting up accounts for your business in order to record transactions is necessary to begin the bookkeeping process. All businesses do not have the exact same accounts, but there are some accounts that all businesses will have for proper bookkeeping.
The basic accounts which businesses will have in common are the following:
- Expenses – Money that is used to pay for items or services like payroll or rent.
- Revenues – Money that is earned by your business through sales or a service.
- Assets – Resources owned by the business like inventory or property.
- Liabilities – Debts owed by the business like a property loan.
- Equity – When liabilities are subtracted from the assets, you are left with equity like stock or retained earnings.
Bookkeeping Method
When setting up a business you will need to decide whether you will use single entry or double entry bookkeeping. Single entry bookkeeping is similar to keeping a checkbook. Each transaction is one entry. However, it still requires a two-column ledger. The two columns trace either income or expenses. Single entry cannot be used for a balance sheet or for tracking assets and liabilities.
Double entry bookkeeping has two columns for each account and each transaction is recorded in two accounts. Two entries are made placing a debit in one account and a credit in the other. All money must be accounted for so that the total amount of the entries balance. Double entry bookkeeping shows a true financial picture of the company’s finances relying on the accounting equation: Assets = Liabilities + Equity.
Most companies use double entry bookkeeping which is more versatile and allows for a balance sheet and tracking. Businesses must follow the accounting rules and regulations of generally accepted accounting principles (GAAP) which are used by public companies, private companies, non-profits, as well as state and local governments.
Reports
When your bookkeeping is accurate and balanced, you can use reports to ascertain an accurate picture of your business’s financial health. The reports typically created by a bookkeeper or by Slaton Financial, if you choose to outsource, are the following:
- Profit and Loss Statement – This income statement shows your company’s revenues, costs and expenses for a certain period of time. This helps you make decisions about the next quarter while having an accurate view of your sales and expenses.
- Cash Flow Statement – This report simply shows where your company is earning money and where it is spending money. With this statement, you are able to quickly determine your ability to pay debts that are owed.
- Balance Sheet – This is used to see a snapshot of your assets, liabilities and equity during a certain time period. This gives you an overview of the financial health of your business and helps in making decisions for the next quarter or upcoming year.
Local Bookkeeping Services from Slaton Financial
When you contact us regarding outsourcing, we can help you make your decision! We have an expert Texas staff that can provide answers to your questions and take on the work of your bookkeeping needs. We keep up with any changes in state and federal tax guidelines so you won’t have to be sidetracked. We will be honored if you choose us to do your bookkeeping knowing that we are helping one of our very own in the north Texas community!
Call Slaton Financial Services today and let us take on the daily upkeep of your bookkeeping so you do what you care most about – growing a successful business for you and for your employees.