A Guide to Bookkeeping for Your Small Business

September 15, 2020

A Guide to Bookkeeping for Your Small Business

What are some bookkeeping tips for your small business?

  1. Categorize Finances
  2. Conduct Regular Check-Ups
  3. Archive Financial Records
  4. Understand Your Bookkeeping Report

Successful bookkeeping for your small business is all about understanding how to properly manage your finances.

Even if you’ve already hired a bookkeeper for your company, this doesn’t mean that you won’t be involved in the bookkeeping process. After all, proper bookkeeping means that you’re able to track every aspect of your business’s financial situation — whether you’ve accrued debt, or whether you’ve yet to receive payment from someone.

More than that, bookkeeping helps you remain in compliance with the guidelines that have been set by the country’s financial authorities. Read on to learn more.

Categorize Finances

A business owner holding his categorized statements

First off, you’ll want to separate your business expenses from your personal expenses. This helps you reorient your attention towards managing them without getting confused.

A great way to achieve this is to open a separate bank account where all your business’ transactions will take place — money transfers, withdrawals, deposits, credits, and the like.

As much as possible, you’ll want to choose a bank that has a good reputation, offers high interest on savings, and also offers online banking options. This allows you to access and manage your business’ accounts more conveniently.

Conduct Regular Check-Ups

A monthly bookeeping report

Even the most meticulous bookkeeper won’t be free from human errors. Trust is important, but there’s nothing wrong with double-checking and making sure that all your records and financial statements are an accurate reflection of the business’s finance-related activities.

Make it a habit to consistently check these documents to ensure that no anomaly is found in them. Though it’s highly advised that you consider an automated bookkeeping system, there is still a need for manual logs. The information that you or your bookkeeper has inputted should match documents like cash memos, invoices, bills, receipts, payslips, cheques, and the like.

Archive Financial Records

Archived financial records

It cannot be stressed enough, but it’s an important reminder for you to always properly archive your financial records. You may think that you won’t have any use for them in the future, but you’re mistaken. Your records may be the key to you being amply compensated by someone who owes your business money and getting none at all.

Your financial records enable you to monitor your business’s progress more closely. They provide you an idea of how well your business is doing in a particular point in time. More than this, financial records are needed in order to accurately prepare financial statements that you may have to submit to the BIR or SEC.

Understand Your Bookkeeping Report

A businesswoman reading through her bookeeping report

Once again, you shouldn’t just leave the job of understanding a bookkeeping report to your accountant or bookkeeper. Instead, you should make the effort to inform yourself about basic principles. This is a way for you to keep yourself in the loop of any financial activities that are done by your organization.

There are many available resources online that can teach you basic, yet most frequently encountered concepts in bookkeeping. You’ll be able to more clearly define terms like revenue, expenses, debit, credit, accounts payable, accounts receivable, fixed and variable costs. Understanding the relationship between these concepts is also crucial.

Soon, you don’t even need to ask someone to do annual or quarterly comparisons. By understanding the report, you’d not only be in control of your business’ finances but you’re also able to make well-informed financial decisions.

Key Takeaway

If you want to become more involved in bookkeeping for your small business, then you need to take some responsibility for your finances. Get rid of the idea that all financial-related matters should be handled by only your accountant or bookkeeper.

Adopting a more involved approach with your finances also means that you’re able to take more responsibility and accountability regarding financial activities. Though this guide is not exhaustive, it will hopefully guide you on the right track to simple bookkeeping.