Even the smallest of small businesses have bookkeeping and accounting needs. Small business owners need basic bookkeeping to keep track of income and expenses. It’s essential for filing taxes, but bookkeeping also gives you essential information for business decisions. How are you planning to expand? How many new staff members can you afford?
Bookkeeping gives you an accurate sense of the inflows and outflows of money in your business. Accounting is about analyzing and evaluating that data to make better choices for your business. It gives you the confidence to make concrete plans for your company’s future.
These are essential parts of helping your business run, but the workload involved can add up quickly. Many small business owners handle the bookkeeping all by themselves, which can increase the chance of mistakes and accidents. It might also be wasting time you could be using to actually focus on your business!
How Much Time Do Small Business Owners Spend on Bookkeeping?
You might not realize just how much time record keeping for small businesses can take up. Your bookkeeper records should include all of your financial transactions from day to day, as well as your longer-term financial documents.
Effective and reliable business accounting means using double-entry bookkeeping. That means that you record transactions twice, counting each transaction for both debits and credits. This way each time money comes into your company, you know exactly where it’s going.
Loans and owed payments can be a lot to keep track of as well, and if your business has a lot of these on its books, that will also take some time to follow carefully. Bookkeepers file debts owed to the business under accounts receivable and debts owed by the company under accounts payable.
If you add up all of these tasks and add the work of making growth projections or producing financial statements for review, it’s easy to see why a small business owner might want to avoid doing some of this work themselves.
How Can You Streamline?
Fortunately, you don’t have to muddle through the challenges of bookkeeping alone. Many others have already gone through and made the mistakes you’ve made and more, and you can learn from their experiences.
If you’ve been struggling to stay on top of the finances of your business and only starting to figure out the basics of small business bookkeeping, do yourself a favor and take the time required to educate yourself.
With just a little knowledge and some planning, you can set up processes for your bookkeeping that will save you time and strengthen your business.
Streamline Your Workflow
If you’re going to be doing your bookkeeping yourself, which may still be the most efficient option if your business is small enough, you need to establish a clear, streamlined process to follow for your bookkeeping.
One way to do this is to centralize your bookkeeping in one simple spreadsheet. You can set up a spreadsheet for either single-entry or double-entry bookkeeping, and then you can compile all your important accounting information there in one easy to follow balance sheet.
Some business owners also use either a spreadsheet or a single paper notebook to keep a thorough record of transactions in journal entries day by day. That kind of meticulous record-keeping is key to good cost accounting. What did you spend and on what?
Whatever you do to keep track of your finances, you need to make the process clear and uniform. You want efficient and accurate record-keeping to be a habit you do almost without thinking.
Use Bookkeeping Software
Of course, paper-and-pencil bookkeeping always includes the opportunity for error. The more computerized and automatic steps you can include in your workflow, the more precise and reliable your system will be.
With quality bookkeeping software, you don’t have to do anything but input the data from your transactions into the system. You can find software that will do the rest of the work for you, taking the calculations and reconciliations out of your hands and off your shoulders.
Many accounting software programs can even link directly to your bank account, allowing for quick and reliable cross-checking. And when it comes time to assess your overall financial status or do your taxes, all you have to do is print an income statement.
Without technology like this, cash accounting is always going to be a labor-intensive process with the opportunity for human error. Keeping track of how much liquid cash you have available at any given time can be tricky, but it’s easier with a program doing the math for you.
Work with a Bookkeeper
A lot can go wrong if there’s a mistake in your record keeping. You rely on having an accurate picture of the finances of your business for all of your management accounting. That’s why sometimes it’s worth it to bring in a professional.
If you’re spending all of your time trying to keep the numbers straight, preparing your taxes, or poring over records to catch mistakes, your small business needs an accountant or bookkeeping professional.
That could mean bringing in a new employee or outsourcing to another person or company to handle your finances. It could even mean just bringing in a professional temporarily to help you set up a more reliable and streamlined workflow. A specialized professional can do more and produce more accurate accounting data for you in less time.
Planning for Success
Bookkeeping may seem unimportant or accessory to the larger work of running a business, and it’s true that it’s not very glamorous. However, accurate financial data for your company is absolutely necessary for keeping your business alive and helping it thrive.
You want to do whatever it takes to keep your business alive and realize the dream you have for its growth. So that means making sure your records are complete and reliable. But if you’re the person with the vision for the company, then you need to be intentional about how you spend your time. Where is your time best spent in the interests of your business?
This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. 1-800Accountant assumes no liability for actions taken in reliance upon the information contained herein.