By the Book: An Introduction to Bookkeeping for Small Businesses

Bookkeeping may not spring to mind as the most immediate of your small business concerns, but accurately recording, updating, and analyzing your financial records is crucial for the safeguarding of your business. Proper bookkeeping ensures that you have a clear picture of your financial health, allowing you to make informed decisions and avoid potential pitfalls. It helps you track expenses, manage cash flow, and stay compliant with tax regulations, which can prevent costly errors and penalties. Additionally, organized financial records can enhance your ability to secure funding or investments, as they demonstrate your business's stability and potential for growth.

Prioritizing bookkeeping is, therefore, an essential aspect of maintaining and growing a successful small business. To that end, here are a few pointers, courtesy of Ainsworth Bookkeeping.

Cash Basis Accounting

There are two widely accepted forms of accounting that allow you to implement correct bookkeeping. These are cash basis and accrual accounting.

● Cash basis accounting involves recording transactions at the moment cash is received/paid

● Cash basis accounting is less expensive and can be simpler than accrual methods, benefiting small businesses and sole traders, especially those without inventory

● It is not the sharpest method however and, if you aren’t following invoices closely, it can paint an inaccurate picture of a company’s financial standing

Accrual Basis Accounting

Accrual basis accounting is the alternative form that records revenue/expenses at the moment a transaction occurs.

● This method uses a matching principle to recognize revenue and expenses in the same period

● It is a benefit to companies as it provides a more accurate picture of a company’s financial status, taking into account credit and long-term projects

● It is, however, a more complicated process and often costs more to implement

Tips For Bookkeeping

Bookkeeping can be expedited with the right know-how. If you’re not confident about recording your own accounts, it might be necessary to bring in some help.

● When starting out, it can be a good idea to use a free accounting software that offers a rich set of features to handle your bookkeeping.

● As you grow, the right cloud-based software will give you, the business owner, the ability to access your records whenever you need to from wherever you are, so you can react to expenditure in real-time

● If you’re struggling to get your head around your books, it might be necessary to bring in a professional bookkeeper to help — many now work on a freelance basis, thereby saving you money.

If you find yourself struggling with organization or managing numbers, it's wise to consider hiring a bookkeeper from the get-go rather than waiting until your books become unmanageable. A professional bookkeeper can save you from the headache of untangling financial messes and ensure your records are accurate and up-to-date. Visit Ainsworth Bookkeeping to find expert bookkeeping services tailored to keep your finances in pristine order from the start.

Finding the time to sort through financial spreadsheets, analyze numbers and manage cash flows is difficult as a small business owner, but if you can put in the legwork now, you’ll save yourself a lot of hassle in the long term.

By Brady Baker -