The Basics of Bookkeeping for Small Businesses

By Inessa Khaykin

The expenses of starting a business are huge, and most small businesses just starting out barely get by as it is. The idea of hiring an accountant full time to handle their records is not something they can budget. Normally, the owner hires a bookkeeper who is basically the accountants right hand, with the accountant himself stepping in once a month to ensure that everything is good.

If you are indeed starting out, the idea of even hiring a bookkeeper seems expensive. Think of this article as a to-do list as a bookkeeper. Why hire one when you can do it yourself until you really get your business moving?

The Very Basics

Like most people who are starting a business, you probably have one thousand and three things going on inside your head of how to run your business best. You have so much to do that you just do not want to deal with the little things, like keeping records of exactly what was spent where, and when. You want to get on it now, and really start to make money.

Slow down a few steps, this is not a race, and in the business world, there is no finish line. If you do not plan your bookkeeping, and figure out exactly what financial aspects of the business you want, and need, to keep track of, you are going to find yourself in six months not knowing if your business is wonderfully successful, or if it is failing miserably!

When properly completed, bookkeeping can and will give you an exact measure of how well you are doing in your business. It provides all sorts of valuable information so you can see your financial success, and make corrections to improve any short coming the business might be having.

Basically, bookkeeping is your best friend for managing the financial aspect, so do not think for a second you can put just a few minutes into it and be done. The best thing, if you are going to be your own bookkeeper, is to set up a system with your accountant before you ever open your business doors or make your first sale.

What Accounting Method is best?

There are two basic account methods that you are going to have to choose from when you decide on your bookkeeping system? cash based, or accrual. The main difference in these two is when you record your purchases and your sales. With accrual accounting, you make your records when it is completed, no matter if cash is exchanged or not. However, with a cash based accounting, you only make your records when money changes hands.

Let's try a simple example. You purchase software, but you do not actually have to pay for it for a month. If you were using cash based system, you would not record this transaction until you paid that company in a month. However, with accrual accounting, you make your records when the transaction happens, and you also record the future debt.

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About the Author

Inessa Khaykin is the president of KJ Accounting and Consulting Group www.mysimpleaccounting.com and author of My QuickBooks Quick Start http://www.myquickbooksquickstart.com. My goal is to help individuals and small/medium companies business owners with they accounting/bookkeeping needs.

Source: http://www.artipot.com