One of the most underappreciated yet vital aspects of running a business is bookkeeping. Far from the most glamorous part of entrepreneurship, keeping detailed financial records can be the difference between success and bankruptcy for small businesses. Bookkeeping requires time and effort, but you cannot put a price on having a clear sense of your debts, deposits and credit as you make important decisions.
Between the hundreds of companies and software that can help you along the way, there is no one size fits all model to bookkeeping. Get ahead of any issues and understand your particular needs to choose the correct option from the inception of your business. Read more to learn how a tailored approach to bookkeeping can help you make better financial decisions and even earn greater profit.
What Is Bookkeeping and Why Does It Matter?
Bookkeeping is the recording of all your company’s financial transactions in a clear and concise way so you have a real time measure of your business’ expenditures and revenue. There are a variety of ways to approach bookkeeping, but the main goal is to have access to accurate and up to date information whenever you are making business decisions.
Having a detailed record of transactions can have a variety of benefits: for starters, you will know where your money is going, and it will help you to adjust your business practices when necessary. You will also be able to take advantage of all available tax deductions and catch banking errors before they become dire. While these things may seem minor at first, they can quickly become make or break moments for your business.
Why not opt for informed decisions, getting ahead of problems and avoiding potential risks? If you want to increase your business’ chances of success, bookkeeping is your answer.
Three Ways To Approach Bookkeeping
There are three main bookkeeping strategies: doing it yourself by purchasing personal financial software, outsourcing your bookkeeping to a professional accountant who will do the work for you or the hybrid option of buying cloud software that also includes a dedicated bookkeeper.
The traditional method of hiring a professional is always a safe bet, but it can be costly as well as cause information delay, as your accountant serves more than one client. Keeping your own books can save money, but it is also a time consuming and challenging process with high risk, especially if you are spreading your time between bookkeeping and other aspects of running your business.
The most preferable option is of course the hybrid option, where you purchase your own software but also have a professional bookkeeper who enters your data and keeps track of opportunities for tax breaks. Some services even offer unlimited consultation hours at no additional cost, so you can always ask for advice without having to weigh your budget. This is the option many small business owners choose, as it combines the best aspects of DIY and professional bookkeeping on a budget.
DIY Bookkeeping Tips
If you decide to take on your own bookkeeping, here are a few ways to stay ahead of the curve:
- Separate your personal and professional finances no matter how small your business is
- Do not rely on bookkeeping in your head; write it out
- Decide which bookkeeping software to use as early as possible; research thoroughly
- Backup your financial records in multiple places in case of data loss
- Plan ahead for large expenses and taxes
- Maintain easy access to important figures at all times
- Set aside time each week to review your books
By Haley Kieser:
I’m Haley. I love learning, writing, exploring the outdoors, and saving money! One of my greatest financial achievements is paying off $29k of student loans in 1 year. Whatever financial goal you’re tackling – you can do it!