A Guide to Bookkeeping and Accounting for Small Businesses
Owning and managing a small business is no easy feat. The prospect of success and growth is fun and exciting, but first, you need to be able to keep things running smoothly. Availing professional help such as bookkeeping services for small businesses is one way to aid you in responsibly managing your own business.
What is bookkeeping?
By definition, bookkeeping is the act of keeping records of the personal affairs of a business. It involves a day-to-day record keeping of all financial transactions pertaining to the business. Bookkeeping ensures that all of the transactions are updated and accurate.
In the past, these records were kept in books and ledgers, thus the term bookkeeping. Nowadays, there is bookkeeping software available to make things easier, but the term still remains.
What does a bookkeeper do?
A bookkeeper’s responsibility seems to be straightforward, which is why owners sometimes forego availing bookkeeping services for small businesses. However, a bookkeeper’s job is somewhat more intricate.
Take a look at the list of some of the responsibilities of a bookkeeper below.
- Daily account management
- Record maintenance, updating
- Make sure that a business is ready for tax
- Management of bank feeds
- Ensure that the business is financially law-abiding
- Accounts payable
- Accounts receivable
- Send out invoices
- Prepare financial statements
- Process employee payroll
- Monitor business cashflow
- Prepare books for accounting
- Manage foreign currency transactions
- Produce inventory reports, stocktake
As you can see, the list is quite long. Some of the items, like tax and legal considerations, even require some in-depth knowledge that not everyone has. If a business owner tries to take up all these responsibilities, he or she will eat up a lot of time and not have enough drive to think of ways to grow the business.
Do you need a bookkeeper for your business?
Do you need to hire a bookkeeping service for your small business? If you feel daunted by the tasks mentioned above, then the answer to that question is a definitive yes.
Advantages of hiring bookkeeping services for small business owners
- You can focus more on what you want to do with your business rather than how to keep it running on a daily basis.
- Less chance of a mistake since a professional bookkeeper will be handling the accounts.
- Save-up on time and effort.
- Enjoy a good work-life balance since bookkeeping and accounts management are time-consuming and tedious.
- Have a fresh pair of eyes to tell you how your business is doing financially.
- Everything and everyone is paid on time, avoiding any possible human resource issues due to payroll concerns.
- Avoid conflict of interest with business partners.
- Save up on cost as a result of timely and accurate financial management.
- Your bookkeeper is trained to identify mistakes or fraud that may end up costing you more money.
- An organized book of finances makes it easier to work with investors, lenders, accountants, banks, and lawyers.
- You have readily-available accurate financial information whenever you need to make business decisions based on finances.
- You have a way to make sure that you are making more money than you are spending.
- Your business thrives.
How much should bookkeeping services for small businesses cost?
You have three options if you wish to avail of bookkeeping services for your small business. You either hire a bookkeeper for a full-time position, get a part-time bookkeeper who works for you as well as several other business owners or outsource your bookkeeping from a company that specializes in bookkeeping and accounting.
Full-time bookkeepers earn a payroll of about $3,000 to $4,500 a month. You will have to prepare this amount if you want to hire a bookkeeper as a full-time employee. However, this practice is common only among bigger businesses.
A part-time bookkeeper will cost you significantly less at only $400 to $800 a month, plus added benefits. The downside to this arrangement is that you will be sharing one person among other businesses. But for small businesses, this arrangement is usually sufficient.
If you choose to outsource from a bookkeeping firm, you may end up spending anywhere between $500 to $2,500 a month, depending on the scope of services you need and the firm’s price offer. The good thing about outsourcing is that you are no longer obliged to provide employee benefits like you would a full-time or part-time employee. This will be the outsourced firm’s responsibility.
Can you do your own bookkeeping?
If you have not decided on hiring bookkeeping services for your business yet, you need to make sure that you are doing it properly yourself. Here are a few tips you can follow to efficiently do your own bookkeeping:
- Install a bookkeeping software. Softwares like Quickbooks, Xero, or FreshBooks make life much simpler and easier for DIY bookkeeping. They also make sure that all records are as accurate as possible.
- Come up with a bookkeeping checklist. This way, you don’t miss out on any crucial aspects of your financial record. Missed deadlines, overlooked taxes, and double payments can cost a small business a lot of money that could have been spent on growing and innovating products.
- Enroll in a bookkeeping class. Nowadays, you don’t even have to leave your couch to study. You can learn all about bookkeeping from the comforts of your home with online courses such as the following:
Knowing the terms and concepts of bookkeeping is essential if you plan to do your own bookkeeping. That’s because you will deal with accountants, lenders, and clients yourself. When you do, you will want to be as prepared and as knowledgeable as you can be to discuss your finances with them. You also want to be aware of as possible to understand the terminology that might come up during your discussions.
Bookkeeping should be as straightforward and simple as possible. It has to be so because it is hard to make complicated things accurate and concise. This online course teaches you how to go about bookkeeping with confidence, even if it’s your first time.