How to do bookkeeping for small businesses: A step-by-step guide

The major reports to include are the profit and loss, the balance sheet, and a cash flow analysis. Additionally, the aged accounts receivables and aged accounts payables reports are helpful in knowing which customers have not paid and which vendors are yet to be paid. These reports will help you gain greater insights into the financial health of your small business. Double-entry accounting enters every transaction twice as both a debit and a credit. Your business’s books are balanced when all of the debits equal (or cancel out) all of the credits. And since it takes equity, assets and liabilities — on top of expenses and income — into account, it typically gives you a more accurate financial personal bookkeeping services near me snapshot of your business.

• Determine a total figure, then break it down and assign amounts to the categories listed in the previous section.
• Investing means buying things, like stocks and bonds, to get money back.
• Choose software that is intuitive and easy to use, with good customer support and resources for learning.
• The golden rules of accounting can help ensure that your bookkeeping is accurate and up-to-date.
• Bookkeeping might seem intimidating at first, but it’s essential for your business’s success.

Learning Financial Statements

From the start, business owners can get personalized answers to questions and spend less time on their books. Without them, it’s nearly impossible to make informed decisions about your business’s financial health. Accounts receivable (AR) is the money your customers owe you for products or services they bought but have not yet paid for. It’s important to track your AR to ensure you receive payment from your customers on time. Generally, if your assets are greater than your liabilities, your business is financially stable.

Hire an in-house bookkeeper

It can help to spend some time reading and learning to get more insights. If you don’t have time, it might be best to get help investing your money from a professional. Generally, you should save enough for three to six months’ living costs in an emergency fund. A rainy day fund can be used for smaller problems in your life, like https://x.com/bookstimeinc major car repairs, home appliance repairs, or unexpected medical treatments. On the other hand, an emergency fund should only be used for big problems, like losing your job or having your life turned upside down. Then categorize your expenses into different categories, start estimating your expected revenue for the upcoming period, and allocate your expenses accordingly.

Bookkeeping Options for Small Business Owners

In some cases, these links are affiliate marketing or sponsored content, which means I may receive some form of compensation related to the link. Or you could check out this in-depth tutorial on using the more comprehensive, PC-based Quicken software from PlayLouder’s founder, Joe DeSanto. Despite being profitable, she might struggle to pay for ingredients and elec for July’s production if she doesn’t have cash reserves. According to a survey published in 2024 by leading financial analyst The Motley Fool, nearly 91 million Americans say that they’d have a hard time raising $400 in a pinch.

It could also mean keeping tabs on your personal debt and assets if you have a personal loan (like a mortgage) or investments like property or a collector’s sports car. At tax time, the burden is on you to show the validity of all of your expenses, so keeping supporting documents for your financial data like receipts and records is crucial. Most accounting software today is based on double-entry What is bookkeeping accounting, and if you ever hire a bookkeeper or accountant to help you with your books, double-entry is what they’ll use. Look for important features to your business, such as invoicing, expense tracking, bank reconciliation, and financial reporting. Choose software that is intuitive and easy to use, with good customer support and resources for learning. Don’t forget to check if the software integrates with other tools you use.