Bookkeeping Basics All Small Business Owners Should Know

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There is no denying that bookkeeping is the foundation on which smooth businesses run. It is the very center of all your accounting reports and is essential to control your company’s finances. And it is also a legal requirement for all incorporated and self-employed companies to keep accurate accounting records for 6 years.

So, let’s start with the basics

First, you have to decide whether you want to follow a single-entry bookkeeping system or a double-entry system. Single-entry bookkeeping is usually done on a spreadsheet that shows both the receipts and the payments. This is usually done for very small businesses or institutions. A double-entry system inputs two entries for every transaction – a debit and a credit. This is more complex, and we would recommend you use accounting software or a professional accountant for the same.

If you are planning to do your bookkeeping yourself then here are some things to keep in mind –

  • First, decide whether you want to follow the single-entry or double-entry system. You also need to think about how often you wish to do your bookkeeping. You can spend a few minutes every day or do it weekly or even monthly. 

(Remember:  if you are VAT or GST registered, you will have to provide sales and purchase history with your returns).

  • Once you start, do keep in mind the following small business bookkeeping tasks which must become a part of your business bookkeeping-

Bank Reconciliation - comparing transactions in your cashbook to the transactions on your bank statements. 

Keep track of all business expenses you can claim, for example, for the company car or supplies, which can all be deducted from your revenue and reduce your overall tax burden.

Credit Control – make sure you monitor your cash flow and improve your credit control to avoid running out of liquidity.

Depreciation Accounting – calculate and include updated values of depreciated assets.

Fixed Asset accounting to keep track of the value of your fixed assets.

Calculate and include payroll and similar details.

In case you are following a double-entry system, then you would need to include a journal entry for any corrections, such as for accruals and prepayments.

You will need to implement all procedures for petty cash management. Make sure your employees use the right templates and fill in vouchers.

Invoice management – this is pretty extensive as you will have to maintain, issue, and record purchase invoices, supplier invoices, sales invoices, and more.

If you are a B2B company, then you will also have to generate a Statement of Account to follow up on payments with your regular customers.

Does all this sound like a full-time job?

That's because it is! As a business owner, your main job is to run and grow your company, so we recommend you hire a professional bookkeeper or outsource your accounts to an accounting company. That way, you can be sure that your accounts are maintained flawlessly, leaving you free to concentrate on other core areas of your business.

Doing business is a test of character — doing business papers shouldn’t be. Osome helps entrepreneurs establish all the accounting and bookkeeping online 24/7 via one cloud-based platform.