Bookkeeping and accounting are probably the bane of every small business owners’ life; don’t like them but can’t do without them. As annoying as the tasks are, they are critical for the sustained growth of your company. Without small business bookkeeping, your business will never reach its full potential; besides you have the IRS to answer to.
Small business bookkeeping is really not that difficult. One of the first steps to get a hang of bookkeeping and accounting is to understand its common aspects, so here are some basic bookkeeping elements explained for you.
- Accounts Receivable- This refers to money that you are due to you, or that you should receive from clients and customers, so it technically refers to a major portion of your income. Sending out invoices and collecting the payments on time are vital to keeping your cash flow steady.
- Accounts Payable- Any money that you owe or money that you have to pay is Accounts Payable in small business bookkeeping. Keep track of your Accounts Payable, pay your bills on time and accurately. This goes a long way in maintaining your business’ good will and to ensure you don’t make the same payment twice.
- Inventory- All the products you have in stock is technically money on a shelf, so keep careful track of your inventory. Make sure you have regular physical checks to ensure the count is correct and also to ensure that the quality of your inventory is not compromised.
- Revenue- Which businessman doesn’t love this word; after all it is the purpose behind starting a small business in the first place. Record all your sales so that you always know where your business stands.
- Payroll Expenses- This is probably the biggest cost for small businesses and big ones. Make sure you record the expenses accurately and pay your employees on time. This is also essential for tax purposes and to satisfy government reporting requirements.
- Taxes- Maintain up-to-date and accurate records and preparing and filing your tax returns will be a breeze. This will also reduce your chances of underpaying or overpaying your taxes, thereby ensuring good small business bookkeeping.
- Cash- Now this of course doesn’t require any explanation, but no list of bookkeeping elements is complete without mentioning cash. The money in your account is your cash. All cash transactions pass through the cash account and are tracked as Cash receipts and Cash disbursements. This is the lifeline of your small business.