Have you ever felt lost while thinking about the financial aspect of your business? You know you are doing well but can’t really find out how much profit you are making or whether you are losing money. 

There might be many unanswered questions going on in your mind regarding your small business. You feel lost, as you can’t see your path clearly. There is one solution that can fix all your worries – do proper bookkeeping.

Yes, bookkeeping is like the key to solving all your financial mysteries regarding your company. It’s the first step of your financial reporting that can unveul all the teeny-tiny mistakes you make on the business, and where you should focus, and when.

Even if your business is small, you still need to do bookkeeping. Both to know the financial health of the business, as well as to follow the compliance set by government authorities.

What is Bookkeeping?

First thing first.

Bookkeeping is the system of keeping records of a company’s financial transactions on a regular basis. This is a systematic way of recording, analyzing, and organizing a company’s cash flow.

Each and every transaction, no matter how tiny it is, has to be recorded properly. This includes sales, purchases, expenses, payments, etc. This will paint an accurate picture of the business activities. All these transactions will be categorized in order to organize them. Once transactions are recorded, they must be broken down into separate accounts.

Common account types include: revenue, expenses, owned assets, and liabilities. By categorizing it, the entire transaction will showcase where your money is coming from and going. 

Afterward, you can analyze your data in order to decide what brings more profits and where you are losing money.

Types of Bookkeeping

There are two common types of bookkeeping:

Single entry bookkeeping: This method involves recording the transaction one time for each financial activity. It’s a cash-based accounting system that keeps track of cash flows in a journal. It mainly focuses on recording your income and expenses when the cash is received or paid.

Double Entry Bookkeeping: In this system, financial transactions have to be recorded twice. Unlike single-entry, this entry system is not cash-based. You enter transactions when you owe money or make money. This system prevents fraud and ensures 100% accuracy. Every transaction has two sides: debit and credit. Total debits are always equal to total credits, so there is always a balance. This system will allow you to see clear pictures of your business’s financial health.

Benefits of Bookkeeping for Small Business 

There are many benefits to bookkeeping, as it provides a snapshot of your company’s financial situation. 

• Financial Clarity- It will shed light on the financial aspect of your business. You will see a comprehensive overview of your income, expenses, and profits. It will break down into categories, which will help you identify your assets and liabilities easily. In the future, it will be easier for you to make big decisions and set your goals. Financial uncertainty is the biggest stress for any business owner. Bookkeeping will help you by giving you real-time information about your financial situation. You know exactly how much money you have, and you don’t have to worry about whether you’ll be able to pay your bills on time or if you’ll make payroll.
• Taxes are fun-  are nerve-wracking even for small business owners, but with strong bookkeeping, this process will be much easier. Because this system will keep your financial data well documented. Transactions are recorded, categorized, and can be verified at any moment. This will minimize the error during tax season. You don’t need to explain your financial transactions for hours; instead, you can handle those documents, and they can handle the rest.
• Cash flow Management- Bookkeeping improves your cash flow management. As it keeps track of your income and expenses, it will help you forecast cash flow in the future. You can prepare for upcoming payments, seasonal changes in sales, and cash outflows. It will help business owners understand which bills need to be paid early and help them manage loans and credit lines. Furthermore, you can recognize the cash flow gaps in the future.
• Cost reduction- Every business owner’s dream is to minimize costs and increase profit. Proper bookkeeping can help owners reduce costs, and you can find out all these hidden costs. 
• Make informed decisions- Making decisions based on financial data is important for your company’s growth. Most business owners make decisions based on past experience or their gut feelings; however, they won’t be accurate. With the help of bookkeeping knowledge, you can make decisions based on your financial aspects. It will guide you in creating marketing strategies based on the numbers. 
• Easy to track- Sales, purchases, receipts, and payments are all written down in bookkeeping, which makes it easier to keep track of every financial transaction in a systematic manner.  It will allow you to easily access your past financial information, which will help you budget, forecast, and make crucial financial decisions in the future. By keeping it organized, it’s easier to analyze. Companies can track trends, identify opportunities, and make informed decisions to improve performance.
• Peace of Mind- Bookkeeping takes the stress out of your mind, so you can focus your energy on growing your business. When you have a strong financial base, you’re able to be more creative and ambitious.
• Gaining competitive advantages- Businesses are competitive these days; gaining competitive advantages will make you stand out in the crowd. With bookkeeping, you can create competitive pricing strategies that will attract customers. T You can see where you can provide competitive pricing without hurting your bottom line.

Getting Started with Bookkeeping

Now that you know the benefits, it’s time for you to get started. But are you unsure about how to start? Let us help you.

• First of all, choose your accounting method. There are two commonly used systems that were mentioned before: single entry and double entry. It’s better to use double entry, as this is the standard method.
• Now it’s up to you to decide whether you want the traditional manual system of accounting or whether you want to use bookkeeping software. Popular choices such as QuickBooks Online and Xero make it easy to enter data, organize transactions, create reports, and keep your data safe. Think about features, user experience, and pricing plans.
• Start keeping records of all the financial records, no matter how small they are. Gather all your financial documents.
• Set up your accounts. You should have a list of all your financial accounts that you’ll use to organize your transactions. The most common accounts are cash, accounts payable, inventory, sales revenue, and various expense categories.
• Make a bookkeeping schedule. You should dedicate time to bookkeeping. 
• Either do it yourself or hire a bookkeeper for your business. You can even hire an online bookkeeping service as well.

How Bookkeeping Deck Can Help You?

You can always do your own bookkeeping, but we can assist you. At Bookkeeping Deck, we can help you by recording and organizing your transactions correctly. We will do the financial management for you so that you can keep track of your income and expenses. Your tax session will be hassle-free as you have all your records accurately categorized. As a small business owner, it will help you make informed decisions for the future as well.

So feel free to reach out. Contact us via email or phone, we are always happy to help you.