The answer to this most common of questions by small business owners is yes, however some may find it too many a hat on top of the sales, management and customer service hats currently sitting on top of their head. The addition of bookkeeper and accountant hats is certainly many to juggle.
That said, it is doable if you can successfully manage all of the timeframes put upon you. Many small business owners find that they would rather opt for bookkeeping services in Manchester and relieve the pressure. However, that is an option for you to decide upon with experience of tackling this area yourself, now let us take a look at the responsibilities of business bookkeeping and how to keep things on the right path.
Learning Lingo Regardless
When you started your business it was to earn money, not lose it. The big difference is going to be learning the lingo that surrounds bookkeeping and accounts – not guessing on what it sounds like it is.
You need to understand what the definition of the terms sale, expense, liability, asset, revenue and accounts receivable are. Put simply, they are as follows; Sale (transactions you receive cash for), Expense (something you pay for like rent or supplies), Liability (something you owe money on such as loans), Asset (a business owned item, such as a printer or computer), Revenue (income from sales made by your company) and Accounts Receivable (money owed by customers from invoices you have sent).
Creation of Documents
The last step was pretty straight forward. The next is where they come to use.
Three documents are going to be critical to your business and give you the progress of your business as well as where it’s headed. The first is the Balance sheet which showcases your business worth. It is a breakdown of everything you owe against what you own. This balance sheet provides the assets, liabilities and owner equity of your business.
Then you have the Profit and Loss Statement which shows your business profitability. Basically, this is a summary of revenue minus expenses for a quarter of a year at a time. This allows you to see those losses and profits during that time frame.
Then we have the Cash Flow Statement to show where that cash is going from your business. This highlights the three activities that your business has cash flow through in operating (day to day money made), investing (paying off of assets) and financing (the money invested in the business). It may sound complicated on where to start on creating these, but there are templates available online but as time moves onwards you may want to consider utilising the help of professional bookkeeping services.
Separate and Track Expenses
No matter what kind of business you run, the most important rule is to separate business and personal expenses. Ideally, you will have set up a separate bank account for your business upon starting to combat this. It would be smart to keep track of expenses with receipts and a business credit card. It may sound like the simplest of steps but when it comes to tax purposes and profit monitoring it will be a big difference.
You may not realise the number of documents you need to keep a tight track of for tax and other business purposes. Areas such as payroll and inventory management is one part of it, but there are many others that can save a huge headache by simply scanning them in preparation.
This involves bank statements, credit card statements, any cancelled cheques, receipts, bills, invoices, payments, tax returns, 1099 forms and payroll documentation. There may also be others aside from these to consider. That is definitely a lot of workloads to consider.
These are generally the starter points to doing your own accounts and bookkeeping and may seem like a mile long road as it is, which is why many small businesses turn to small business bookkeeping solutions to keep these areas secure and running smooth and not take time away from the real job at hand.