2023 Guide to Bookkeeping for Small Businesses

Keeping track of income and expenses for your business is called bookkeeping. Proper bookkeeping informs you about how well (or not so well) your cash flow is doing. It also gives you an overall idea of how your business is doing. Constantly reviewing and keeping an eye on the books is essential for avoiding unforeseen account balance and expense realizations. To help you understand the basics of small business bookkeeping, we've compiled the following guide.

Small Businesses Need Bookkeeping

As you may already infer, as a business owner, bookkeeping is an essential task. But why?

• Information gets organized
• Particular information is required to be tracked, per the IRS
• Budgeting support
• Decision-making support
• Earnings tracking support

Bookkeeping vs Accounting

Please reference our FAQ about this topic. Bookkeepers are responsible for continuously updating their clients' financial records. Accountants provide advisory services and utilize the general ledger, which is kept current and precise by the bookkeeper.

Structure of Bookkeeping

Whether you do the bookkeeping yourself or hire someone to do it, certain elements are fundamental to properly maintaining the books. Some of these elements are done more regularly than others to ensure that the books are always up to date. Other elements are completed at certain time periods as necessary to complete a business task.

There are four main tasks to proper bookkeeping:

1. Record transactions
2. Send invoices
3. Prepare financial statements
4. Execute payroll

Software and Tools

For the small business owners that don't want to handle their data entry, you can hire online bookkeeping services (for example, Accounting Analytics provides outstanding services). These online services are a practical way to deal with everyday bookkeeping so you focus on running the business. But for the ones who want to do the data entry, there are accounting softwares that can aid you in simplifying the process.

4 Simple Steps

1. Assign transactions to specific accounts
2. Perform journal entires to debit and credit accounts
3. post entries to ledger account
4. Adjust entires at the end of each accounting period