Bookkeeping is one of the most critical parts of running a small business. It is a process consisting of recording, organizing, and maintaining financial transactions systematically. These transactions and records help you understand the financial health of your business and make well-informed business decisions.
Initially, bookkeeping for small businesses seems like an easy task. But as your company grows, you could get too busy, or it might get too complex for you to handle on your own. This is when hiring a virtual assistant bookkeeping expert can be helpful. These experts can offer top-notch and tailored services to manage your finances effectively.
Whether you want to handle the books yourself or delegate that task to virtual bookkeepers; this blog will help you grasp the basics of bookkeeping every small business owner should know about.
Why is bookkeeping crucial for small businesses?
Whether you take care of the bookkeeping yourself or outsource it to a bookkeeper or small business assistant, it is imperative that your bookkeeping is done correctly. Here are some of the reasons why bookkeeping for small businesses is essential:
- Splitting your business and personal funds guarantees that you are not personally accountable for any debts or troubles arising from your company.
- Monitoring a company's financial health identifies opportunities to enhance practices or areas needing improvement or changes.
- Bookkeeping for small businesses helps in finding errors early on by monitoring payments, and reconciliation helps prevent financial problems in the future.
- It is possible to save money and simplify accounting for small business by optimizing tax processes and partnering with tax experts.
- Accurately maintaining paperwork and data makes processes like qualifying for a loan easier.
10 Bookkeeping Basics for Small Businesses
1. Pick a bookkeeping entry method
There are two types of bookkeeping for business: single-entry and double-entry. It is important to select a technique before you start maintaining financial information. The method you select influences how you enter each financial transaction.
- Single-entry accounting is the most basic type of bookkeeping. Each financial transaction must be recorded just once in your total bookkeeping record. This approach suits freelancers or small business owners with only a handful of monthly business transactions.
- Double-entry accounting is more complicated but more durable and better suited for businesses that have progressed beyond the home office stage with a few monthly orders. All transactions are recorded in a journal under double-entry bookkeeping. Subsequently, each item gets registered in the general ledger twice, as a debit and a credit.
Among both these methods, double-entry bookkeeping is often recommended for most small-business owners. You can hire a bookkeeper from Wishup who is skilled in both these entry methods.
2. Set up a general ledger to record transactions
Previously, firms would keep track of their financial activities in books known as the general ledger. That concept is now outdated, and general ledgers are now primarily virtual.
There are several methods for creating a general ledger virtually. Google Sheets are the most accessible and affordable. However, juggling various accounts can make general ledgers complex, especially as the size of your business and transactions increase. Thus, businesses can hire a virtual assistant who can help them manage their accounts and books efficiently.
3. Segregate your expenses into business and personal
Open a corporate bank account and keep your company and personal finances separate. There are a few reasons for this.
One major factor is liability. For example, suppose you run a business or LLC from the same account and mix your finances. In that case, there's a chance that you might be held personally accountable for any debts or financial trouble your business gets into.
Taxes are also a significant factor in why you shouldn't combine your personal and business accounts. A company cost may end up in your personal account, causing you to miss out on a significant tax deduction.
4. Pick Appropriate Tools
Your industry niche will largely determine how you categorize transactions. Your transactions are classified into five account types: assets, liabilities, revenue, costs, and equity. Then, you will have to choose the best bookkeeping tools. Currently, there are three popular options.
- You can use one of the hundreds of public cloud bookkeeping systems, such as Wave, Xero, or QuickBooks.
- You could opt for free online tools such as Google Sheets, which we discussed previously.
- Or, you could outsource bookkeeping services, who can use the abovementioned tools to manage your finances.
5. Know the basic bookkeeping and accounting jargon/lingo
The most important part of learning how to do bookkeeping for small business is to learn basic bookkeeping jargon. Here are some common ones you should know:
- Assets: These are the things or resources your business owns. It includes equipment, inventory, furniture, or cash.
- Liabilities: These are the debts or obligations your business owes to others. For example, loans or accounts payable.
- Income statement: A detailed financial statement indicates your business's expenses, revenue, and profit or loss over a specific period.
- Balance sheet: It is one of the most important financial statements that shows a business's assets, liabilities, and equity at a specific point in time.
6. Separate professional and personal expenses
Another basic bookkeeping for small business tip is to keep your professional and personal expenses separate. It will help you keep your financial records accurate. Mixing them up can cause a lot of tax and accounting problems. To ensure everything is kept separate, it's best to have separate bank accounts and credit cards for business transactions.
7. Accurately record transactions
Once you have established your financial accounts and chosen a bookkeeping system, you must start tracking your finances. In addition to getting the data in hand, you must select which accounts will be debited and which will be credited.
Each transaction must be documented accurately and in the correct account to get an accurate financial picture of the company.
8. Keep accounting statements updated
When doing bookkeeping for business, make sure to keep your accounting statements updated at all times. This will help you track your financial progress and make informed decisions based on accurate data at any point.
9. Ensure your books are ‘balanced’
Account debits and credits should match when totaled somewhere at the end of the month, quarter, and year. If they do, this indicates that your books are "balanced."
In brief, you should use this formula to ensure that your books are appropriately balanced -
Liabilities + Equity Equals Assets
As an entrepreneur, you can’t afford to make mistakes and lose time. Therefore, hiring a home business bookkeeping assistant is advisable to ensure your accounts are balanced correctly.
10. Make bookkeeping a habit
Like everything else in business, it would benefit you greatly if your books were maintained regularly on a proper schedule. This will create uniformity and give you a sense of stability and security with your finances. It will also help you prevent future issues.
Bookkeeping v/s Accounting
Online accounting and bookkeeping services are often confused with each other, but they are actually two separate parts of financial management. When you are getting started with accounting and bookkeeping for small businesses, understanding the difference between the two is important.
Bookkeeping is all about keeping track of daily transactions like purchases, sales, receipts, and payments and organizing them into their respective accounts. It ensures financial transactions like income, expenses, and assets are properly recorded and stored.
On the other hand, accounting is all about taking financial data, analyzing it, and interpreting it so that business owners can make smart decisions. Accountants take the bookkeeping results and make financial reports like income statements, balance sheets, and cash flow statements. They look over the financial data and give insight into how the business is doing financially, how profitable it is, and how much cash is coming in.
How To Manage Bookkeeping?
1. Allocate Transactions to Specific Accounts
To get started with basic small business bookkeeping, it's important to assign each transaction to the right account. This means sorting out transactions based on sales, purchases, expenses, and payments. Doing this helps ensure your financial records are accurate and up-to-date.
2. Do Journal Entries for Debit and Credit Accounts
The next step in how to bookkeep for a small business involves making journal entries. A debit entry shows money coming into your business. On the other hand, a credit entry represents money going out of your business. Making journal entries is essential for tracking the business's financial activity accurately.
3. Post Entries to Ledger Account
Once you have made the necessary journal entries, it's time to post them in the ledger account. This account is a record of all transactions for that particular account, and it gives you an overview of its financial activity.
4. Adjust Entries of Each Accounting Period
At the end of each accounting period, it's essential to make adjust entries to fix any errors or omissions. This helps ensure the books are accurate and up to date so that the financial statements accurately represent the business's financial situation.
Who is a Virtual Bookkeeping Assistant?
A virtual bookkeeping for business assistant is a professional who provides bookkeeping services remotely, so you don't have to worry about hiring a full-time in-house bookkeeper. They can help you manage tasks like keeping accurate records, reconciling bank statements, and preparing financial statements while saving you time and money!
An online bookkeeping assistant is proficient in handling different accounting software and is fully trained in complex bookkeeping methods and processes. They will ensure all your business finances are up-to-date.
Is hiring a Virtual Bookkeeping Assistant for small businesses a good idea?
Bookkeeping is an incredibly important part of a business's financial management. However, it is a complicated and time-consuming process. Thus, hiring a virtual bookkeeping assistant can help small business owners to streamline their bookkeeping processes and focus on growing their businesses.
Here are the top three benefits of hiring a VA bookkeeper:
1. They help you save time
Small business owners already have a long to-do list. Thus, they may not find enough time to do their bookkeeping. Hiring a basic bookkeeping small business expert can help you save time and energy for other critical business tasks.
2. They enhance scalability
A virtual bookkeeping assistant's services are flexible, so you can scale up or down depending on your business's needs. This scalability makes it an excellent option for budget-conscious entrepreneurs.
3. Enhanced expertise and accuracy
Bookkeeping assistants know the ins and outs of accounting software. They stay on top of the latest tax laws and regulations. They can provide you with reliable and accurate bookkeeping services to keep your small business on the right track and avoid costly mistakes and penalties.
Why choose Wishup for bookkeeping requirements of your business?
1. You get cost-effective services
For your business to grow, cutting costs wherever possible is essential. This is why employing a Virtual Assistant is an excellent alternative to a full-time accountant. Virtual bookkeeping services are paid by the hour and don’t require additional benefits, bonuses, paid leaves, insurance, or retirement pension plans.
2. Virtual Assistants are accountable
Unlike regular employees, you can track precisely how much work they do in an hour. In addition, at Wishup, our Virtual Assistants will send you a detailed daily report with the tasks they achieved during that working day.
3. Work with the Top 1% of talent
Recruiting a quality employee is a tiresome process and can take weeks. At Wishup, we handle the screening and hiring process and hire only the top 1% of candidates.
4. Your finances are in safe hands
At Wishup, we understand that financial security is essential for businesses. Your finances are in good hands with us, and we will keep your sensitive financial info secure and confidential.
5. Onboard your virtual assistant in less than a day
At Wishup, we enable you to onboard your VA in less than 24 hours! Thus, you won't have to halt your operations or compromise your productivity.
6. You don’t have to spend a penny on training
At Wishup, we train all our bookkeeping assistants in 70+ accounting and bookkeeping tools to ensure they are prepared for the job. Thus, you won't have to spend any money on training them.
7. Wishup offers an incredible no-questions-asked refund policy
At Wishup, we strive to give our clients the best experience. Thus, we offer a no-questions-asked refund policy if you're not content with our services. Making sure our clients are satisfied is important to us, so we'll do whatever it takes to make it happen.
8. Instantly replace your VA (if unhappy)
Sometimes things don't work out as planned, we understand this. Thus, we offer the option to instantly replace your virtual bookkeeping assistant if you are unsatisfied with their work.
9. Try out your VA with a 7-Day Free Trial
Try us out for a week and see if we're the perfect bookkeeping assistant for your business! Our services are available for a 7-day free trial. You can test us out and ensure we're the right fit before signing any long-term contracts.
That was all about how to start keeping books for a small business or hire a VA to do that for you. As a small business owner, you can catch a break by hiring a virtual bookkeeping assistant to take care of this task. This way, you can be sure that the job is being done by someone who knows what they're doing and has the qualifications to prove it.
If you are looking for a competent online bookkeeping assistant, we at Wishup have you covered! Visit our website and book a free consultation or contact us at [email protected]
FAQs For Small Business Bookkeeping
1. What is the best bookkeeping method for small businesses?
Depending on the size and nature of your business, there are plenty of small business accounting and bookkeeping methods to choose from.
If you have a low volume of transactions, the single-entry system might be ideal for you. On the other hand, opt for the double-entry system for more complex but offers more accurate financial records.
2. How do I start bookkeeping for beginners?
When starting with bookkeeping, you should focus on understanding the fundamentals of financial accounting. Start by identifying the accounts you need for your business finances. Then, pick a bookkeeping software that works for your business and budget. Start entering transactions regularly.
3. When do I need extra bookkeeping help?
You will need to hire a small business bookkeeper as your business grows and the number of transactions rises. You will also need extra bookkeeping help if you are having trouble keeping up with recording transactions, reconciling accounts, or generating financial reports. Bookkeeping professionals can assist you with tax preparation.
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