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The basics of bookkeeping for small businesses
- By Inessa Khaykin
- Published 07/22/2010
- Bookkeeping
- Unrated
The basics of bookkeeping for small businesses
The expenses of starting a business are huge, and most small businesses just starting out barely get by as it is. The idea of hiring an accountant full time to handle their records isn't something they can budget. Normally, the owner hires a book keeper who is basically the accountants 'side kick', with the accountant himself stepping in once a month to ensure that everything is good.
If you are indeed starting out, the idea of even hiring a bookkeeper seems expensive. Think of this article as a to-do list as a bookkeeper. Why hire one when you can do it yourself until you really get your business moving?
The Very Basics
Like most people who are starting a business, you probably have one thousand and three things going on inside your head of how to run your business best. You have so much to do that you just don't want to deal with the little things, like keeping records of exactly what was spent where, and when. You want to get on it now, and really start to make money.
Slow down a few steps, this isn't a race, and in the business world, there is no finish line. If you don't plan your book keeping, and figure out exactly what financial aspects of the business you want, and need, to keep track of, you're going to find yourself in six months not knowing if your business is wonderfully successful, or if it's failing miserably!
When properly completed, book keeping can and will give you an exact measure of how well you're doing in your business. It provides all sorts of valuable information so you can see your financial success, and make corrections to improve any short coming the business might be having.
Basically, book keeping is your best friend for managing the financial aspect, so don't think for a second you can put just a few minutes into it and be done. The best thing, if you're going to be your own bookkeeper, is to set up a system with your accountant before you ever open your business doors or make your first sale.
What Accounting Method is best?
There are two basic account methods that you're going to have to choose from when you decide on your bookkeeping system cash based, or accrual. The main difference in these two is when you record your purchases and your sales. With accrual accounting, you make your records when it's completed, no matter if cash is exchanged or not. However, with a cash based accounting, you only make your records when money changes hands.
Let's try a simple example. You purchase software, but you don't actually have to pay for it for a month. If you were using cash based system, you wouldn't record this transaction until you paid that company in a month. However, with accrual accounting, you make your records when the transaction happens, and you also record the future debt.
If you are indeed starting out, the idea of even hiring a bookkeeper seems expensive. Think of this article as a to-do list as a bookkeeper. Why hire one when you can do it yourself until you really get your business moving?
The Very Basics
Like most people who are starting a business, you probably have one thousand and three things going on inside your head of how to run your business best. You have so much to do that you just don't want to deal with the little things, like keeping records of exactly what was spent where, and when. You want to get on it now, and really start to make money.
Slow down a few steps, this isn't a race, and in the business world, there is no finish line. If you don't plan your book keeping, and figure out exactly what financial aspects of the business you want, and need, to keep track of, you're going to find yourself in six months not knowing if your business is wonderfully successful, or if it's failing miserably!
When properly completed, book keeping can and will give you an exact measure of how well you're doing in your business. It provides all sorts of valuable information so you can see your financial success, and make corrections to improve any short coming the business might be having.
Basically, book keeping is your best friend for managing the financial aspect, so don't think for a second you can put just a few minutes into it and be done. The best thing, if you're going to be your own bookkeeper, is to set up a system with your accountant before you ever open your business doors or make your first sale.
What Accounting Method is best?
There are two basic account methods that you're going to have to choose from when you decide on your bookkeeping system cash based, or accrual. The main difference in these two is when you record your purchases and your sales. With accrual accounting, you make your records when it's completed, no matter if cash is exchanged or not. However, with a cash based accounting, you only make your records when money changes hands.
Let's try a simple example. You purchase software, but you don't actually have to pay for it for a month. If you were using cash based system, you wouldn't record this transaction until you paid that company in a month. However, with accrual accounting, you make your records when the transaction happens, and you also record the future debt.
Inessa Khaykin
Tired of trying to figure out where the money is and where it should go? Let KJ Accounting and Consulting Group help you with your book keeping and accounting needs. Whether you want us to help you set up your books so you can manage them or you would prefer to have us as your trusted expert to do it all for you, KJ Accounting and Consulting is your answer and solution to your needs.
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