Bookkeeping is the core requirement of every business, irrespective of its size. But for small businesses, it’s even more critical because it can impact their growth and success. If you are a business owner, you must know some of the bookkeeping basics.
There is always the option to hire bookkeeper services in Basildon, but a basic understanding will make you a better manager. Also, bookkeeping is the backbone of your business’s accounting and financial systems.
Here are the basics of bookkeeping that every business owner must know.
What is accounts payable?
Accounts payable is a business’s account to track all the money it owns to a third party, such as banks, suppliers, transporters, government, or anyone they borrowed from. Keeping track of accounts payable is essential as it will list all the expenses. For instance, if you have a bank loan on your business, your loan contract will be part of accounts payable to monitor the instalments.
What is accounts receivable?
Accounts receivable is the opposite; it keeps track of all the money third parties owe your business: customers, banks, companies, or anyone who purchased your product or hired your services.
What is bookkeeping?
Bookkeeping records your business’s financial transactions daily by making entries to a physical set of “books” or recording them into bookkeeping software. For instance, most bookkeeper services in Basildon use cloud-based accounting software for bookkeeping. The practice makes it possible for business owners to see where the business is spending money, where the revenue is coming from, and what tax deductions they can claim. Even for tax law compliance, it is mandatory to ensure accurate and up-to-date financial transactions.
Choosing the right entry system
Small businesses can choose between single- or double-entry accounting.
The single-entry accounting system records all your transactions only once, whether an expense or income. Most bookkeeper services in Basildon offer single-entry accounting for small businesses that don’t have a large number of equipment or huge inventory.
Double-entry accounting records every transaction twice as a debit and a credit. It does so to “balance the books” between accounts. At the same time, it is more complicated but effectively prevents errors in recording transactions.
The choice of the entry system will decide how your business-related financial transactions will be recorded. This is why you must choose it wisely depending on how your bookkeeping processes will work.
Learn to leave an audit trail
If your business handles bookkeeping manually, you must know how to leave an audit trail. An audit trail is a practice of managing the invoices in an order such that you can retrace any transaction easily if there’s an error.
If you know how to leave an audit trail, your bookkeeping will be more effective, as you can quickly retrace any financial activity. Again, bookkeeping software is an excellent option to keep track of all the records so you can audit them effortlessly when required.
Know when to hire a bookkeeping service
For small businesses, the bookkeeping process can be simple, depending on the resources it utilizes. But, if you find it increasingly challenging to manage the accounting requirements, then you must hire experts like “Practical Bookkeeping, Accounting & Taxation Services”. They will help reduce your financial worries and increase your personal wealth..
Outsourcing bookkeeping tasks are helpful in several ways. You don’t have to hire staff on payroll for accounting. Professionals know how to do bookkeeping in compliance with the law.
We hope you learned the basics of bookkeeping associated with your business.