You finally did it! You are running your own business- a dream come true. After all the planning and running around, your business is finally up and running; but all entrepreneurs know that it doesn’t end there. In fact, it has only just begun; sustaining your business and growing it steadily is tougher than setting it up. This is precisely why all small business owners become engrossed in running the business and end up ignoring something vital to keeping their business afloat- their accounting and bookkeeping.
Why is accounting and bookkeeping for small business so important? Simply because both keep track of your money and money is the first indicator of where your business is headed- to success or failure. First things first- let us understand what accounting and bookkeeping are and how they differ from each other. Bookkeeping is the daily activity of recording and categorizing transactions and reconciling accounts with bank statements, while accounting is the next step of analysing the bookkeeping data to understand business progress and trends to make informed business decisions.
Now that we have established why accounting and bookkeeping for start-ups is important, the question is how can you take care of it.
- Use spreadsheets- Well, you can always choose to handle the accounting and bookkeeping for your start-up yourself using spreadsheets; it is not really that difficult. The problem however is that this can take up a lot of time, time that you could have otherwise spent on growing your business. If you are not careful, you will end up neglecting either your business or your books; neither a favourable outcome.
- Use an Accounting Software- This is better than using spreadsheets, but the responsibility of maintaining the books will rest on you, thereby eating into your time.
- Hire a Bookkeeper/ Accountant- Definitely the easier option but can be a problem if you don’t have money to spare, especially when you are talking about accounting and bookkeeping for start-ups.
Research and choose wisely; find the option that best suits your needs.
There are a few basic things you need to keep in mind for effective accounting and bookkeeping for small business.
- Maintain accurate and up-to-date records. Might seem obvious, but you will be surprised to know how easy it is to not do so.
- Track expenses carefully and keep copies of all transactions, payroll data, payments and organizational documents.
- Schedule and perform regular end-of-period procedures like balancing accounts, reconciling bank statements etc.
- Maintain perfect tax records and pay your taxes on time.
Accounting and bookkeeping for small business is definitely not easy especially if you are a start-up but it is not impossible. With the right guidance and support and a little bit of patience on your part, you can get a handle on it.