Important Facts About Bookkeeping Small Businesses Should Know in 2024
Bookkeeping is essential for any business. Through bookkeeping, an owner can identify if a business is generating profits or losses.
Bookkeeping services have become a necessity for small businesses in today’s day and age. Smaller businesses often have fewer resources, which means that they have to use every bit of knowledge and experience they can to stay afloat.
Finding someone you trust to handle your small business bookkeeping services is one of the many ways that small businesses can function efficiently.
Bookkeeping services help businesses keep their financial records organized and accurate. As with any other business service, these services can be expensive. Bookkeeping services are no exception. They can range from the inexpensive to the expensive side of things.
This article will discuss some of the most important facts about bookkeeping services.
1. What are bookkeeping services?
Bookkeeping is the recording, storing, and retrieving of financial transactions for a company, nonprofit organization, individual person, etc.
Bookkeeping can include common financial transactions
- paying suppliers
- billing for services provided or goods sold to clients
- documenting receipts from customers
- recording invoices
- processing employees’ payroll
- financial reporting
- monitoring accounts receivable
- recording depreciation
- and more
2. Bookkeeping and Accounting are not the same thing
What is the difference between accounting and bookkeeping?
Both bookkeeping and accounting are necessary for any business, but they aren’t the same thing.
Bookkeeping is the recording of financial transactions, whereas accounting is the interpreting, classifying, analyzing, reporting, and summarizing of financial data. In accounting there is interpreting and analyzing data, in bookkeeping there is not.
Big picture outlook: Bookkeepers handle the recording aspect of all accounting processes, accountants handle all parts of the accounting process.
3. Types of Bookkeeping Systems
The 2 main types of bookkeeping systems are the single-entry system and the double-entry system.
Single-entry bookkeeping is used for companies that have few or uncomplicated transactions.
This system records business expenses and cash sales that are paid when incurred.
Single-entry bookkeeping typically consists of a cash sales journal, a cash disbursement journal, and bank statements.
It is not typically used for a company that has accounts payable, accounts receivable, or a lot of capital transactions.
Businesses that have more complex transactions use double-entry bookkeeping systems.
The double-entry bookkeeping system posts single transactions as an income or expense item. Then a second entry is created to trace the transactions to a corresponding account.
4. Bookkeeping Software is Common for Small Businesses
Nowadays, many small businesses do most or all of their bookkeeping using bookkeeping software, instead of traditional systems.
Popular bookkeeping software, such as QuickBooks, use the double-entry system, but the user doesn’t need to be well versed in the method to be able to use the software.
The software is usually designed to be user-friendly and can help reduce bookkeeping mistakes.
Benefits of bookkeeping software
- can process accounts quicker
- increase reporting accuracy
- provides necessary accounting reports
- streamlines filing your business taxes
- data is backed up
- more benefits of bookkeeping software
Bookkeeping software is becoming increasingly popular among small businesses.
It is an effective way small business owners can access the financial information they need.
5. Proper Bookkeeping Helps You Pay Your Taxes on Time
The more organized your books are, the easier it is to file your taxes.
You will need to gather all financial records and organize them by category.
Accounting software, like Quickbooks, helps small businesses keep track of all their financial information.
This can help reduce stress and last-minute scrambling during tax time.
6. Always Keep Data Up to Date
Even if you hire an accountant to help with bookkeeping, make sure all files are up-to-date.
An accountant only uses the information handed to them, so any errors or changes need to be addressed as soon as they are realized.
7. Bookkeeping Is Typically Performed by a Bookkeeper
A bookkeeper is someone who records the day-to-day financial transactions of a business.
The main responsibility of a bookkeeper is to write the daybooks.
Daybooks contain records of sales, receipts, payments, and purchases.
A bookkeeper records if the transaction was cash or credit.
Bookkeepers also record things in a supplier’s ledger, customer ledger, and general ledge.
8. Bookkeeping Has Been Around for a Very Long Time
In written form, the history of bookkeeping dates back to 4000 B.C., and non-written form goes back as far as 8000 B.C.
There have been clay tablets found in Babylon and Assyria from 4000 B.C. that recorded business and communal contracts.
9. “Everything About Arithmetic, Geometry, and Proportion.”
“Everything About Arithmetic, Geometry and Proportion” was a book written by Frater Luca Pacioli in 1494.
It is generally recognized as the first complete text written about bookkeeping.
It describes the standard accounting system in detail, including commonly used bookkeeping tools such as ledgers and journals.
Pacioli is commonly known as the father of modern bookkeeping.
10. Common Bookkeeping Accounts for Small Businesses
Bookkeepers for small businesses will typically record
- cash
- accounts receivable
- inventory
- accounts payable
- loans payable
- payroll expenses
- owners’ equity
- retained earnings
If these items are recorded correctly, bookkeeping can be your best friend and the reason a business runs effectively.
11. Integrating Outsourced Bookkeeping with Your In House Accounting Department
If handling your accounting department on your own is starting to get overwhelming, there are many benefits to connecting your accounting department with an outside bookkeeping service.
Many bookkeeping services provide additional manpower, accounting software resources, and expert advice.
They help with time sheet monitoring, payroll processing, financial consulting, and can help with accounting technology questions that goes beyond your IT department.
12. How to Become a Certified Bookkeeper
If becoming a certified bookkeeper for your small business, or hiring one, is something that intrigues you, there are necessary steps to take in order to be a certified public bookkeeper.
You can obtain a license by education or by experience.
If you choose the later route:
- Pass the Uniform Certified Public Bookkeeper Examination
- Possess Two-years (4,000 hours) of Bookkeeping or Accounting Experience
- Agree to Abide by the CPB Code of Professional Conduct
- Obtain 24 hours of CPE credit each year and
- Complete and Submit the CPB Application for Licensure
13. Bookkeeping Options
Small businesses do have options when it comes to bookkeeping.
The first option is to do it yourself. If you are going to take on the tasks of being your own bookkeeper, know that bookkeeping can be time-consuming but can’t be forgotten.
Another option is to hire an accountant or an accounting firm. When hiring an accountant to do your bookkeeping, you’ll be privy to expert advice and not have to stress about it.
A third option is to use DIY bookeeping software. Bookkeeping software can be extremely helpful, but as with all things, it does have a downside. Using a good piece of software doesn’t typically educate a user about US tax code, requirements, or regulations.
The last option is a fully automated bookkeeping service, like the one mentioned above. It’s important to find the bookkeeping service that works well for your company. What worked for your family friend, or competitor, may not work for you.
You can always talk to a consulting and accounting firm to get a better idea of what would meet your needs.
14. Maintaining Consistency to Your Bookkeeping is Key
No matter what type of bookkeeping system you use, consistency is vital. Have daily, weekly, monthly, and annual tasks that you check in on. If you aren’t doing the bookkeeping yourself, follow up with who is.
Volpe Consulting and Accounting Bookkeeping Services
Volpe provides affordable bookkeeping services for businesses, and one set up, they are virtually autonomous.
Some of our bookkeeping services include
- monthly, quarterly, and annual bookkeeping
- individual and company payroll services
- ledger and financial statement prep
At Volpe, we will work with your current staff and train them on crucial everyday aspects they use.
Our goal is for your books to reflect your operations, and to streamline your bookkeeping process to make it as efficient as possible.
We are also certified for Quickbooks online and desktops and can integrate our services into any existing Quickbooks campaign.
