Bookkeeping is an essential task to operate a small business. Bookkeeping enables small businesses to save, arrange, and examine financial data. This financial data allows companies to find solutions for the protection of their business. The IRS mandates that businesses save and update specific records and utilize accounting to track costs and revenue. Some documents the IRS requires are gross receipts, employment taxes, purchases, expenses, and many more. There are also regulations for IRS debt and tax relief. Without bookkeeping, you may have inaccurate records that can lead to fines and penalties from the federal government. Read on to learn how to do bookkeeping for your small business and some strategies to employ.
Select An Entry System
First, you want to select an entry system. Bookkeeping for small businesses mandates that you select single or double-entry accounting. Single-Entry accounting keeps a single record of all transactions as income or expense. This system is simple and user-friendly for small businesses that lack notable resources. However, Double-Entry accounting records every transaction twice, as a debit and a credit. While this method requires more work, it provides the necessary safeguards to prevent mistakes when transactions are recorded. Make sure you select an entry system that best fits your small business’s needs.
File Bank Statements And Invoices Accurately
Next, make sure you file bank statements and invoices accurately and in chronological order. If done incorrectly, the bookkeeper will have to locate and secure these essential documents, which will cost your small business time and money. If the documents are not retrievable then your business could face a fine from the federal government. Paid and unpaid invoices should be sorted apart from each other and in alphabetical order by the supplier’s name for purchase invoices. Sales invoices should be sorted in order of future payment dates and should be updated once paid. Make sure you file your bank statements and invoices correctly in order to mitigate the risk of fines and penalties.
Keep Track Of Sales
An essential account to keep track of is your sales account. This account documents all of your company revenue from sales. In order to understand the success and growth of your business, you must ensure that all the information in the sales account is accurately recorded. When bookkeeping, you want to inform yourself about the various types of accounts that will require maintenance. In order to perform this task, find a checklist online that will break down what necessary information needs to be recorded. Keeping track of sales is one of the most important duties for any bookkeeper.
Utilize Accounting Software
Furthermore, online accounting software options mitigate human error and save time on daily tasks. There is a multitude of small businesses that utilize online bookkeeping software to perform tasks such as, retrieving data from a point-of-sale system and invoicing software. Additionally, they provide automated features for bill payment, send invoice reminders to clients, and will notify you once an invoice has been paid. This software also enables bookkeepers to check the cash flow from mobile devices and fast-track bank reconciliation. Find an online bookkeeping software that will streamline your process and help you save time.
Establish A Sales Tax Procedure
Lastly, a bookkeeper also needs to establish a sales tax procedure. As a bookkeeper for a small business, you must find out if your business is being run in an origin-based state or a destination-based state. If you run your business in an origin-based state you are required to add the sales tax that is required by your state to purchase. If you operate in a destination-based state you are required to add the sales tax of the purchaser’s location and state. International sales are tax exempt for US-based businesses but be sure to consult with an accountant to determine your state’s regulations for international sales tax.
Bookkeeping is an essential duty for any small business to succeed. First, you want to select a single-entry or double-entry accounting system for your business. Next, you want to ensure all invoices and bank statements are correctly filed in the necessary order. You also want to monitor your business’s growth strategy and revenue with your sales account. Next, find online bookkeeping software to streamline, automate, and reduce the time spent creating and tracking important invoices. Lastly, make sure you establish a sales tax procedure that correlates with the requirements and regulations of the state your business operates within. Read the points above to learn how to do bookkeeping for a small business and some strategies for success.